With my left thumb joint failing as I approach 60 years of age, I find myself rather frustrated in an attempt to be a judicious buyer of health care. I wonder if the term “free market” even applies to the provision of medicine in our country today. And I ponder what policies can help us out of this mess.
The diagnosis is basal joint arthritis; the therapy is joint replacement surgery. Two well-regarded surgeons, a fairly young doctor who I thought would champion the latest advances, and a seasoned veteran who I hoped would tend toward a more conservative course, are in alignment: although splints and injections might ease symptoms, long-term relief will come only with surgical repair.
For some of us, a good deal can also be therapeutic, and competitive shopping is deeply rooted in my genes, so I began asking for prices.
The surgeon’s billing person provided my initial education, telling me that assembling an estimate requires conversation with at least five practices: the surgeon, an anesthesiologist, physical and occupational therapy, lab, and out-patient surgery center – despite the fact that all of them are located in a shining, new medical office building dedicated to hand care. Just think if automobile repair operated under a similar business model: we’d get separate bills from the garage, the mechanic, and the car wash tech each time we go in for service!
The surgery center was first to give me a firm price: $4,997.23, explaining that the odd number happens to match my remaining annual health insurance deductible. As a retiree who must purchase health insurance without the benefit of group buying power, I find the most affordable option to be a high-deductible HSA plan that covers 100% after I pay the initial $5,000 out-of-pocket. The costs for operating room, nurses, recovery room, drugs & supplies, etc. would run about $19,000, with my share due before the operation begins. “Yes,” I was reassured, we take all major credit cards.”
So what about estimates from the other providers? Do they really matter after I satisfy my deductible? Regardless how much they charge, my out-of-pocket costs won’t change. Why bother asking ahead of time? I think they must count on this sentiment, based on how tedious it is to get answers. It seems that the medical industry is as bad at providing price estimates as the American public is at asking for them. Imagine a world where purchasing a new car generates separate invoices from the manufacturer, delivery truck driver, dealer, salesman, and county title clerk – and where estimates are not readily discernible before the transaction begins!
Medical price estimates come in two flavors: allowed and standard. Most of us pay an allowed rate that the insurance company negotiates with in-network providers. Those without health insurance – presumably the least able to pay – are charged standard prices, which appear to average about 50% more. Thus I am met with yet another obstacle to price comparison – why bother to shop for the best price when the insurance company has already set the rates?
Okay, so doesn’t this just make life easy? When one is in pain, mundane things like money should not matter, right? My out of pocket cost is capped; the surgery will make my hand feel better; I will retain and regain dexterity and functionality otherwise diminishing. I should be happy! But doubts nag: it is elective, and it will cost fifteen to twenty thousand dollars at the allowed rates. Shouldn’t I be a good consumer and use those health care resources responsibly?
By definition, a free market economy promises to efficiently allocate scarce resources via prices determined by supply and demand. No central control. No government interference. Winners and losers are determined by simple choices made by informed consumers who want to get the greatest value for their hard-earned cash. This system works extremely well for cars, gasoline, housing, clothing and food, so why do I question it’s applicability to health care? Because, for the past several decades, we have violated the most basic of free-market tenets: that buyers make choices based – at least in part – on freely-determined prices.
Since World War II, when automobile unions won subsidized health benefits in response to government-imposed wage controls, we have been teaching consumers that health care is something they should get just for the asking. While there are arguments that basic medical care should be a “right” in an advanced society, or that we are more competitive globally with a healthy population, those are topics for another essay. Here, I am simply focused on one reason that the free market – as currently implemented – is not shaping an effective and efficient health care system in our country.
We see one result of this system that has divorced buyers from prices quite clearly by looking at Wikipedia, which reports our national heath expenditures as 15% to 17% of GDP – about half again as much as other developed countries, the next highest of which comes in at 11%, and most of which seem to center around 9%. This means that other national priorities necessary for global competitiveness necessarily go begging, such as education and debt reduction, for instance.
The approaching elections force us to ask, “what is the answer to this costly morass?” I wish I knew. Unfortunately, fixing decades of developed business models and entrenched bureaucracies will require deep political will and massive effort. Far be it from me to think I can prescribe a comprehensive solution.
However, I do know a couple of things. The first is that we can’t afford to reverse course. It took Washington twenty years to address healthcare reform with the Patient Protection and Affordable Care Act – commonly called Obamacare. If it is repealed now, and our government stalemate continues as seems likely for many years to come, we will fall further and further behind the rest of the world that spends a third less on healthcare. Yes, the Affordable Care Act has problems that need to be addressed, so let’s do so! But, we can’t afford a wholesale repeal of our only effort at healthcare reform in two decades.
We also can’t afford to turn over even more more of our lives to the insurance companies. As noted above, we’ve already abdicated the role of medical price negotiation. Implicitly, this includes much of the decision making power as they dictate what will be covered and for whom. Just ask anyone with a pre-existing condition about the impossibility of getting competitive health insurance bids, and we see yet again that a supposedly free-market system is not getting the job done for us today. I ask then, how can it seem like anything but sheer folly to consider fragmenting Medicare by a voucher program that turns over another huge portion of our healthcare to the proven inefficiencies of the insurance system?
Along with a penchant for good deals, support for the Republican party has been part of my core since the 1970s. So it is with much dismay that I now find myself pushed toward President Obama because his healthcare policies are the only sensible option on the table today.