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Health Care Discussion – Why Does No One Discuss This?
What is this? What is this all about? What other business is run this way?
I say again: What kind of business is this?
Isn’t this a symptom of something that is severely distorted? Isn’t that first number a cry for help when viewed in context with the adjustment? That first number is a fake number.
Here’s what’s going on — the government has stepped into this field in a big way and it has caused an intelligent and clever response from the business people in the medical industry. This creative invoicing method is done in concert with the insurance industry people. Government people know that the top “price” is a scam number and they don’t talk about it. None of us talk about. I want to know why this issue isn’t discussed and why it isn’t used as a method of measuring (at least indicating) the level of damage that government regulations do to a critical industry — and the medical industry is important to each one of us.
As I tell my Swedish brother-in-law doctor: “The medical industry is too important to let the government control it.” This causes him to visibly blanch because it turns his world view upside down.
(Thanks to @davecarter and @docjay for the excellent Radio Deplorable podcast at http://ricochet.com/podcast/evening-doc-jay/. I was going to put this in a comment there but decided to write a post instead. I hope you all can give Dave’s episodes a listen.)
Published in Healthcare
But, you are completely missing my point then. It is true that they take less than they bill but what they bill is fake. Do you not understand this?
It’s not a random amount that is paid — it’s a KNOWN discount from whatever the price is stated to be. They factor this discount (it seems to vary for every damn procedure) into what is their true cost and inflate the “price” of the procedure so that they get what they need to cover their costs.
@cm says it best:
And please stop blaming the providers for this – they are having to respond to government intervention.
With that said I’m sure that there are unscrupulous accountants and lawyers in these fields and they have learned to game the system because, though the government thinks it’s controlling costs with these regulations, they are actually easy marks for crooks and grifters.
Isn’t it the government, health insurance companies, and certain providers working in concert, with the government being the elephant in the room, of course. There once was a small business opportunity in providing healthcare services but this collusion is rapidly killing any individual opportunity. I understand the feds control entry numbers into medical schools through funding internships.
Larry, I’m a provider.
If you knew the answer to your question, why pose the question?
The only thing that is similar is, for example, Wal-Mart buying so many of an item from a manufacturer that they can buy them for less per piece and pass that savings onto the consumer.
There was an earlier exchange where you correctly observed that I don’t really pay much attention to the quarterly statements from Medicare which is true. In my case, the fees I pay medicare and my supplemental insurance cover 100% of my doctor and hospital bills and make medical service look like something I pay a flat fee for regardless of how much I use. Doesn’t seem to me that’s a very good approach to get patients to pay attention to costs. I think in some cases the hospital where I have obtained some emergency services have taken advantage of my appearance with total coverage to cover some of their indigent patients, maybe illegals from Latin America since it was in Phoenix.
My question is also why aren’t more people talking about this? This is a smoking gun and it needs to be discussed by the many experts involved in this field.
Yes, that is similar but you don’t see their invoices showing a special adjustment. Instead you see “we’re saving you $xx” and happy talk like that. Also, the original price is based on real data of what it costs plus a profit. Walmart only deals with reducing profit % and the manufacturer has the advantage that it will still do better because of more volume.
Completely different situation really.
Has anyone ever figured out how much a doctor’s visit would cost if they didn’t have to pay a small army to figure out insurance procedures?
Bingo!
Yes, when I first had employer provided group hospitalization, I would pay the doctor and file a claim. Then they would let me know I had not reached my deductible yet. The doctor had to do zip except receive my payment.
Ah. The Good Old Days!
I’m on Medicare now, plus a Supplemental policy that my former employer helps pay for. What it means is that when I look at the papers from the dr, the ins and medicare it becomes a serious challenge to tell who’s doing what to whom.
Before this, I understood that the Insurance allowable was based on “reasonable and proper” costs determined by looking at the average of equivalent billings across the field – or something like that. So I figured that the initial billing costs were just a device to increase the average Billings.
I do find it intriguing that a country doctor with a receptionist that handles records and appointments and billing and office business, and one nurse, has one full time person dedicated to handling all the insurance and medicare stuff. That can’t have anything to do with why he’s getting out to become a full time fisherman.
