Why do hospitals care about health care costs?

chuckster, ADN, BSN, RN, EMT-B · Mar 9, 2011

The health care system in the US is a perversion of the normal consumer models of capitalist societies. Using insurance to pay for care is possibly the most inefficient way to pay for anything. Were you aware for example that there is one health insurance employee for every doctor in the US (about 1 million physicians and about 470,000 health insurance employees)? There is also huge disparity in the prices charged for procedures (note that I'm using price, not cost) and compounding that, there is very little transparency in the pricing. The price charged for a simple colonoscopy for example ranges from something like $900 to over $3,000. And to the second point, just try calling a clinic to get a price for a colonoscopy (or really any procedure - Lasik surgery excepted). You can't get one because it's not in the best interest of the clinic or hospital to compete on price.

There is also the "Field of Dreams" phenomenon. The US has something like 6 times as many CT scanners as does another very similar country like Germany (and 4 times as many MRI machines). So guess which country leads the world in per-capita CT and MRI procedures (hint: It's not Germany - though they are far ahead of us by most measures). And of course there's the drug advertising - I could go on.

The point is that system for delivering and paying for health care has become a model of perverted inefficiency. This should be evident to everyone from just a few data points. We spend much more than any other country on health care: In 2007, just over $6,700 per person vs about $5,200 for Luxemburg (the next closest and by far the highest anywhere but the US). By comparison, Norway and Switzerland spend about $4,000, Germany and France just over $3,000. Most first-world countries spend from $2,000 to $4,000 per person. Despite the much greater spending, most outcomes (not just longevity and infant mortality) in the US are not only not better than most other countries (including some 2nd and 3rd world countries) they are worse.

I urge everyone to read David Goldhill's excellent article from the Sept 2009 issue of The Atlantic, "How American Healthcare Killed My Father". Despite the title, the article is really a interesting and excellent survey of the health care system in the US and more importantly, contains some very insightful suggestions on how to change the system for the better (note to both conservatives and single-payer advocates - you will be disappointed that the suggestions don't support either of your positions).

Link to the article:

http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/

classicdame, MSN, EdD · Mar 9, 2011

what you fail to mention is the HUGE tax burden in those countries. My son has lived in Sweden 14 years. He pays at least 35-40% more in taxes every year than I pay, whether he uses health insurance or not. And if your complaint does not fall into their predetermined method of care then you pay privately. No such thing as a free lunch.

chiuli · Mar 9, 2011

I went many many years without insurance and I had no choice but to pay for my procedures. I got the bill and a due date to pay. No body babied me around. My simple blood work was 1,000 and as much as I didn't want to, I paid for it.

I don't get how people not pay their bills. Its like buying a flat screen tv and then deciding not to pay the bill.

RNOTODAY, BSN, RN · Mar 9, 2011

hmmmm , so the other day the site was having server problems? :rolleyes:

chuckster, ADN, BSN, RN, EMT-B · Mar 9, 2011

what you fail to mention is the HUGE tax burden in those countries. My son has lived in Sweden 14 years. He pays at least 35-40% more in taxes every year than I pay, whether he uses health insurance or not. And if your complaint does not fall into their predetermined method of care then you pay privately. No such thing as a free lunch.

The tax burden issue really a red herring. Yes, taxes are higher in the Nordic countries and in fact in most of the countries with state-sponsored health care. The higher tax burden is however not necessarily due to health care costs, though that is probably a component. The total social safety net in most countries, certainly the Nordics and Western Europe, is much more robust than in the US. Not saying this is either a good or bad thing, only that the higher unemployment benefits, state-sponsored pensions, generous maternity leave, state funded rail, etc are significant contributors to the higher tax burden.

In addition, we often are not making a valid comparison of the tax burdens when figures like "35%-45% more" are cited. I'm not familiar with all the specifics of Sweden's taxation but I am somewhat familiar with that of The Netherlands, which I suspect is quite similar to Sweden in this regard and for which a total tax burden of about 52% is often cited. In the US, the highest marginal federal tax rate is 35%, seemingly indicating that the average Dutchman pays a whopping 48% more in taxes (52% less 35% = 17%, 17% divided by 35% = 48%). But this is not a valid comparison because it takes the total tax burden in Holland (52%) and compares it to only the federal tax burden of 35% in the US. Add in an additional 6.2% in Social Security tax (which I think has been temporarily reduced to 4.2%) unless you are self-employed - then you pay at the rate of 12.4%. Add another 1.45% for Medicare. You also need to add in state income taxes that don't exist in most European countries and most of your real estate taxes (I say most because RE taxes in Holland exist but at a much lower rate - schools are paid for out of federal, not local taxes). You can see that we've narrowed that "48% more" down quite a bit.

Frankly, all of that is beside the point. Sweden spends $2,900 per person on health care. The US spends $6,700. Someone pays either way - in Sweden, it's the taxpayer, in the US it's the taxpayer (for Medicare, Medicaid, the military and gov't workers), companies (in the form of insurance premiums) and individuals (in the form of premiums or to a smaller extent, out of pocket). Swedes pay higher taxes than Americans (though I suspect not as much more many have been lead to believe) but not all of that is due to spending on health care.

