If you have yet to read Steven Brill’s TIME cover story, “Bitter Pill: Why Medical Bills are Killing Us,” you should. It’s long, but it’s worth it. Though the public has been worrying about medical costs since the Great Depression, Brill does a great job illustrating just how expensive medical care is and how Obamacare doesn’t really do much to offset costs. After reading this article I asked myself a few questions. The first was, why are medical bills really so high?
The simple answer is because of the fee-for-service payment system that doctors in the U.S. have fought so long to keep. It’s a method of payment older than our country itself. When doctors would do home visits in colonial times they would charge patients per mile traveled on the horse and buggy. And although doctors don’t directly charge us for the gas to get to work in the morning, we are charged for medical education, administrative costs and other costs that aren’t directly related to one service. Even when you go to a hospital you are charged twice – once from the doctor and once from the hospital. The professional authority of doctors has allowed them to control their own fees for services as separate from the total cost.
This causes the second issue of doctors and hospital administrators dictating prices. Doctors have always charged patients on their ability to pay and not on the quality of service or on effort. For example, surgery costs have steadily increased but the actual effort of a doctor to perform a surgery has decreased. At one time only the doctor would be charged for a surgery because he did most of the work including pre-op care and rehab, now he is still charged at the same rate, but you are now paying technicians, assistants and others who are billed as well. Procedures have been simplified but medical costs remain high and continue to rise.
One of Brill’s main opinions was that an expansion of Medicare could help control costs, yet medical historian Paul Starr argues that it was the third party government programs and private insurers that led to medical inflation in the first place. Because most of the time patients don’t see their bills, the general public is unaware of the true cost. Another reason is that because third-party payers reimburse, hospitals and doctors were encouraged to raise the rates of reimbursement to offset expenses instead of figuring out how to lower costs in the first place.
All of which begs another question: how can non-profit hospitals make so much profit? Hospitals originally started to provide free care for individuals whose families couldn’t take care of them and for a while they served only charitable care. But with the increase of the middle class, patients wanted better rooms and better services so doctors and hospitals began to charge more. Because of surgery and technology, hospitals became institutions with a lot of jobs, people and money floating around. Hospitals are usually governed by an elected board of trustees but when they aren’t affiliated with a university or religious institution, can easily be bought out by a big corporation.
So these hospitals with a non-profit, tax-exempt label get to keep their status even if they are now owned by a corporation and then governed by corporate management. Even many state hospitals have been sold to corporate entities. The other scenario is when a non-profit hospital then buys for-profit entities such as restaurants, rehabs, clinics, nursing homes etc. It seems that the status quo for hospitals is to increase available services and fees, expand buildings and usurp other medical entities, which all drastically raise costs for the patient. At the same time, the hospitals argue this is what patients want — top of the line technology, more services and bigger and nicer buildings. So I guess (certain) patients are getting what they want, and they’re paying for it too.
My last question was, why hasn’t anything been done to stop the medical monstrosity of health care costs? The quick answer is there have been efforts but most have been focused on Medicare and Medicaid, not on the entire system, and none have had an impact. The full explanation is for another time. As Brill notes in his article, Obamacare makes some minor, meager efforts at controlling costs but nothing impressive, mostly because of such strong hospital lobbying.
However much controlling costs is essential to having a more efficient health care system, expanding coverage was always the main priority of Obamacare. But Obamacare is adapting to peoples’ worries, as the administration recently announced they will require insurance companies to report any price increases. With Obamacare we’ve jumped over one hurdle on expanding access to care. Now we can hopefully pave a path to reducing costs.