For the same reasons doctors embraced HIP in the 30s and 40s (my mother remembers him saying of HIP “This will be the end of medicine as we’ve known it) and the AMA finally
loved Big Brotherembraced Medicare.Also, because if you learn how to game the system you can do OK. And because insurance coverage is thought to convey “legitimacy.”
A long time ago, particularly in rural areas, there was a system some chiropractors used called “G.P.C” which stood for “God, the Patient, and the Chiropractor.” The billing system consisted of a box on the wall with a slot in the top.
The thing I don’t care for about this comment is that it makes insurance (and now days that means care) partly dependent on whether you are part of a big system.I don’t think that is the free market we want.
I think it should be like the rules for undercutting prices. You can charge whatever you want, but you have to sell to everyone who comes shopping. So, a healthcare facility can give a discount, but any insurer who meets the facility’s paperwork gets the discount.
I think hospitals should have a rate that they charge and any discounts must be provided up front based on group discounts (if they must). If they give a B.S. (blue shield) discount on a service, then the rate given to blue shield customers must show that before any operation. Also, they should be required to publish standard rates so people can discriminate on price.
Also, if someone pays cash up front for a basic service (one with little risk), they should be able to get the lowest price since cash is the simplest payment (so it should be the lowest cost). Well, I would grant that it is more complicated, but I think that gets my point across.
There does seem to be a lot of Admin.
How do you think it compares to other countries’ systems?
More or less?
We have never tried a “free market” in medical care, at least since the middle of WWII, when companies began to offer third party insurance, and government started to get involved in health care, certainly never for anything looking like modern medicine.
The free market would work, and work well if we ever tried it.
We never have tried a free market, and certainly, nothing being seriously proposed at the present time is even vaguely free market, but it does introduce some small moves towards methods that start to move responsibility from the Federal Government back towards patients, but way too little.
Many (Most?) individuals look at a bill, and think in a free market the provider would just charge them that unrealistic top line number, so they think ”Never, I want to keep my government subsidy!’
In practice, after a very painful transition period, overall costs to the economy would go down, and quality up, but, of course there would be many cases to publicize where someone had something “unfair” billed to them. But that happens now as well, we just choose for the most part not to look at them, or suppress our knowledge. As a result, we go for a system that over time guarantees poor slow care, and gets slower, more costly, and poorer daily, because the decay is hidden, only the possible negatives of a transition to a free market are made visible.
WalMart tries to reduce its profit percentage?
That’ll be news to shareholders.
“Health care” is in part goods, in part services. Many of the goods are produced by cartels and/or subject to price controls. Many cannot legally be distributed through unlicensed channels or by unlicensed personnel, and require a heavily bureaucratic and formalized authorization to purchase process. The training of those personnel is expensive and also run by cartels.
Walmart, not so much.
Lots of retail works that way. Who pays sticker for a new car?
Reimbursement in medicine is based on a percentage of “usual and reasonable” charges. All driven by what Medicare pays. Everyone else sets their contracts based on them.
Or pay a fortune in malpractice insurance?
I recently saw a piece on CBS about insulin prices spiking … Prices doubling and tripling over the past few years. The prices they are referring to are ‘list prices’. The pharmaceutical reps they spoke to indicated that the various companies were tough competitors on ‘net prices’ – that is the ‘negotiated prices’ that large purchasers actually pay to the pharma companies for the drugs. The Pharma reps argue that ‘net price’ of insulin has only gone up 2 or 3 percent a year over the same period. What’s the difference?
Apparently, like the auto industry, ‘List Price’ is a price that virtually no one actually pays. However, it does serve as an important benchmark for some important players in the drug pricing game. ‘List Price’ is actually paid by a few unfortunate souls who have no insurance or who’s insurance doesn’t cover the particular prescription.
Pharmaceutical companies start with a drug to sell and a ‘List Price’. Large purchasers who end up paying for those drugs do not interface directly with the Pharma Cos. Large purchasers employ ‘Pharmacy Benefit Managers’ … PBMs. These PBMs negotiate a final price – ‘net price’ – to be paid by the large purchaser to the Pharma Company. The PBMs get paid based upon how much they ‘save’ the purchaser….ie discount from list. So … Let’s think about this for a minute …. The higher List Price is the better the PBM likes it because it increases the possible spread between List and Net Prices … ie their paycheck. Consider the following …
Suppose a drug costs 80 dollars.
