Why Healthcare Is So Expensive

There’s an interesting case study illustrating at the WSJ illustrating why healthcare in the U. S. is so expensive. The author, a physician and a lawyer lays out the scenario:

As a doctor and a lawyer, I like to think I’m pretty good at navigating the health-care system. So when my wife and I found a large swollen bruise on our 3-year-old son’s head more than a week after he had fallen off his scooter, I was confident we could get him a CT scan at a reasonable cost.

We live near one of the top pediatric emergency rooms in the country. The care was spectacular. My son was diagnosed with a small, 11-day-old bleed inside his head, which was healing, and insignificant.

I was proud to see the health-care system working, to see academic medicine working, and most of all to see my son run as fast as he could out of the ER two hours later.

He or, rather, his insurance company received a bill for $20,000, half of which was for trauma team activation. If you don’t have access to the article, I’ll summarize it for you: he researched the bill, wrangled with the billing supervisor, and, ultimately, got the improperly levied charge for the trauma team activation removed.

The problem for most patients (or their parents) is that they aren’t physicians and lawyers, don’t have the understanding or backgrounds to make a good argument, and insurance companies don’t engage in minute examination of every bill that comes in through the transom.

There is a good lesson here, however, for why our healthcare system is so expensive:

  • Facilities like the one the author found so helpful are expensive and maintaining their availability has to be billed somewhere.
  • Medical bureaucracies are huge and growing. Being able to determine what and how to bill is enormously lucrative.
  • Insurance doesn’t change either of those things and may even aggravate them. When insurers are paid on the basis of a percentage over outlays they have no incentive to keep outlays down.

9 comments… add one

  • PD Shaw

    A former partner once disputed a bill that charged her for a doctor’s visit, when he wasn’t available, so she saw an NP instead (for whom she was charged). The insurance company got the charge removed, but how would they have known this if the patient hadn’t been engaged?

    In contrast I know an insurance defense attorney who was going to Chicago to meet with a doctor, who had to cancel. It wasn’t clear when he learned of the cancellation, but he took the train to Chicago and billed the client for the meeting that didn’t take place. A law firm secretary caught the billing he submitted and reported it to the managing partner, who reported to the attorney ethics board, which censured him.

  • Jimbino

    I had to file a FOIA to get the list of Medicare allowances by CPT code. Once armed with that info, I was able to help two friends challenge bills of $1000 each. I sued a dentist in small claims court. Their attorneys called right away to settle.

    The beauty of small claims court is that you don’t need an attorney and rich medical providers are encouraged to settle. If they lose, it costs them money and a hit on Web-based references.

  • PD Shaw

    Having taken our daughter to urgent care last night after she fell off her bike in inconsolable pain, I do wonder about taking a child to “one of the top pediatric emergency rooms in the country” and not expecting to pay a premium for going to an emergency room at least.

    Last time (15 yrs ago), we needed medical assistance for a suspected broken bone, we were told the only place to go was the E.R. because the urgent care facilities couldn’t have x-rays. Now, the scanning equipment is in the urgent care facility, but the processing is in the hospital’s radiology department downtown.

    Of course, we received no bills or information about how much any of this cost, other than an invoice for a $50 pair of crutches that we were assured would be covered by insurance, they just needed us to sign for their receipt. If I started asking questions about cost, I doubt the answers were in that building.

  • steve

    Admin costs in the US are at least twice what they are in other countries. It is a bureaucratic mess. I say at least because all they ever measure are costs for the insurance companies and maybe the hospitals. Costs on the provider side are ignored as are the costs for patients who have to go through all of the hassle. Always nice to remember what it could be like. MAtt Welch, editor of the libertarian Reason online mag wrote this.

    http://reason.com/archives/2009/12/07/why-prefer-french-health-care

    Steve

  • The key reasons that admin costs are high is that wages are high and, as I said in the post, knowing what and how to bill pays off.

    It’s like taxes. Why do big companies have large tax departments? Because it pays off.

  • Lee

    Years ago, I was referred for a needle biopsy under ultrasound. I got there, was in the room with the techs, the radiologist and the surgeon. The two doctors were looking at the ultrasound and decided that it did NOT need to be biopsied after all. The seal on the needle biopsy kit had NOT been touched. When I got a copy of the bill that was sent to the insurance company, I noticed that the biopsy kit was invoiced. I called the insurance company to let them know that not only had no biopsy taken place, the seal on the kit had not been broken. They dealt with it. I like to think I did my part…

    I go to a dentist who is not cheap. She will file with the insurance companies, but does not take it–the patient pays her and gets reimbursed by the insurance companies. I like it. I know how much things cost, and really think about whether i need it or not.

  • jan

    ” I know how much things cost, and really think about whether i need it or not.”

    That’s part and parcel of a “consumer-based” approach in health care — something advocated by those who often include HSA’s in problem-solving the containment of HC costs. It only makes sense, though, that involving yourself in choices, costs and actual immediacy of treatments or medical services creates cautious considerations and cost-saving behaviors in people.

  • jan

    As a side-bar to the topic of health care:

    This is where packing the courts will help the PPACA stay afloat. Because of Reid’s recent activation of the controversial nuclear option, the Senate was able to get it’s more liberal nominations seated on the DC Circuit Court. Now, after this perfect set-up, the Halbig Case can be reheard “en banc,” with the odds-on-favorite being it will join the call made in Richmond, VA, which sided with the Administration’s tricky interpretation of the original subsidy dispersal language clearly written in the PPACA.

    The U.S. Circuit Court of Appeals for the District of Columbia granted an Obama administration request to have its full complement of judges re-hear a challenge to regulations that allow health insurance tax credits under the Affordable Care Act for consumers in all 50 states.

  • jan

    There’s more to be revealed in the Obamacare saga:

    As the Times reports, the administration is bracing for the fact that the next open enrollment period may be even more traumatic than the first one. Huge price increases in premiums are expected. As Kevin Counihan, the man recently named to head the federal exchanges, told the newspaper, “Part of me thinks that this year is going make last year look like the good old days.”

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