How much will that cost, doctor?

Of all the expensive services and products I can think of, only one denies to the consumer the leveling effect of competition and market pricing, and that is health care. The way it works here in the most developed country in the world is non sensical. If, like 85% of everybody now, you have some form of health insurance, either through your employer or a federal agency like Medicare or Medicaid, you don’t even ask what things cost. When you get sick or hurt, you just enter the system and place yourself at its mercy. If you are one of the 15% uninsured you are probably either too poor to afford insurance or don’t have good sense. Or a “young invincible”. Or too rich for it to matter.

If you do have healthcare insurance, your insurer is supposed to negotiate pricing, and they do as best they can. But the negotiations are hamstrung by a paucity of data. Even the federal government has problems with it. Why? Well, healthcare is complicated and subjective. A half century ago there was no standard pricing at all, but then Medicare got into the act and, just for the elderly, they set up pricing for everything from bunions to bypasses. That was both good and bad. Doctors and hospitals were aghast at first, but they soon came to love it because for the first time they could charge for all they did instead of bundling everything into what they thought people could pay.

But Medicare still negotiates and the result is pricing that has started to become standard. But, what is the basis of even those prices? The medical industry and the AMA have been fighting attempts at data collection and analysis and transparency of pricing at least since the 1970’s. In 1979 a federal court in Florida granted the AMA an injunction barring release of doctor-specific Medicare information, and that is pretty much where it stood until now. Pricing varies wildly and has no rational basis.

The situation is finally changing. Based on a court order the injunction has just been lifted and the Centers for Medicare and Medicaid Services (CMS) have released data on more than 880,000 doctors and other medical providers who collectively received $77 billion from Medicare in 2012. The medical industry is crying foul and appealing on the basis of privacy, both of doctors and patients, but that is a thin argument. Consumers are being skinned. One ophthalmologist alone took in more than $20 million from Medicare in 2012. The USA Today newspaper was prevented from contacting him under the legal provisions that lifted the 1979 injunction and permitted the release of the pricing data.

The veil is starting to drop. If pricing does become transparent, then both insurers and the high-deductable insured can better shop and the market will begin to matter, not just for the elderly but for all, and that includes all the newly-insured under the Affordable Care Act.

This development could be a game-changer, but it is only happening under a Democratic administration. What I fear is that under the GOP it would be reversed under the pretense that healthcare pricing is not the unique thing that it is.

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
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20 Responses to How much will that cost, doctor?

  1. The release of the data is long overdue and more scrutiny is absolutely necessary.
    However, as one who is still actively involved in the healthcare industry, I must let you know that Medicare does not negotiate on physician fees. The allowable payment is set in Washington and physicians either take or don’t take Medicare payments.
    In the early 80′s the inpatient hospital costs were bankrupting the system because at that time all hospitals were paid “cost plus” that guaranteed a government determined “reasonable” profit. Each year hospitals used armies of accountants to submit their Medicare cost reports to settle the previous years and plan for next year. With the system going bankrupt a fix was implemented that shifted the risk from the government to the hospitals via a Diagnosis Related Group (DRG) system developed at Yale University. Going forward inpatient treatment for Medicare payments fell into roughly 477 groups, and each hospital received a pre-determined set amount for that DRG. If treated for less it kept the profit, if cost it more the hospital ate it.
    While that helped keep the program solvent for these past 30 years, new problems emerged
    1. Most of the tests that used to be done “in house” the day or night before shifted over to the outpatient side and that side of the payout has exploded over the years.
    2. Technology has shifted much that used to need hospital treatment into outpatient centers and even physician offices themselves making the raw number of providers that needed to be policed and ever larger, and ever more unworkable number.
    3. The senior lobby along with home health and medical device manufacturers have successfully used the “quality of life” shame to add one after another additional “service” added to the Medicare list of items paid for. From the scooters, to shoes, to penis pumps, if you’ve got Medicare, you can get it.
    What looked like a very good compromise and cost control measure in the 80′s has turned into a bloated monster paying for anything and everything that a lobbyist can get added to the approved list of services.
    But in the end, it was inevitable. There is absolutely no way a government run healthcare system in a nation as large and diverse as the United States can provide the quality of care demanded and the cost needed to keep from bankrupting the treasury. The only reason Medicaid still exists today is because providers have shifted the losses over to private pay and health insurance companies. The amount of dollars that the private health care industry subsidizes Medicaid and Medicare losses is staggering.
    But the biggest problem isn’t even Medicare or Medicaid. It is as you mentioned in your post: That we all go to the doctor now and never even think of the cost. The minute a 3rd party insulated the patient (payer) from the cost, the clock started ticking on an bloated, expensive healthcare system whose charges were barely recognizable in comparison to the true cost. Throw in the trial lawyers lobby, the misguided emergency rooms must treat anyone presenting mandate, and the “standard of care” lawsuit standard that costs untold dollars and you’ve got an entire system in need of serious reform.
    Unfortunately instead of reform, we got the Affordable Care Act. As a wealth transfer mechanism it’s brilliant, as a system for providing quality, affordable, healthcare it is a disaster.

