Bitter Pill: The Exorbitant Prices Of Health Care

Tyler Durden's picture

Instead of asking the endless question of "who should pay for healthcare?" Time magazine's cover story this week by Steve Brill asks a much more sensible - and disturbing question - "why does healthcare cost so much?" While it will not come as a surprise to any ZeroHedge reader - as we most recently noted here - this brief clip on the outrageous pricing and egregious profits that are destroying our health care quickly summarizes just how disastrous the situation really is.  A simplified perspective here is simple, as with higher education costs and student loans: since all the expenses incurred are covered by debt/entitlements, there is no price discrimination which allows vendors to hike prices to whatever levels they want. From the $21,000 heartburn to "giving our CT scans like candy," Brill concludes "put simply, with Obamacare we’ve changed the rules related to who pays for what, but we haven’t done much to change the prices we pay."

 

Via Time,

The $21,000 Heartburn Bill

One night last summer at her home near Stamford, Conn., a 64-year-old former sales clerk whom I’ll call Janice S. felt chest pains. She was taken four miles by ambulance to the emergency room at Stamford Hospital, officially a nonprofit institution. After about three hours of tests and some brief encounters with a doctor, she was told she had indigestion and sent home. That was the good news. The bad news was the bill: $995 for the ambulance ride, $3,000 for the doctors and $17,000 for the hospital — in sum, $21,000 for a false alarm.

"Giving out CT Scans like candy..."

The costs associated with high-tech tests are likely to accelerate. McKinsey found that the more CT and MRI scanners are out there, the more doctors use them. In 1997 there were fewer than 3,000 machines available, and they completed an average of 3,800 scans per year. By 2006 there were more than 10,000 in use, and they completed an average of 6,100 per year. According to a study in the Annals of Emergency Medicine, the use of CT scans in America’s emergency rooms “has more than quadrupled in recent decades.” As one former emergency-room doctor puts it, “Giving out CT scans like candy in the ER is the equivalent of putting a 90-year-old grandmother through a pat-down at the airport: Hey, you never know.”

 

Selling this equipment to hospitals — which has become a key profit center for industrial conglomerates like General Electric and Siemens — is one of the U.S. economy’s bright spots. I recently subscribed to an online headhunter’s listings for medical-equipment salesmen and quickly found an opening in Connecticut that would pay a salary of $85,000 and sales commissions of up to $95,000 more, plus a car allowance. The only requirement was that applicants have “at least one year of experience selling some form of capital equipment.”

When you follow the money, you see the choices we’ve made, knowingly or unknowingly.

Over the past few decades, we’ve enriched the labs, drug companies, medical device makers, hospital administrators and purveyors of CT scans, MRIs, canes and wheelchairs. Meanwhile, we’ve squeezed the doctors who don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so gameable. And of course, we’ve squeezed everyone outside the system who gets stuck with the bills.

 

We’ve created a secure, prosperous island in an economy that is suffering under the weight of the riches those on the island extract.

 

And we’ve allowed those on the island and their lobbyists and allies to control the debate, diverting us from what Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”

The health care market is not a market at all.

It’s a crapshoot. Everyone fares differently based on circumstances they can neither control nor predict. They may have no insurance. They may have insurance, but their employer chooses their insurance plan and it may have a payout limit or not cover a drug or treatment they need. They may or may not be old enough to be on Medicare or, given the different standards of the 50 states, be poor enough to be on Medicaid.

 

If they’re not protected by Medicare or protected only partially by private insurance with high co-pays, they have little visibility into pricing, let alone control of it. They have little choice of hospitals or the services they are billed for, even if they somehow knew the prices before they got billed for the services. They have no idea what their bills mean, and those who maintain the chargemasters couldn’t explain them if they wanted to.

 

How much of the bills they end up paying may depend on the generosity of the hospital or on whether they happen to get the help of a billing advocate. They have no choice of the drugs that they have to buy or the lab tests or CT scans that they have to get, and they would not know what to do if they did have a choice.

 

They are powerless buyers in a sellers’ market where the only consistent fact is the profit of the sellers.