Noah Smith has entered the debate:
So the fundamental reason your health care costs so much is not that the health insurance companies are lining their pockets. And it’s not that insurers are an inefficient mess. It’s that the actual provision of America’s health care itself just costs way too much in the first place.
The actual people charging you an arm and a leg for your care, and putting you at risk of medical bankruptcy, are the providers themselves. The smiling doctor who writes you prescriptions and sends you to the MRI and refers you to a specialist without ever asking you for money knows full well that you’re going to end up having to wrangle with the insurance company for the cost of all those services. The gentle nurse who sets up your IV doesn’t tell you whether each dose of drugs through the IV could set you back hundreds of dollars, but they know. When the polite administrative assistants at the front desk send you back to treatment without telling you that their services are out of your network, it’s because they didn’t bother to check. The executives making millions at “nonprofit” hospitals, and the shareholders making billions on the profits of companies that supply and contract with those hospitals, are people you never see and probably don’t even think about.
Excessive prices charged by health care providers are overwhelmingly the reason why Americans’ health care costs so cripplingly much. But they’ve outsourced the actual collection of those fees to insurance companies, so that your experience in the medical system feels smooth and friendly and comfortable. The insurance companies are simply hired to play the bad guy — and they’re paid a relatively modest fee for that service. So you get to hate UnitedHealthcare and Cigna, while the real people taking away your life’s savings and putting you at risk of bankruptcy get to play Mother Theresa.
So the way to make our health care system affordable is not to browbeat insurers, in the hope that they will be able to reduce their profits and pay for us to have cheap health care. Insurance companies simply do not have the power to do that, even if you threaten to shoot them. What we need is to reduce costs within the actual medical system itself...
He jumps in to the comments to add:
They [providers] don't know the exact costs, but they have a general idea, they know the costs are very high, and they typically don't talk to patients about those costs when prescribing services to them. This is understandable, given that talking about costs would make patients less comfortable while receiving care, and one of doctors' main jobs is to make patients feel comfortable. But there's basically no point in the process of receiving care at which patients could make a decision based on cost.
Incentives matter, and patients aren't automata who are unable to follow incentives, as much as some doctors would like them to be. They can understand pricing concerns/risk, and they're coming from a wide variety of financial situations. A recent NYT op-ed admits as much:
One of my first lessons as a new attending physician in a hospital serving a working-class community was in insurance. I saw my colleagues prescribing suboptimal drugs and thought they weren’t practicing evidence-based medicine. In reality, they were doing something better — practicing patient-based medicine. When people said they couldn’t afford a medication that their insurance didn’t cover, they would prescribe an alternative, even if it wasn’t the best available option.
As a young doctor, I struggled with this. Studies show this drug is the most effective treatment, I would say. Of course, the insurer will cover it. My more seasoned colleague gently chided me that if I practiced this way, then my patients wouldn’t fill their prescriptions at all. And he was right.
Of course, the op-ed is doctor-apologia, working as hard as possible to finger point at insurance companies and only admitting a possible problem of lacking clear and reasonable pricing when it comes to drugs; after all, patients and their insurance companies pay pharmacists and drug companies for drugs, not doctors. They can't see that there could be a similar problem for their own services (insert Upton Sinclair quote). But they admit that patients can and do make decisions based on their understanding of prices and risk. Yet, when it comes to their own services, this is absurd to them. Surely they know better than the patient, and the patient should just do what they say; cost doesn't matter.
But as Noah points out, they "know", but they don't know. They "don't bother to check". They give every excuse imaginable to avoid the topic. And some of this is understandable! As Noah points out, they just want to focus on the medicine; they want to make the patient feel comfortable with the medicine; medicine is sacred and money is profane, so never the two shall meet. Doctors don't want to know. They're happy to sit back and say that they're prohibited by law to consider their costs in providing recommendations, but conveniently forget to be patient-based, not remembering that patients can and do make such decisions. But patients can only do this in a reasonable way when they're properly informed before making decisions. Without information, it's generally fear that rules the day, be it fear of medical issues or fear of medical expenses. Some doctors want to not know so much that they can't even identify the names of the relevant numbers in the billing/insurance process that might be involved in the decision-making process. This is perfectly fine, of course; they shouldn't have to spend all their time becoming intimately familiar with the details of how each of their patients' insurance works.
