A $98,836.50 Day in The Hospital

The remedy for many serious problems that concern many people is to terminate government power to pass laws and regulations in one field after another and to replace these State-made arrangements with free markets. A dollars and cents case can be made as well as a moral case against State meddling (see here and here). Everyone has at least some idea, even if vague, that medical costs are exorbitant. The reason for out-of-sight medical costs is that government has destroyed free markets in medical care via such legislation as Medicare, Medicaid, related laws, and of course Obamacare.

I’ve been sent a genuine hospital bill by a man in Atlanta, Georgia who “had an unpleasant experience with one of HCA’s criminal facilities in January 2014 following a minor auto accident in which I was not injured, but was rendered unconscious, most likely due to a minor concussion.” His accident was in 2014; that’s 12 years after HCA entered a huge fraud settlement and admitted to 14 felonies. This bill therefore is from an HCA that is currently clean, that is, not under any indictments.

His hospital stay was exactly one day in January of 2014. He entered a community hospital. The total charges were $98,836.50. Insurance covered $97,765.50. That doesn’t erase the charges. Checks were written to the hospital and money was transferred to it. Who paid? People enrolled in the insurance plan, often forcibly, often through employers. I believe that economic analysis will show that the costs fall on the category called “labor”, or that they amount to a tax on work.

The breakdown of charges was as follows:

Sterile supplies 40.00 (1 unit)
Lab/Immunology $665.50 (3 units)
CT Scan/Head $18,762.25 (3 units)
Emerg Room $5,394.25 (3 units)
Drugs requiring det code $209.75 (2 units)
EKG/ECG $757.00 (1 unit)
Drgs/Other $8.75 (1 unit)
Lab/Chemistry $7,358.75 (18 units)
Lab/Hematology $1,181.25 (5 units)
CT Scan/Body $22,531.75 (3 units)
MRI $1,071.00 (2 units)
Trauma response Level II $34,141.75 (1 unit)
EEG $2,051.25 (i unit)
Room charges $4,673.25

The MRI was never performed. The patient refused the offer and the doctor’s report “reflects that decision”.

High charges like these are wasteful in a large number of ways that I won’t attempt to elucidate. It’s like having to pay $20 for a gallon of gasoline that would cost $2 in a free market. It’s also like being held up by a stickup man. Wealth is transferred from working people to others. The prices distort incentives. Services are performed that do not need to be performed. Others that should be performed are not.

How can an ordinary room charge (not the emergency room which was charged separately) come to $4,673.25? How much does it cost to stay at a luxury hotel in an expensive city? “Though Trump International Hotel & Tower New York earns a Five-Star rating, you won’t have to break the bank for a night in the hotel: The average price of a room at the New York City hotel starts at $495, depending on the season. Standard rooms begin at 440 square feet — an unusually large size for a room in New York — so you can count on even the basic rooms affording you a certain level of luxury.”

A 64 slice CT scanner costs about $1 million for a basic model. It has an annual upkeep that runs about $125,000 a year. Suppose it will last about 7 years, which is conservative. A hospital might use it 150 times a year, conservatively. (At a specialized imaging center, it will be more frequent than this.) If this is billed at $7,000 per scan, that amounts to $1,050,000 in a year. I do not know what is meant in the bill by “3 units” of CT scan, so I’ve divided the costs shown by 3 to get about $7,000 per scan. But even this conservative figure suggests that this hospital recovers the entire cost of a new scanner in 1 year. That makes it very profitable.

Let’s turn elsewhere, to a study of CT costs in a large hospital in India. This covers all the costs, direct and indirect, including the depreciation of the capital cost that the above calculation entails. Their head scanner cost $374,812.59 in the year 2000 and they depreciated it straight-line over a 10-year life. The machine cost is only 12 percent of the total costs. They find the total costs over a 6-month period and then they divide by the number of patient scans performed. This works out to $10.89 per patient scan. You read it right, a little under $11 per scan. I read that “The private healthcare sector is responsible for the majority of healthcare in India. Most healthcare expenses are paid out of pocket by patients and their families, rather than through insurance.” This comparison will meet with all sorts of ifs, ands, and buts, but I still believe that it instructs us that our system of heavy government regulation of every aspect of health care should never have been instituted.

I grew up under an out-of-pocket system in which both my mother and father paid for serious operations and hospital stays themselves. So did our circle of relatives and close family friends. There was no national insurance program and they had no private medical insurance. Health care markets were largely free markets in which patients paid directly for services themselves, either through savings, loans, gifts or charity.

Americans were responsible for their own health care, and that comes with being “free”, which means running your own life and letting other people run theirs. The concept of forced pooling into medical insurance was a foreign notion, completely at odds with being free. The concept of forcing our family to pay for the health care of members of some other unknown families was completely at odds with being free. If we give gifts, isn’t that our own personal business? The idea of being forced to compensate unknown others for their luck of the draw in genetics and family upbringing was totally foreign and inimical to the idea of freely running one’s own life, or, as libertarians would say, owning oneself. Who was going to decide who was “deserving”, who was deemed “undeserving” and made to pay, and how much wealth would be transferred?

A big determinant of one’s health is how one takes care of oneself. If other people drink a lot or take drugs or expose themselves to sexually-transmitted diseases or have poor hygiene or go for risky sports or like to get a heavy tan or gorge themselves on sweets or otherwise intentionally undermine their bodies, or if they are too lazy or improvident to save for a rainy day, why should they be insured by those who avoid doing these kinds of things or do them in greater moderation?

Forcible socialized health care brings the curtain down both on a person’s own responsibility and the freedom to run one’s own life. It curtails the benefits of free markets, imposing very high concealed costs on labor that undermine our economic behavior.

Life, liberty and the pursuit of happiness are matters to be pursued by each person. That is the meaning of “all Men” as in “…all Men are created equal…”. It means each and every one of us. But socialized health care invites government control over every nook and cranny of one’s life because so many things affect health. It invites control over alcohol, tobacco, drugs, food, diet, beverages, sports, safety, travel, autos, euthanasia, etc.

The institution of our current system began between 1906 and 1917. It has so far culminated in Obamacare and $98,836.50 days in the hospital.


10:11 am on September 26, 2017