    • Jim Wheeler says:

      There is absolutely no way a government run healthcare system in a nation as large and diverse as the United States can provide the quality of care demanded and the cost needed to keep from bankrupting the treasury. The only reason Medicaid still exists today is because providers have shifted the losses over to private pay and health insurance companies. The amount of dollars that the private health care industry subsidizes Medicaid and Medicare losses is staggering.

      But other countries, like Canada for example, do in fact have single-payer healthcare systems that have outcomes as good or better than ours and at about half the cost. The Canadians I blog with seem to be pleased with it. And as far as I can tell, American healthcare insurance companies are doing just fine, financially. They pass their costs on to their customers in premiums and high deductibles.

      Unfortunately instead of reform, we got the Affordable Care Act. As a wealth transfer mechanism it’s brilliant, as a system for providing quality, affordable, healthcare it is a disaster.

      Nobody, including me, contends that the ACA is perfect or that it will solve the pricing problem, but I think it likely that it will improve the financial situation, simply because it gets the uninsured into the insurance system, imperfect as it is. It also improves society as a whole by, for example, protecting people from unpredictable serious health problems.

      What many people don’t seem to realize is that the ACA is not a health insurance plan in itself, it instead sets rules for the industry so that market competition among the insurers can, hopefully, take place. And yes, I agree that it does function as a “wealth transfer mechanism”. Such is needed if Congress is going to insist that people never be turned away from an ER. Because of EMTALA and Medicare pricing, there is no market pricing (nor shopping) at the consumer’s level.

      To disparage government systems simply because they result in “wealth transfer” ignores the reality of why such things exist. As a nation, I submit, we do that because we can collectively have a better society than we can with a Rand-like government in which everybody is presumed to be self-sufficient. In a way, national defense is also a wealth-transfer system, one in which the weak and poor are protected equally with the strong and wealthy.

      Why is it, I wonder, that people who bash the ACA don’t offer some rational alternative that does solve the pricing problem?

      Thanks for joining the conversation. I appreciate an insider’s view, including that of the process for adding mechanisms and devices.

