October 19, 2009

More on health care

"This American Life" is one of the better podcasts that I listen to. As Matt mentioned, their last two podcasts have been on the health care system.

Part one describes how doctors, patients and insurance companies each contribute to the problem of escalating health care costs. Like so many issues, everyone has a hand in the problem. Part of the reason market forces don't work as expected in the the health (and other) insurance markets, is the disconnect between who consumes and who pays for the product. Part two expands on this topic.

In part two of the series, they team up with another good podcast on my regular rotation, "Planet Money". Planet Money does a very good job of explaining the complicated economic issues of our time. In part two they describe how we almost accidentally ended up with employer based health insurance. They have a great comparison with shopping for groceries that does a good job of pointing out the oddity of this setup.

They also cover the huge difference between the cost of name brand and generic drugs. They compare two identical acne drugs, one is $50 and the other $668. The difference - the $650 version comes with (non prescription) calming wipes, calming serum and a calming mask - worth a few dollars. Because of the disconnect, the patient (if he has insurance) has no clue about the costs of the two choices. The piece has a good bit about how the insurance companies and pharmaceutical companies encourage patients in opposite directions.

There is also a good bit on pet insurance, how costs of treatment are thought of differently, and the story of a hedgehog.

Another topic that has been brought up is that patients often receive multiple bills for one office visit. One from the hospital, one from the doctor, one from the radiologist, etc. Adding to the confusion is the varying amounts listed on the bill. There is the listed cost, and then the adjusted price the insurance is willing to pay. Each insurance pays differently, based on their market share and negotiating power. From this number, the insurance pays their portion depending on your coverage, and then finally there is the bill due to you.

I have received four bills so far for my doctor and hospital visits earlier this summer. I'm not sure if this is all I will be billed for, as medical bills are notoriously slow to arrive. There may be other bills from radiology, lab work and other folks that had a hand in things. As near as I can interpret, the charges so far:

Total Charges - $9,407.19
Insurance adjustments - ($5,784.15)
Insurance payments - $2,764.25
Billed to me - $858.79 (plus co-pays of about $125)

If I am interpreting things correctly, the hospital/physicians are getting paid about 39% of what they are billing. Is the total charge line like the sticker price of a car that no one is expected to pay, or are these real costs that need to be made up elsewhere? According to the last part of the podcast, some of the costs are passed on to insurance companies that have less bargaining power. Ironically, it is possible that increased competition in the insurance market could actually mean higher premiums.

I highly recommend both health care podcasts (part 1, part 2), and regularly tuning in to both This American Life and Planet Money.

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