The Pharma Co wants to raise the price 2% to 81.60. Do they enter the negotiation with a List Price of 81.60? Probably not. In fact, the bigger the difference between the List Price they start with and the 81.60 they want to end up with, the easier the negotiation will be and the more the PBM will earn. It would seem that a lofty List Price is almost a bribe to the Pharmacy Benefit Manager. PBMs would almost NEED lofty List Prices to justify their own existence and the money paid to PBMs is a net dead weigh loss to the system. In addition, the people stuck paying those List Prices get raked over the coals.
Does this help account for the crazy prices you see? If “discount from list” is a metric that purchasing managers get rated on have we created perverse incentives here?
This entire thread points up the real problem: focusing on insurance coverage, rather than on care.
Physicians never traditionally ran their practices as a business. There were always a lot of patients in the mix who never paid. And a tremendous amount of work was done for NO pay. F’rinstance, when office hours ended at 8 or 9 PM, the doctor still faced a pile of charts with lab results on top, which he had to review and then call the patient, talking for as long as it took. Hospitals forced their staff physicians to see the ward patients (those who couldn’t pay.) (That used to really p. me off, since the hospital maintained its tax-free “charitable institution” status on the backs of its staff, who didn’t get a tax break for their unpaid labor!) Oh and what about being “on call”, meaning tethered to a small radius around your office and never getting uninterrupted sleep even on weekends?
The insurance industry, by contrast, has always been the ultimate for-profit business. People now see the two, medicine and insurance, as hand-in-hand, but there could hardly have been two more unlikely partners. It was like trying to harness a mule to your steam engine.
It seems to us (my doctor husband and me) like in the late 1980s there was a concerted effort to topple doctors from their pedestal of public approbation, which had made all the extra unpaid stuff they did worth it. Suddenly, doctors were a money hungry, non-caring elite who preyed on sick people.
When the HMOs came in people got what they deserved: capitalized medicine.
Your artifact of billing is a product of the process I’ve described.
Are you kidding me?
It HAS to be illegal for providers to settle directly with patients for a lower price (even though there is no other service industry and no other contractual relationship within which the parties cannot compromise a claim.).
If it weren’t illegal, the entire system would collapse. Who would buy insurance?
For that matter, who would buy insurance if it were possible to budget for likely costs of medical care each year, like responsible people do for other living expenses?
And what if nobody bought insurance?
The sad fact is, that might cause catastrophic unemployment.
The rising cost of health care is no surprise. When Dental Insurance came into play there was an amazing rise in the price of dental procedures and appliances. Many of these price changes occurred simultaneously with the rise in the price of gold in the early 1980s. The rise in the price of crowns was almost 1oX it prior price which was attributed at the time to the cost of gold. The Gold went down in price, but the crowns never did, nor did anything else. When you don’t pay out of pocket for those services you tend not to be as concerned about the rise. Dentists complain bitterly about the annoyances of dealing with insurance companies, but this strikes me as totally disingenuous, as these companies have increased the income of the average dentist astronomically.
No, I meant that sentence to say they work on reducing the profit % of the manufacturer.
Come on now — I’m showing you a cost summary with a 65% offset. You have to explain a lot here to account for that. Also, it’s not called a discount — it’s called an adjustment. The medical industry is seriously compromised.
Why is no one talking about this?
Ever seen a car company do that?
This kind of stuff goes on all the time in my line of work. “The normal price for this storage array is $500,000 once we put it all together. But it’s the end of the quarter, and we are really trying to break in to the market for companies your size, and we really want to have a presence up here, and I really like to work hard for my customers, and blah blah blah…the cost is now $100,000!”
The mechanism is different, but the point is the same. They artificially jack the prices sky high, because they know you are going to try to wheel and deal, and they pretty much already know what a company of your revenue level and average growth can afford.
Let the whole system crash and burn. Set fire to it Berkeley ninja style. Give me price transparency or give me death!
Yeah. When the whole “customer service” model came in, I always warned people that they might not be happy with that. The “customer” is the one who pays the bill, be it individual, insurance or government entity. As a patient, you may not be happy with what the customer wants.