Check out the feature article in this week’s Time Magazine. It’s called “Bitter Pill,” and it’s written by Steven Brill, a savvy insider. In addition to making me apprehensive that health insurance costs are about to spike upward due to Obamacare’s lack of any meaningful price controls on health insurance, it gives an insider’s look into the massively arbitrary pricing of health care services. In the absence of any competitive market, big hospitals (including the so-called non-profit hospitals) are freely allowed to concoct the prices they charge. They quietly maintain their made-up pricing on their non-public “chargemaster” price lists. This system is well known by those in the industry. The prices charged by hospitals are typically many multiples of the actual cost to the hospital, and there is absolutely no justification for much of this pricing.
You might fall out of your chair repeatedly as you read Brill’s article. Based on discussions with a number of my friends recently, Brill’s article is the hottest read in town, and deservedly so. I learned more about health care in the hour it took me to read than I had in the entire past year.
I learned that hospitals function as a public good yet there is no meaningful regulation–it’s as if your state and local governments decided that they were going to stop regulating the electric company, which promptly quadrupled its rates, and promised to do it again next year. Further, hospitals specialize in keeping its consumers in the dark with regard to the prices they charge and the actual value of these goods and services. Those using hospitals typically have no idea what financial damage they are about to incur. It could by in
excess of $50,000 for one day of service. The poster boy for the price gouging is the CT scan, which typically costs several times what a CT scan costs in most European countries. Why does it cost so much? Well, those of us who have insurance might not pay the full price–that is reserved for the working poor and lower middle class. They get hammered the worst in our disgraceful system.
In this article, you’ll read about more than a few people who went into bankruptcy even though they HAD health insurance. You’ll read about people who had the good sense to hire a patient advocate, and it literally saved them, cutting 80% from the massively inflated bill.
For a quick review of the main themes of “Bitter Pill,” check out the video by author Steven Brill. He characterizes the entire health care pricing system as “irrational.” He gives the example of a pack of gauze pads that you can get at Walgreens for $1, but a hospital will charge you $77.
Are things about to get better thanks to the Affordable Care Act?
Obamacare does very little to solve any of these problems, which is probably why it got through Congress. It doesn’t do anything to control the prices of prescription drugs or medical devices such as CT scans. In fact, if anything, it will increase the profits of all the players in the market by making sure that more people have insurance and therefore more people are in the marketplace with the funds from insurance companies to buy all these products.
Warning: “Bitter Pill” might keep you up all night, unless you are in a good position to pay 50% more for your health insurance premiums for the coming year. I’m sad to say that I saw this crazy spike of insurance costs coming–I was not convinced by anything I read over the past four years that Obamacare had any meaningful price controls. And what fool would think that adding tens of millions of people to the insurance rolls and mandating new benefits wouldn’t affect the prices of health insurance? It’s not like the very wealth administrators of big non-profit and for-profit hospitals are going to willingly give up any of their huge salaries. Brill also has some unkind words for the business of strategy of those big “non-profit” hospitals: they are buying up smaller hospitals and private medical practices with all of that money they squeeze out of their patients in order to control the market. When they own most of the market, the don’t need to push down their rates when health insurance companies come knocking. Another villain to this story is big Pharma, who has been coddled by Congress. Oh, and Congress is thoroughly corrupt, in case you’ve failed to pay attention for the past few decades.
One can only hope that this slow motion train crash will convince Americans and their leaders that they need a single payer system (if we can’t afford gold-plated policies for everyone, we should at least mandate a minimum/humane set of benefits for everyone). It would seem like the catastrophe described by Brill (and I’ve barely touched on the horrors he describes) would make something akin to Medicare-for-All the guiding star.
About the Author (Author Profile)Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.
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- The horrendous cost of health care : Dangerous Intersection | May 23, 2013