Medical Cost

by Robert Klassen
by Robert Klassen

DIGG THIS

Medical cost is the great political football. If a talking head runs out of politically correct subjects that he or she is paid to holler about, the ever-rising cost of health care is right there on the shelf. But what is it?

I recounted my experience as a private pay patient earlier. I never did know the total cost, because they didn’t tell me, however I did pay eight-hundred and some dollars out of pocket. That was in 2004.

Three years later, I woke up one morning short of breath. What? That’s never happened before. I took my pulse. Thirty. Oh my, that’s never happened either. I’ve had abnormal heart rhythms from childhood and atrial fibrillation for over two decades, but these were always fast, not slow, so what was this? Hospital time. Forty-eight hours later I walked out feeling fine with a pacemaker installed. What did it cost?

But we’re not finished, because now Medicare "adjusts" the charges.

And Medicare paid:

This leaves me with an out-of-pocket expense of $302 so far (I haven’t received the "adjusted" hospital bill yet, three months later). However, this does not answer the question, what was the medical cost? Was it the original charge, or was it the adjusted charge? Where do these numbers come from?

Every time I hear or read about the high cost of American medical care, I wonder which set of numbers is being used. Then there are numbers that we don’t see or hear about at all, and those are the indigent write-offs, such as the first hospital charges that I generated and never saw three years ago. Some percentage of that "charity" is reimbursed to the hospital annually, but I don’t know how much or by whom. Without any way to prove it, I’m guessing that around half of the medical costs that we hear about vanish into the air from whence they came.

Yet doctors and hospitals have operational costs that cannot vanish, so they must know in advance about what to expect in return for charges. If they expect half of what they charge, then they must budget accordingly. But for the medical service provider, surprises always await. Congress can change the rules, third-party payers can change the rules, and providers are stuck with the changes.

This is, sadly, a perfect example of socialist central planning. The consumer has no idea what it’s going to cost when he or she walks in the door. The provider has no idea what he or she is going to be paid. Neither the consumer nor the provider has third-party quality evaluation; there is no consumer’s guide to hospitals and doctors, there are only rumors.

Third-party payers, that is insurance companies, which are also Medicare contractors that do the "adjusting" and paying, actually run the whole show. They are massive protected bureaucracies that couldn’t care less. They might pay the whole bill, they might pay part of the bill, and they might pay nothing.

In The Market for Medical Care, Devon M. Herrick and John C. Goodman provide a useful analysis of this situation and offer some examples of innovative solutions to the problem, one of which is the walk-in cash clinic with prices posted. These are popping up in shopping centers, but of course they can’t cope with major trauma or illness. The authors call for the elimination of secrecy among providers, the elimination of paper records (an enormous waste of time and money), and for quality evaluations open to both the providers and the consumers. In other words, put competition into the business. These are policy recommendations and, as such, go against the policy of established and protected cartels like the AMA and the AHA.

Would I have done a cost and quality comparison on that fateful day? If such information were available online, yes, I would, but more likely I would have been tracking such information for years in advance. That ’s the way I shop. As things stand, nobody knows medical cost.

April 28, 2007

Robert Klassen [send him mail] retired from a forty-year career in critical-care respiratory therapy. He is the author of five books, including Atlantis: A Novel about Economic Government, and Economic Government, which describe a solution to the problem of political government. Here's his web site.

Copyright © 2007 Robert Klassen

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