It's hard for me to come to any conclusion other than that providers shouldn't be bothered to know those details. Instead, there is an extremely simple solution that takes one small step toward what Noah wants - providers just need to inform patients of what they know about the pricing for suggested courses of actions before those courses of action are taken. We need to create a point in time where patients can have the relevant information with which to make a decision that takes their own understanding of their own finances into account. I have suggested that providers simply provide the price that they will be billing insurance and their negotiated rate. The negotiated rate gives the patient a good idea of what to expect if the procedure is covered. Sure, the provider doesn't know the rest of the details of the insurance policy (deductibles, co-insurance, out-of-pocket max, etc.), which are important for estimating things like out-of-pocket costs - again, they shouldn't. But the patient can know these things. The only information the patient is missing is the information that the providers refuse to give them. In addition to the negotiated rate, it would be nice to have the full bill amount, so the patient can consider the risk of an insurance denial (and perhaps have a conversation about this risk or gather more information). Then, they at least have some idea of how much they could be nominally on the hook for if there is an insurance snafu.
I am generally anti-regulation, but the good doctors here at TheMotte have convinced me that there is no way that we are going to persuade them on this point with reason, so I am reluctantly throwing in my support for as minimally-scoped regulation as we can come up with, just as much as it takes to cast off the excuses and actually get numbers in front of patients at a point in time where they can use those numbers to make decisions. Hopefully, someone can get this idea to people like Noah, so they can consider advocating for something like this rather than tired ideas he gave like having the gov't "play hardball" to negotiate prices. He seems open to ideas:
There are probably other ways to foster competition and increase efficiency in the medical care system.
Indeed, there is, and it's right in front of your eyes. It's the natural conclusion of your request in the comments for what NYT would call "patient-based medicine".
Jump in the discussion.
No email address required.
Notes -
I think the ultimate US health system would be: Medicaid for those who need it, Medicare for purely palliative care, HSAs as common as 401ks, and insurance that only covers emergencies where the patient is unconscious or at risk of life and limb if a quick decision isn't made. Otherwise full price transparency and an easy way to look up prices for comparable services across all nearby providers.
This is viable for some services, but much of the expense in healthcare is unplanned and transferring between systems is hideously expensive and complicated. If you get hit by a car and end up in the ICU for three weeks and rehab for five months that's as expensive as thousands and thousands of doctor's visits, and price transparency doesn't help a lick. Even if you are awake and say "take me to the cheaper hospital" the ambulance is going to take you to the place you are triaged to, because if you die your family will sue the shit out of them and win.
Furthermore how do you want handle cost overruns. Let's say you get your appendix out and you shop around to whoever reports the lowest price (and it's urgent not emergent so you leave the hospital AMA to go to the cheaper place). Let's say 5k. What do you do when the surgery is a bit more complicated and expensive and the bill is 15k. What do you do when you have a major complication and the price is 1.5 million dollars? People would be furious! And if you want to just average out how much the hospital spent on all of those surgeries...well you've just reinvented general insurance again (since healthy/less complicated people are subsidizing the complicated).
This kind of risk distribution seems to be the big question. I'm not sure what the most just way to handle it is, or that it is the same question in every case.
But this isn't a crazy problem that we only run into in medical care. Every contractor in the world is subject to the same problem. Estimates and quotes from any HVAC contractor or excavator takes account of the possibility of cost overruns. The placement of that cost overrun is negotiated in the contract. They offer you an estimate of the cost, and then a clause in there will tell you that it may cost more, or that this price is only certain for X days, or that cost overruns may require progress payments or be split 50/50 or be subject to additional Good Faith Negotiations. Or they just eat the cost when they get the estimate wrong. Or you have a bond on the job completion which will pay out if the job isn't done.
One could easily sell, as part of the price of the procedure, insurance on the procedure itself covering possible bad outcomes. Rather than tying in the price of every medical procedure in the country with the price of every other medical procedure in the country.
These are all solved problems in every field, except medicine.
If contractor is redoing my attic and on starting renovations it turns out that my uncle stored there 10kg of U-235, his collection of land mines and 1450kg of asbestos and top secret documents of USA, Ming Empire and Slovenia... Then they can just announce that they stop work, pay penalties stipulated by contract and run away screaming.
The same for say programming contract, if I discover that part of system run on literal punchcards in sealed off bunker then I will likely (depending on contract structure) pay contract penalties and run away or announce that 800h time estimate gets revised to >4800h.
If doctor is doing routine appendix and discovers clot/cancer/other medical emergency equivalent to above they are, I expect, not allowed to run away screaming and pay just modest penalty stipulated by contract and leave patent there.
It's extremely common to abort a surgical procedure because of unexpected complications. And, to scale, a surgeon would face similar liability: modest penalties for damage done, reliance.
This is easily figured out in contract.
Why are y'all so dramatic with your examples?
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link