Greg Scandlen has an excellent post on American health care expenditures relative to those of other nations here. Folks on the left constantly talk about how much the US spends on health care and to an extent they have a point.
Problem is that, as the following chart illustrates (from Scandlen’s blog posting), Americans do not directly spend much on health care. Rather, the spending is done by governments and insurance companies:
How can this be rectified? Well, the first thing to be done is to equalize the tax treatment of health care so that employers are not given the incentive to buy insurance for their employers and that individuals take control for more of their health care spending.
I have studied this problem. The major part of the problem is the way health care providers quote their services. Their charges to the non-insured are significant multiples of their charges to insurers (private and public) and their terms are also onerous to the non-insured (pay in advance).
So self-insurance is not a practical option.
A system of catastrophic insurance with self-insurance for everything else would both increase competition and insure that routine expenditures reflected the value of the service to those requesting the service.
But we can’t get there with the outrageous prices currently quoted by providers..prices that they rarely if ever receive.
Obviously providers prefer to deal with insurance companies..not Medicare but other private insurance companies rather than individuals.
The only solution I see is regulatory….making it illegal to quote a price that is greater than the maximum reimbursement a provider receives from any insurance company with which it deals.
That is not most favored customer treatment but simply no premium pricing higher than provided under the most favorable insurance contract. Is that unreasonable to ask? I think not.
Few want to see more regulations. But the current system is self-perpetuating and takes the cost to the consumer out of the process of establishing the demand for medical services and thus inflating the demand.
One has to assume that the providers like the current system as it inflates demand. Thus it has certain characteristics of monopoly pricing. I am against monopoly pricing so I am against collusion within the medical profession to prevent the true cost to the consumer from being involved in the consumer’s purchase decisions.
An alternative to regulation would be full disclosure….i.e. all providers would publish for each service, their highest insurance reimburesment and their price to “walk ins”.
But to self-insure one has to be able to obtain the full range of medical services that might be required. So if you do not have sufficient providers publishing reasonsable (not higher than their highest reimbursement) consumers can not self insure.
This used to be called usual and customary charges. The self-insured should be able to obtain services at the usual and customary cost.
Strong negotiators might be able to achieve this now but few of us are in that category and one characteristic of medical services is they often are time sensitive. If you have a blocked artery, one might not be in a position or mood to negotiate.
Unfortunately, this is a meaningless chart without knowing how much is spent in dollars rather than just in percentages and how much of the total is provided by government subsidy. Additionally, the percentage of out of pocket needs to be related to a percentage of total income.
There is a great article written by a businessman and published in “The Atlantic” in September 2009 (http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/) on health care. The title of the article is a bit misleading since the bulk of the information relates to problems and solutions. Both Paul and Sigmund’s comments echo the article.