      • While yes, the Canadian system and other European systems provide healthcare at a lower cost when just looking at outlays, they are still providing European healthcare, not the technologically driven, standard of care or get sued, I demand the best of the best American healthcare that is currently our system.
        I am one of those bashers of the ACA and I and others have offered numerous alternatives since it was first being debated but as you know, not one of those have even been tried. The reason I am against the ACA is because it just will not and cannot do what needs to be done.
        Access to care? Nope, Medicaid expansion only dumps more into an already overcrowded system that has even more doctors dropping out of that payor system leaving more without access to docs. Add the recent study out of Oregon showing that Medicaid recipients in that state actually had WORSE health than those with no Medicaid coverage should be a wake up call for all of us.
        Lowering the costs? Unless we actually address the 3rd party cost insulation issue you discuss in your post, provide real tort reform, and get the patient more involved in the actual choices and pricing costs just will not come down. The ACA does not address this problem either. Preliminary numbers are also showing that of the new signups they are indeed the sicker and more resource intensive ones that without large numbers of young people to offset will drive costs even higher.
        Insuring the uninsured was the excuse used to pass the ACA. Yet the numbers coming out of those who have enrolled to date in studies by Rand corp and others show that considering the billions and billions in cost, the upheaval to the industry, and the incalculable hit to economic activity from the uncertainty from the political manipulation of deadlines and exemptions, the ACA is not only not insuring the previously uninsured but adding a future entitlement cost through Medicaid expansion that is just simply unsustainable without huge tax increases down the road.
        It (ACA) was also touted as “deficit reducing”, yet much of that deficit reduction revolved around the double counting the $700 billion in Medicare advantage cuts that were delayed for the 2012 elections to avoid senior backlash and now have been delayed again due to political pressure. The reduction this year was less than 2% and yet that couldn’t be implemented. Add in the continued delays of the individual and small business mandates and the ACA is unraveling before it ever even gets implemented. (THE ICD 10 coding mandate just got delayed again for another year as well. That’s a good thing because we don’t need the overly complex system but a bad thing because it’s yet another “deadlines really mean nothing” kick the can down the road.)
        Yes, we desperately needed healthcare reform. No I do not propose returning to the status quo before the ACA passage. But just tweaking this monster around the edges will not provide reform either.
        Repeal the entire mess and start over. Keep the pre-existing conditions and cap regs, that can be spread across the risk pool at reasonable cost, re-think the 26 on parents insurance 22 to 24 maybe but really 26?, provide real tort reform, allow purchase across state lines, utilize health savings accounts and catastrophic policies, drop the arbitrary, politically motivated coverage “standards” (a 55 year old in Fargo should not be forced to pay for pediatric dental care), drop the emergency room must treat all no matter what mandate that has turned them into community clinics rather than true emergency rooms. Other issues include community clinic expansions, expanding nurse practitioners as front line primary care providers. The above are just off the top places to start.
        No, they do not provide an immediate “blanket of coverage” to the uninsured but as we now know, neither does the ACA. Smaller, targeted reforms that can be tailored from one region to another can be much more efficient and more effective in actually providing care and coverage than one large top down system run out of Washington and controlled by politics.
        As it’s currently structured and being implemented the ACA is far more about wealth redistribution than it is reducing costs and increasing access.
        But sadly, once it got labeled Obama’s “signature” achievement the wagons have been circled and even daring to suggest that perhaps a mistake was made, that this bill really doesn’t do what it said it would do.
        And I’m not saying this because I’m on the other side of the political aisle. I’ve read the thing, I’ve studied it through the prism of the 80′s reform that I was on the front lines of implementing, and I can tell you without one word of partisanship, it just can’t work. The politics won’t allow the cuts to ever get fully implemented, (that balloons the deficit) and the mandates only drive costs higher and make networks smaller.
        If the issue is truly about reforming the system then the ACA goes away and is replaced by stand alone bills addressing the specific issues.

        • Jim Wheeler says:

          Your detailed comments provide some clues that your thinking is biased in this complex subject. I accede to your experience but I think you’re missing the big picture. For example:

          While yes, the Canadian system and other European systems provide healthcare at a lower cost when just looking at outlays, they are still providing European healthcare, not the technologically driven, standard of care or get sued, I demand the best of the best American healthcare that is currently our system.

