Health Care

Here's a cheery topic these days, but I have a question I'm hoping someone can help shed a little light on for me.
When my wife had shoulder surgery, we eventually bought a sling from Rite Aid for about $8 + Tax. A week or so later we see the doc who mentioned that he can get her a sling. We assumed it would be more...well, more than the thing we bought. It was exactly the same thing...down to the stitch. It also cost about $80.00 per the bill.
Where did the inflation come from? My father-in-law is a doctor and he's described times where his office had to operate at a loss in order to treat certain cases because of the insurance costs. I'm assuming the 10-fold increase in cost comes in part from insurance costs.
What gives?
Take care,
Matt

Matthew Gano wrote: Here's a cheery topic these days, but I have a question I'm hoping someone can help shed a little light on for me. When my wife had shoulder surgery, we eventually bought a sling from Rite Aid for about $8 + Tax. A week or so later we see the doc who mentioned that he can get her a sling. We assumed it would be more...well, more than the thing we bought. It was exactly the same thing...down to the stitch. It also cost about $80.00 per the bill. Where did the inflation come from? My father-in-law is a doctor and he's described times where his office had to operate at a loss in order to treat certain cases because of the insurance costs. I'm assuming the 10-fold increase in cost comes in part from insurance costs. What gives? Take care, Matt

Oh it gets better... The actual numbers I am about to use are plucked from the air but based on my decades of work as a RN in a variety of settings and jobs... First of all you father in law is partly right in that unreimbursed care can be a factor although it is probably not as great as some doctors and hospitals claim (I know there were hospitals in the 1980s and 90s that could get "Hill-Burton" federal funds to cover unreimbursed care never bothered to factor that in to their statements to the public).
But another bigger factor is the absurd patchwork caused by the lack of a single payor system. For an item you can buy at the pharmacy for $8 and that your doc charged you $80 ... Here is where my numbers are NOT REAL but within the realm of the possible in terms of how they relate to each other :
If you were on Medicare maybe the Feds - or actually the regional huge private insurance company that actually implements Medicare (another little-publicized fact that accounts for HUGE variation in what gets covered between different areas of the country) would pay the doctor $50. If you were elderly disabled and low income on Medicaid they might pay the doctor $5 or maybe $10 - not sure if he'd lose money or make a buck or two. If you were with a private carrier on a traditional plan, the would arrange contractually for a discount from his $80 and "allow" $60 and if you had a 20% copayment the insurance would pay $48 and you would pay $12. If you were with a for-profit HMO, they would have negotiated a per-covered person per month price for all services (likely with percentages allocated to inpatient and outpatient services) - known as "capitation" - and so you doctor would simply put the few bucks he paid for your sling - less than $6 by buying slings in bulk - in the expenses column against the allowance he gets for carrying you as "his" patient.
Every purchased item in every hospital in the USA is subject to this bizarre and illogical system.

To add to what Janet said, hospitals generally expect that only about 1/3 of billed fees will actually be collected, for whatever reason, either because of insurance company allowances or uninsured people who can't/won't pay. And that 1/3 fraction doesn't seem to change with the actual dollar amount of the bill.

So what do they do? They make sure that the revenues received (not billed) match whatever they need to cover their costs and (at for-profit hospitals) their profit expectation. Whether that amount matches the actual cost of the item is purely random.

Hence the total lack of transparency in medical billing. Just try to find out in advance how much a procedure will cost you...

Katherine

Interesting stuff! Thank you both!
It's really no wonder there is so much cynicism regarding health care costs. It's just another example to reinforce my pre-existing distaste for economics too. I'm not saying I know a better way, but it's a real shame that money-issues mitigate the value of things. In making the system overly-complex, we lose control over it and start playing a wierd sort of alchemy game.
...So it seems anyway.
Thanks again, good stuff to know.
Take care!