Interesting post about medical pricing by Roni Rabin entitled Confusion on Pricing at Hospitals Adds to Pain. (h/t Indiana Law Blog). It describes a study trying to determine the cost of a routine appendectomy in California. The price: somewhere between $1,500 and $182,955.
The post includes this paragraph:
Though she is an emergency room doctor herself, Dr. Hsia said, she has no idea what the hospital charges for various procedures. When patients ask her, she has to tell them she doesn’t know.
In my practice, I’m called upon to take the depositions of doctors from time to time. In the course of defending a personal injury case, we’re called upon to try to figure out the reasonable cost of past and future medical treatment the injured person might require as a result of their injury. Doctors are almost invariably unable to answer questions about what procedures cost.
If doctors, who are soaking in the system – smart people making their livelihood from these procedures – can’t tell you what a procedure costs; it’s ridiculous to center health care policy around the fiction that consumers can sensibly make economic decisions about their treatment in the current health care environment. Pricing transparency needs to come first.
Yes.
My doctor recommended I take Makena during my pregnancy. It is $1500 per dose and one gets 17 – 20 doses. Often these are delivered by a home health nurse at 200 – 300$ per visit.
Since this was one of the few cases where I could actually find out info about the price ahead of time (there has been a controversy about this particular drug and its cost, people getting mad at the March of Dines, etc), I asked instead to have the active ingredient in this medicine compounded at a local pharmacy. It comes out 12$ per injection including the needles. It took only 2 home nurse visits for my husband to be taught to administer it. He doesn’t charge me for the service.
Just one more example of how the lack of transparency in medicine affects costs, ridiculously.
Oh, I see they have lowered it to $690 per dose. I’m still not impressed.
http://articles.latimes.com/2011/apr/01/news/la-pn-makena-price-cut-fda-20110401
“If doctors, who are soaking in the system – smart people making their livelihood from these procedures – can’t tell you what a procedure costs; it’s ridiculous to center health care policy around the fiction that consumers can sensibly make economic decisions about their treatment in the current health care environment.”
Doug, this sounds pejorative to me — yet I hesitate to believe you are denigrating doctors. Most doctors, “hospitalists” excepted, work “in” hospitals but not “for” hospitals. They work for medical schools or physician groups that contract with hospitals. In fact a doctor with whom I am acquainted recounted to me how young doctors are cautioned not to mistakenly come to conclude that “hospitals are their friends”. The relationships are tenuous. So, I’m not sure the doctors would know the information you feel they should be familiar with. The doctor would know the charges for his or her services, but not what the hospital would charge for use of the facilities, supplies, services of techs, etc. And, individual and/or group insurance coverage will surely influence the answer, as insurance companies negotiate “bulk discounts” from hospitals.
I agree with you about the ridiculous part, just not the genesis of why it’s ridiculous.
Doctors have varying reasons for not knowing what the expense of procedures they describe might be. My primary point is that expecting consumers to make economically sound decisions about purchasing health care services is unreasonable if their primary contact with that system, the physician, can’t tell them what anything costs.
Secondarily, I guess, I’m skeptical about whether doctors can practice good medicine without at least a general notion of what something might cost in relation to the anticipated benefit of that thing. I might not know what the course of litigation might end up costing, but my strategy is going to be different if I’m chasing a $10k payoff versus a $1 million payoff.
What the doctor charges is not what the procedure will cost the consumer because of the various insurance levels, insurance companies, insurance plans tailored for groups, etc. The doctor may charge X but the insurance company Y “allows” Z, then, there is the deductible, the co-insurance, the in-or-out-of-network coverage, the out-of-pocket limit, etc. These are all variables, and is it feasible to ask the doctor to parse all these factors? The transparency needs to include the insurance coverage level and variables, and I think that would be a tough nut to crack. Maybe it would be simpler in a single-payor system.
First, my wife commented that this may be your most concise, thought-provoking post. I have to agree. Well done.
Second, responding to the part with doctors not knowing the costs: They should know exactly what they think the procedure is worth, and be able to give the disclaimer that it may be more or less depending on insurance or cash payment. For example, “The procedure costs $1,500, and that is what I’d charge you if you paid cash. I have to charge insurance $2,000 since it costs me more to get my money back, and sometime they negotiate that down to somewhere between $2,000 and $1,500.”. If they can’t do that, they better have a business manager that can, or how can they stay in business?
As for private vs single payer: The only way I see private insurance working is to have a regulated set of products that insurance companies may offer, and require that people buy their own insurance. Business can give a stipend & still get the same tax break, but the check is written to the insurance company of the employee’s choice. The regulated products should be a small number, say less than 10, with a common name (Plan A, Plan B, etc). This allows for different options on what is covered, but also allows for competition & clear pricing. The conversation with the doctor’s office can be “Oh, you’re on Plan B? Well, with that, the procedure is covered, but the medications are at 50% co-pay, so here is your cost.”
I think this also solves the pre-existing condition issue. If you were on a plan that covered the disease you had, by law you should be able to switch to another plan that covers it.
Jason, I question your belief how easy it will be to move from one plan to another. What will stop the insurance companies from selling plans that require the purchaser to keep the plan for 6 months or 12 months? I just can’t vision an insurance based system where a significant number of 300 million people switch plans every 30 days.
Tuna,
That is where the regulation kicks in. The product offered, along with the terms of the product, would a regulated item. Perhaps some of them would have a 1-year term, I have no problem with that. We have worse terms with TV and cell phone companies.
Companies would be free to offer “sweeteners” to make their Plan A better than the competition, but anything that is Plan A would have a floor that says it will at least give a certian minimum level of coverage.
Would the insurance companies do something like this willingly? Doubtful. However, if the only other choice is government run healthcare that eliminates their business for the most part, I think they would have to play ball.
This is the kind of stuff I don’t understand when people say they are against a single payor system run / funded by the government.
They claim the bureaucracy would be hideous; how in the bloody hell could it get any worse?
They claim taxes would have to go up; what the bloody hell do you call your insurance premiums? How are those not considered a “health tax” already?
It still comes down to: we need to shift resources away from things like wars and defense contracts, and over to spending a boatload of money on medicine and education. Its what first world countries should be doing; keeping their citizens smart and healthy, and letting us drive the economy and maintain that first world status. We can always build guns if the need arises.
All attempts at healthcare cost containment have failed. Managed care could not bring healthcare costs in line. Clinton’s managed competition might have had a shot in the 1990s, but AAHP managed to take that down. Controlling heatlhcare costs in a for-profit healthcare system model like the US is like the game of Whack-a-Mole or squeezing a balloon. Tamp down one vector and something else pops up or out.
When I was counsel for managed care companies I honestly believed that managed care could control costs. But I was wrong. I agree with you, Nick, single payor is the only option left.
I am totally agree with you Doug, many hospitals do not disclose actual charges .Patient have rights to know for which services he is paying for.