          The “technologically driven” services you admire are one of the reasons why our system is too expensive. The bling, including digital monitors of all kinds and scanners of all kinds are over-used. That is driven by, as you mention, fear of law-suits, but also by greed because our payment system is rewarded by through-put and motivated by profit ahead of patient benefit. I recently heard from a reliable source that one of our local hospitals has set a goal for its GP’s of 8 minutes maximum per patient visit. I think that’s absurd and when I mentioned it to our doctor, he agreed. The ACA on the other hand emphasizes preventive care that includes early detection and treatment for the conditions that most affect health, life span and quality of life, things like diabetes, COPD, atherosclerosis, mental health and addictions. Your wish to scrap it and start over is redolent of the 40 or 50 such political attempts that have been made by the House in the last few years.

          It would have been better if we had opted for a single-payer system, but the GOP and the for-profit medical industry would have none of that, so we are stuck with what we have. You say it can’t work. It is working poorly in those red states that have worked so hard to sabotage it, but it does seem to be working well in many others. Time will tell because the ACA is here to stay, at least until 2016. If the GOP wins all of government then, your side will have its bite at the apple.

          • I think you misinterpret my post. I don’t admire the technology driven component at all. I am merely stating that Americans are hooked on it and there isn’t enough money in the world to provide that to over 315 million people.
            I know you have deep faith in a single payer system but the two biggest single payer systems in place now are not working.
            Medicaid is deplorable, it doesn’t even cover the cost of providing the service and as the Oregon study shows it isn’t improving health either.
            Yes, the ACA provides for some preventing care, that IS a good thing but again, those issues can be addressed without upending the entire industry.
            As for the ACA is working in non-red areas, it is far, far too early to gauge that. Thousands have had their networks narrowed, their deductibles and premiums rise and can’t continue with doctors they’ve been seeing for years.
            Imagine if all of a sudden instead of you getting a choice to pick your Medicare plan you instead get a notice that Washington has deemed your plan no longer good enough and that you have these new one or two choices that will increase your costs and decrease your services.
            I know you’re frustrated with red-states not taking it whole hook but it is bad law with no good to come from it.
            It looks great to see all those new “benefits” that are now covered but somebody has to pay for them. And that is where the ACA falls way short.
            In the tried and true phrase: It over promises and under delivers.
            And it’s not about my side or your side, it’s about reform that will work. It shouldn’t be a democrat or republican issue, it should be an American issue.
            I’m not against the ACA because Obama signed it, I’m against it because it’s the most poorly designed law to ever pass Congress and it is already spinning off more unintended negative consequences than even prohibition which gave us organized crime.
            And we’re not even to the worst of it yet, the employer mandate. Which of course has been conveniently delayed again for political reasons.
            It’s not which party, it’s just plain politics. The “Doc” fix is still being put off year after year, years after it was supposed to go into effect. The Medicare advantage cuts are now delayed two years, the individual mandate in flux, more carve outs and exemptions for one plan after another………..every major mechanism that is to pay for this system and keep it from being another entitlement drawing more away from the treasury and further endangering Social Security and Medicare is being delayed. And none of those delays are being done by any Republican in any red-state. If the party that birthed it and the President that signed it into law won’t even fully implement it why in the world should anyone believe this is really a “good” thing?

          • This was good reading. As I read your post, and the conversation that it started, I was reminded of several decades ago when I was a young court reporter. My perception of who should prevail, whether in a deposition or a trial, was — whoever spoke last. I would listen to one side, think, yes, yes — then the other side and I’d say, Oh, yes, that’s true — then the other side, etc. But in this case, I believe I stuck with you. I wanted to refute the idea presented that no government-run health care system could provide quality … etc., and was pleased to see you did that. It’s all complicated and there are good arguments here. And I would have preferred a “medicare for all” approach, but what we have is progress, and I think we need to support it.

  2. aFrankAngle says:

    Interesting how company A negotiates a $500 fee … but company B $800 … and the uninsuranced rate is $2000 … Meanwhile, and regardless of the majority party, I have no clue where it is going.