You are absolutely right that there's no free lunch. Someone pays either way - we just pay more than everyone else and get poorer results in the bargain. We are much better at hiding the true costs though.

ImThatGuy, BSN, RN · Mar 9, 2011

It's often a fight trying to get insurance companies to reimburse for services and supplies utilized. Also, medicare and medicaid are quite explicit about what they'll pay for and what they want. What isn't reimbursed is either sent to collections for fractions of the return or written off. It's actually a big deal and the essence of modern healthcare. Oddly enough the process is much more interesting to me than patient care.

As for the AMA, good riddance. Don't wanna be here? Get gone.

chuckster, ADN, BSN, RN, EMT-B · Mar 10, 2011

It's often a fight trying to get insurance companies to reimburse for services and supplies utilized. Also, medicare and medicaid are quite explicit about what they'll pay for and what they want. What isn't reimbursed is either sent to collections for fractions of the return or written off. It's actually a big deal and the essence of modern healthcare. Oddly enough the process is much more interesting to me than patient care.
As for the AMA, good riddance. Don't wanna be here? Get gone.

Possibly true, but again misses the real issue. Socialized medicine as it exsists in Europe is not viable in the US. Indeed, thanks largely to the polarization due to US news reporting, "socialized" anything is an anathema to Amercians. What lost in this myopic argument is that "socialized" medicince already exists in the US and indeed is one of the major forces to be reckoned with in health care (Medicare, Medicaid, Tricare - the military insurance plan and the government employees insurance plans are for all intents and purposes socialized medicine and are no one can possibly argue that they represent a very large chunk of US health care). But I digress.

If it is a given - as I believe it is - that the US finds European-style socialized medicine wholly unacceptable, then we must adopt a true capitalist system that truly empowers individuals. Indeed, this is what groups like the Tea Party appear to advocate. So let's make individuals responsible for routine, predictable medical expenses (well-care, broken bones, minor accidents, maybe even pregnancy). Let's give them a means to pay for these - real medical savings plans that don't have the "use it or loose it" component of the existing plans. Lets let them get estimates of what things will cost. Have the govt plus-up the accounts for low income individuals. Empower consumers to look for medical bargains, the same way they do when they buy MP3 players or flat-screen TVs. Reserve insurance for the things it is good at: Serious accidents, serious illnessnes and the like.

Sound interesting? None of this is my idea. Read this article and you'll see what I'm talking about.

http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/

And actually, this thread is about the cost drivers in US health care, not the system per se. So maybe we should get back to that. Remember, there is one health insurance worker for every 2 doctors in the US. Think we may have a few too many administrators and not enough folks actually providing care? Discuss.

cogath · Mar 10, 2011

I know that with my insurance company the hospital definitely doesn't get the prices it asks for things. For example a procedure costing $70 so says the hospital, my insurance company will only "allow" $26, and of that I may have to pay about $3-4 or somethings nothing.

ImThatGuy, BSN, RN · Mar 10, 2011

Possibly true, but again misses the real issue. Socialized medicine as it exsists in Europe is not viable in the US. Indeed, thanks largely to the polarization due to US news reporting, "socialized" anything is an anathema to Amercians. What lost in this myopic argument is that "socialized" medicince already exists in the US and indeed is one of the major forces to be reckoned with in health care (Medicare, Medicaid, Tricare - the military insurance plan and the government employees insurance plans are for all intents and purposes socialized medicine and are no one can possibly argue that they represent a very large chunk of US health care). But I digress.
If it is a given - as I believe it is - that the US finds European-style socialized medicine wholly unacceptable, then we must adopt a true capitalist system that truly empowers individuals. Indeed, this is what groups like the Tea Party appear to advocate. So let's make individuals responsible for routine, predictable medical expenses (well-care, broken bones, minor accidents, maybe even pregnancy). Let's give them a means to pay for these - real medical savings plans that don't have the "use it or loose it" component of the existing plans. Lets let them get estimates of what things will cost. Have the govt plus-up the accounts for low income individuals. Empower consumers to look for medical bargains, the same way they do when they buy MP3 players or flat-screen TVs. Reserve insurance for the things it is good at: Serious accidents, serious illnessnes and the like.
Sound interesting? None of this is my idea. Read this article and you'll see what I'm talking about.
http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/
And actually, this thread is about the cost drivers in US health care, not the system per se. So maybe we should get back to that. Remember, there is one health insurance worker for every 2 doctors in the US. Think we may have a few too many administrators and not enough folks actually providing care? Discuss.

I've never been a proponent of socialized healthcare. I do believe in insurance though. I'm fine with Medicare and Medicaid to an extent as well but Medicaid should be as short-term as unemployment (IMO) and require a drug screen prior the the issuance of benefits as well as routine testing thereafter. The same should apply to any government benefit.

At any rate, I'm all for upfront payment or billable insurance. If you can't pay then you don't get help. Cold? Heartless? Perhaps. Pragmatic? Definitely. If you can't contribute to the pie then you don't get a slice in my book

Healthcare administration is fast becoming an interesting field to me. Sadly, I'm not nearly as clued in as I'd like to be. Frankly, the finance and policy of it all has become more interesting to me than actual patient care.