Elyssa Durant, Ed.M.
Saturday, August 29, 2009
Health Economics: Free Market for a Public Good?
I have a serious problem with the most recent health reform effort. Asking or expecting the health industry to reduce costs through self-regulation without accountability is simply ridiculous.
Health care is already completely self-regulated and controlled. A person does not have free choice when choosing a provider. Due to an unholy alliance of provider networks, insurance underwriters, pharmaceutical conglomerates and private for profit hospital corporations such as HCA.
By negotiating with providers and developing one-size-fits-all prescription formularies and treatment protocols, we remove the ability for the consumer to make independent informed decisions about the value of various treatment options.
We rely upon one the ratings of physicians who have self-interest in controlling access and information to accurate information through their reliance upon Certification and Licensing Boards. By limiting access into the profession, health care costs are inflated and it is near impossible for the consumer to determine the fair value of a health care service.
Second, the consumer is far removed from the negotiating process, so we do not have a good sense of the fair, free market value of one particular service in comparison to another. All you need to do is look at any EOB (explanation of benefits) report for your last trip to the hospital.
Billing codes are used and assigned through various service departments and the insurance carrier then decides which services are covered and at what rate. They use the terms like “Reasonable and Customary Rates” and then choose to pay 80% of that. Therefore, by definition, that 20% must be built in to the billing rates to adjust for the actual (and expected) rate of reimbursement.
Such complicated billing procedures and methods are so complicated and technical that the end recipient of services (the consumer) really has no idea if an X-ray costs $90 or $73. Add into that a separate fee for the radiologist, and sometimes a charge just to use the facility, and even smart people find it difficult to understand.
The bills are then processed by an insurance adjuster who must determine primary and secondary (supplemental) plans and determine who is responsible for what, the end cost and intricate design is truly “priceless.”
Good luck to those people who actually purchased supplemental plans they saw advertised on TV, you have been duped. Giving people (especially the infirm and the elderly) a false sense of security is unfair and unjust.
Without regulation, intervention and enforcement, many people will continue to believe they are prepared and protected from that ultimate for “just in case” scenario that results in major, catastrophic medical loss.
The administrative cost alone on the part of the “Responsible Party” is probably more costly than the initial service they received at whatever hospital for whatever condition.
You cannot apply basic economic theory and free market principles to health care. Health care is fundamentally different and should be considered a public good.
Elyssa Durant, Ed.M.