    • Jim Wheeler says:

      I think there’s no alternative but to read the fine print, Frank. Policies are going to differ and it’s my understanding that Ohio’s “exchange” is supposed to help customers sort it all out. If you know anyone who has the experience, I’m all ears.

  3. PiedType says:

    I’d like to think publicizing those prices would result in competition that would lower them. But the insurance companies drive the pricing more than the doctors do, so I’m not sure how it would all work out for patients, many of whom aren’t going to price shop for doctors and procedures like they would for, say, a car.

    • Jim Wheeler says:

      The insurance companies are supposed to compete with one another on their customers’ behalf, PT. But the problem may be the one Jim in Iowa mentions – the difficulty of comparing differing policies, their costs and deductibles. One symptom of this I read about all the time is the complaints of people who are angry over their ACA-approved policies being more expensive than their “old” policy. It’s my understanding that this is invariably because their “old” policy was really crappy.

      • PiedType says:

        One shortcoming of ACA is not removing the antitrust exemption for health insurance companies and forcing them to compete the way other businesses do, with each other and across state lines. But it didn’t, so they won’t. And prices will stay high.

        The old policies may have been really crappy, but they were also cheaper. There is no point in kicking people off policies that they chose because that’s all they could afford and/or wanted, and forcing them to pay more for policies that include coverage they don’t want or need (eg, pediatric care for single people, pregnancy and childbirth for men). And yet that’s what ACA does. Nor does it does it do anything to improve health care when it adds 12 million people to a system already overburdened and understaffed.

        I think it’s too soon to say the ACA has failed, but I’ve thought from the beginning that it was badly, badly flawed and I remain skeptical about its ultimate success in providing better care to more people at a lower cost.

        • Jim Wheeler says:

          Fair enough, PT, but regarding the ACA forcing people to pay for coverage they don’t need or want, I note that Jim in Iowa’s wife managed to avoid that problem. Your complaints are, I think, similar to those of Geoff Caldwell – they seem to boil down to hating to pay for more than you personally use. The problem with that is, nobody knows what health disasters fate has in store for each of us. Repeal EMTALA, let hospitals resume dumping poor patients on the doorsteps of the bad ones, or in alleys, and then I’ll consider the case for tailor-made policies and a government only Ayn Rand could love.

  4. Jim in IA says:

    My wife and I have talked often about this. We are urged to be smart consumers. To shop around for the best policies and pricing. As a Medicare recipient, I am to pick from the various plans for the best fit for me. There is no way I can ever dig any deeper than superficial price of the premium. The cost of services is secret. Even a billing statement is the most confusing thing to read. Who paid what for something and why? It makes no sense.

    • I certainly understand your frustration. I review my parents EOB’s and there Medicare open enrollment each year I even get confused at times. Ours is a system that started out with noble goals but over the years has had one layer placed upon another resulting in a web of regulations, procedure codes and payment tables that make it impossible for an average person to decipher.
      It makes the entire system a fraudster’s dream and a physician’s nightmare all the while we the taxpayer keep getting the bill. If there is ever an issue you need help on I’d be happy to review it for you. Can email me offsite at gc@caldwellscorner.com.

    • Jim Wheeler says:

      I’m glad to hear from someone who is shopping for healthcare insurance, Jim. As one who fortunately doesn’t have to do it myself, I’m interested in your experience in using the Iowa healthcare exchange system. Am I right that while you can’t compare the cost of, say, heart bypasses, between insurers, that you can compare coverages and deductibles? Or are coverages too different to compare? Seems like someone ought to come up with lists of what’s not covered by the different plans. If the ACA doesn’t do that, it oughta, seems to me.

      • Jim in IA says:

        I am covered by Medicare now as of last summer. Reading the details offered by the various choices of companies for my B and D coverage was daunting at the start. It felt like I needed to know a lot more than I did in order to make an informed decision. I settled on a plan by a company I was already familiar with for part B. So far so good. But, I am very healthy. I don’t know how it would go if I had a long and drawn out illness.

