Where
did that $80,000 go?
Getting to the heart of healthcare woes
CBS MarketWatch, 9-30-03
ARLINGTON, Virginia (CBS.MW) -- The Gadfly's been on medical leave for the summer, and learning first hand why so many people are so confused about the economics of health care in America.
My repaired heart valve, related medical care and treatment for a subsequent complication cost a total of nearly $80,000. Or maybe just under $55,000. Or maybe some other figure.
I consider myself a relatively educated consumer. But I hate to admit I don't know the true cost of probably the most important purchase of my life -- my open heart surgery.
Let me start by separating the issue of cost and worth. It would be impossible to put a dollar figure on what it's worth to have a life-threatening problem fixed. The doctors, nurses, technicians, therapists, support staff, administrators and clerks involved in my care were wonderful, and I really do owe them my life.
But when it comes down to what we can figure in dollars and cents, the unique life-and-death nature of health care might help explain why our system has become so confusing. We don't shop for health care like we shop for any other big purchase. Some of the basic principles of a free market are skewed. By many standards, most of us fail as good consumers when it comes to health care.
Pity the uninsured
Those of us lucky enough to have health insurance are tempted to ignore cost issues because we aren't directly paying the bills. We figure it's not coming out of our pocket, so we'll pick the best doctor we can find, let the professionals take care of the money and go our merry way with our rebuilt heart.
Ultimately, of course, it really is our money. Our premiums, our taxes and our access to quality health care all depend on finding a solution to the problems with the business side of medicine.
If I was one of the estimated 41 million uninsured Americans, I would have been billed "full price" for my care -- $78,432.63 so far. But my insurance company has "preferred provider" deals with the hospitals and doctors. They brought the price down to $53,407.84 - roughly a 32 percent discount.
The discount is deeper in some areas than others.
The surgeon in charge of fixing my heart billed $6,000, but insurance paid an agreed rate of $2,875. The hospital billed $42,000 for the surgery and my first three-day stay, but accepted $7,000 less. One specialist billed $699 for a weekend emergency consultation but was paid an agreed insurance rate of $80.
On the other end of the scale, the nurse responsible for checking on me when I was out of the hospital billed $72 for each home visit, and insurance paid full price.
Caught in the middle
One of the ironies of our current system of health care is the uninsured -- those least able to afford health care -- are likely to be billed more, because they don't get the discounts negotiated by insurance companies and government health care programs like Medicaid.
This summer, a congressional committee began an investigation of billing practices by large medical providers -- focusing on how prices are set.
The House Committee on Energy and Commerce sent a letter demanding a wide range of billing, revenue and charity-care information from 20 providers, including for-profit hospital chains like HCA (HCA: news, chart, profile) and Tenet Healthcare (THC: news, chart, profile).
"The uninsured seem caught in the middle of the sophisticated and complicated forces driving health care financing, including government entitlements, managed care, rising costs and shrinking public funds," said the letter, signed by congressmen W.J. "Billy" Tauzin (R-La.) and James Greenwood (R-Pa.).
The letter said the committee's preliminary investigation had found rates on hospital's master lists -- the "full-price" rates -- "are often inflated far beyond their actual cost and reasonable profit, due, in part, by the providers' need to make up for the steep discounts ... demanded by the third-party health plans."
The congressmen cited a study by the Department of Health and Human Services that found California urban hospitals last year averaged a more than 300 percent mark-up from actual costs in their "master-list" prices.
List price vs. Real price
Dick Davidson, the president of the American Hospital Association, responded with a statement acknowledging the complexity of the issues involved, and saying providers were trying to comply with federal rules that "seek to ensure that a hospital charges all patients receiving the same services the same price."
But something is dreadfully wrong if our system means the common "list price" for all health care is so inflated that only the poor are expected to actually pay it.
The Gadfly doesn't have the solution. Heck, I can't even remember meeting some of the doctors who are billing my insurance company, and while I'm sure the piece of medical equipment listed on one bill at $11,000 was worth every penny, I couldn't tell you its purpose.
I do suspect, however, that a system good enough to train doctors who can cut open hearts and rebuild them could also come up with a fair way to make the economics of health care make sense -- even to consumers.