I did some research on medical costs yesterday and found some interesting things. I’m quite familiar with the medical system; I’ve had 5 knee surgeries after tearing both ACLs playing football.
A few things of note. I read a blog by a medical physician to get his opinion on why medical costs are so high and have been rising. His opinion was that it was primarily a result of choice of the patient. In other words, people are choosing more expensive procedures and equipment. Some of this is the result of marketing. Also, he said that when people have insurance, they tend to choose the most expensive thing that insurance will cover, even if it doesn’t do a better job. Also, people would choose prescription medication instead of over the counter meds because insurance paid for the prescriptions. If people are constantly choosing more expensive procedures, it seems this would inevitably result in higher insurance premiums. In other words, it seems that health care is no more expensive than it ever was, it’s just that when studies are done showing people are paying more, it’s the people themselves that are choosing to pay more because most of them have insurance.
My first two knee surgeries were covered by Medicaid because I was a college student. I paid for my others. I can’t remember the exact amount, but I think the total was somewhere in the range of $10,000, total. The hospital allowed me to pay in very small installments; some months I only paid 5$, but I kept paying and eventually paid the bill in its entirety. This got me to thinking: Since we know that insurance companies are profit driven like other companies, they know that in all likelihood, most people will pay more to their insurance companies than the insurance companies will ever pay for medical bills. If the hospital allows me to make smaller payments than an insurance company does each month, why do I have insurance? And here’s the key: With insurance, I’m paying to make sure two businesses make a profit–the hospital and the insurance company. If I have no insurance, I’m only paying the hospital and they always seemed easier to work with than any insurance company. When I worked for the police department in Bangor, I was astounded at how much the city paid in insurance costs for each officer. I paid a small percentage of the total cost. The insurance companies were making huge amounts of money, something I have no problem with except that I think much of the profit is driven by hysteria. Maybe those companies create some of the hysteria to sell their product, I’m not sure. The problem with having no insurance is that the uninsured must pay prices determined by the majority of people who have some sort of medical coverage. The market is completely distorted.
I’d also like to point out that in almost all my interactions with the medical system, I had no idea what I was going to be paying when everything was said and done. I didn’t really know what my insurance would cover. Sometimes I walked out amazed at how little I had to pay, and other times I was surprised that I had to pay a large chuck of money. I think that someone should sit down with people going in to have surgery and go over each cost, line by line, just like they’re buying a car.
The reason I started looking at medical costs was because I’ve always wondered why medical costs would rise more than other costs within the economy. Medical costs should be controlled by supply and demand, just like the costs, of say, roller skates. I believe that medical costs are artificially inflated because of insurance. People buy products that they have only minimal demand for simply because they can. Medical companies and hospitals can soak the insurance companies, who have near bottomless pockets, and the cost gets back to the consumer, even those that don’t try to game the system. To tell the truth, since we have mixed our economy to the point where we actually have damaged the natural process of determining value, we may be better off just allowing the government to fix prices within the medical field. Of course, this greases the already slippery slope of centralized control.