        My part D for drug coverage is cheap. I take 1 generic drug. There is no copay, just a monthly premium. Other plans were much more costly that this one.

        None of these were through the Iowa Exchange. That is where my wife shopped. She is younger than me. She chose a plan that was not on the exchange. It doesn’t off her maternity or pediatric coverages. We don’t need them. That was a cost saver for her. The exchange plans all seemed to offer those components. So far, it is gives her good cost coverage.

        How will these policies she and I use look in 3 to 5 yrs? Time will tell. Geoff above seems to think we are moving in the wrong directions and the cost are going to balloon more. Maybe. I would like to see some brave folks in DC who are willing to speak out clearly and intelligently who can wrestle this monster of health care into submission. Hell. We could send people to the moon and back with technology that we laugh at today. Smart people can do amazing things. Instead, we now have stubborn and narrow minded individuals looking out for the bottom line of all the wrong people…their wealthy donors.

        Now I am getting off on a tangent. I’d better shut up. :-)

  5. shimoniac says:

    As one of the aforementioned Canadian bloggers, I can tell you that even our universal health care system is starting to show cracks. The money for health care is doled out by the individual provinces and territories, therefore each jurisdiction (to loosely use a term) sets its own priorities as to what it will and will not cover. We, in Ontario, used to get an optometry appointment every two years, and limited chiropractic care; but that was delisted ten years ago. The money saved was supposed to be reinvested in acute front line health care (Emergency Room).
    With some cousins in health care I could tell you some stories that would leave you speechless. Just one example is, the province reduced payments to hospitals and told them to do with less.
    Okee-dokee said the boards of directors at hospitals across the province. One local hospital has a chairman of the board and ten board members, each pulling down 100K or more. What did they do, as did most of the hospitals across the province? Fired nurses, orderlies, janitorial staff, cooks, and like that to make up the difference. The hospital still has a chairman and ten board members who now qualify for bonuses because they saved money.
    In the meantime if you are transgendered, your hormones, psychiatry, and reassignment surgery is covered by OHIP (Ontario Health Insurance Plan). Recently they’ve amended the rules to pay for more than one cycle of IVF, because having a baby is a right after all.
    On the other hand, there was a girl in the paper recently who has a condition that is so rare most doctors have never even heard of it. The medicine that this girl needs to stay alive costs both arms, legs, and a kidney; or as a government comptroller might say, a rounding error. She cannot get it covered by the government. The manufacturer has been effectively donating it for the last several months, but they have stockholders like any other company. That largess is going to run out sooner rather than later. Then where will that girl be?

    • Jim Wheeler says:

      @ Shimoniac,

      Your account of Canadian healthcare is sobering. As said before in this thread, there’s lot’s to discuss in the fine print of any bureaucracy and I have to admit that the notion of submitting my health and welfare to the judgement of some bureaucrat is unsettling, to say the least. On the other hand, the U.S. system of fee-for-service has been on an unsustainable financial trajectory and I hear stories similar to those you tell about people left out of coverage. I think we can be sure that no system is ever going to be without criticism. Perhaps the one positive aspect of your account is that you seem to have public transparency in your system, and so far as I know, it is still demographically delivering about the same outcomes as ours at half the cost – mortality and quality of life.

      Having an optometry appointment every two years sounds about right to me for someone whose eyes are aging normally. If someone develops some chronic condition, I assume that would be accommodated. The rare disease or condition has always been a problem for any system. Drug companies have no financial incentive to pursue medicines for such and the girl you mention is lucky that one for her even exists. I submit that no system can ignore costs or avoid tough choices and being on the hospital board you mention would probably keep me awake at night, I don’t know.

      I appreciate your thoughtful input here, shimoniac. Regards to your pop.

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