David Asman is an anchor at the Fox News Channel and host of “Forbes on Fox.” In this must read piece for anyone interested in the differences between a centralized and a decentralized health care finance system, Mr. Asman compares the care and cost that his wife received in the British and American health care systems earlier this year after she suffered a serious stroke during a vacation in London. The entire op-ed is interesting, but I found the following observation particularly telling:
When I received the bill for my wife’s one-month stay at Queen’s Square [Hospital, in London], I thought there was a mistake. The bill included all doctors’ costs, two MRI scans, more than a dozen physical therapy sessions, numerous blood and pathology tests, and of course room and board in the hospital for a month. And perhaps most important, it included the loving care of the finest nurses we’d encountered anywhere. The total cost: $25,752. That ain’t chump change. But to put this in context, the cost of just 10 physical therapy sessions at New York’s Cornell University Hospital came to $27,000–greater than the entire bill from British Health Service!
There is something seriously out of whack about 10 therapy sessions that cost more than a month’s worth of hospital bills in England. Still, while costs in U.S. hospitals might well have become exorbitant because of too few incentives to keep costs down, the British system has simply lost sight of costs and incentives altogether.
Meanwhile, Washington Post business columnist Steve Pearlstein contends in this column that most Americans are willing to dispense with market allocation in regard to health care:
For most Americans, providing health care ought to be different from selling soap; they won’t tolerate doctors acting like commissioned salesmen and investment bankers. And if that means having less market competition and more regulation in the health care system, it seems to be a trade-off they’re willing to make.
H’mm, I’m not so sure about that. Hat tip to Arnold Kling for the links to the articles.
Wow.
$2700 for one session of Physical Therapy? That’s hard to believe.
Medicare pays me (as a Board Certified General Internist) $32 for a standard follow up office visit.
Of course, the $27,000 may have been the charge for the therapy BEFORE the Medicare allowable adjustment was applied. (I am assuming that, as this woman had a stroke, she is over 64, and therefore qualified for Medicare). You can bill any amount you want for the care you provide (in hopes of finding some fool that will pay your full price), but Medicare has a maximal allowable charge that a health care entity can charge Medicare-eligible patients. And (through Part B) they pay 80% of the allowable number.
Through the years, standard third party payors (like Blue Cross Blue Shield) have been charged the high amounts, and have paid a lot of them. Now most insurance companies have negotiated fee reductions from groups of doctors and hospitals (which became “preferred providers”), or more recently have tied reimbursement to Medicare rates.
Not unlike new car prices, what is on the sticker and what you actually pay may be tremendously different.
Another analogy is the apocryphal $10 tab of Tylenol in the hospital. The reason the charge for one Tylenol is $10 for you is that (as a person with health care insurance) you are buying your Tylenol…..and also the Tylenol for the 3 people who are uninsured and won’t pay their bill…and also the Tylenol for the 6 people on Medicare whose hospital charge is the same whether they get any Tylenol or not. The discussion of capitated care is a whole other issue…..
Still, if you can charge $2700 for a session of P.T., I’m in the wrong dang speciality (if I was money hungry, that is…)
jrb
Tom,
Read an interesting idea in the WSJ last week.
Automobile insurance is relatively cheap because everyone has to have it to drive. The pool is huge, and the good drivers subsidize the bad ones.
Health insurance is expensive, in part, because the sickest 10% are responsible for about 80% of the HC expenditures, and because of adverse selection — people don’t seek HI until they need it.
Why not apply the AI principle, and get everyone in the pool by requiring everyone to take out some private form of HI?
I’m certainly not suggesting this is the answer, of course, because it does not solve the allocative inefficiency problem of third-party payors, but maybe this in concert with greater use of HSAs would be a step in the right direction. Any thoughts?
Mr. Baker,
Asman is in his 40s at best, and the article notes his wife is young as well without giving her age. So no Medicare.
Milton, I saw the same WSJ article about the individual health policies. The reasoning is valid and such a system would be a substantial improvement on the present employer insurance-based system. However, the employer insurance-based system is firmly entrenched, and has the benefit of having a powerful political lobby and favorable treatment under the tax laws. Individual health policies have neither.
Another reason why health care finance reform is inextricably tied to income tax reform. I’m just skeptical that the Republican Party has the leadership necessary to lead such a reform movement.
No question, Tom, but employers can’t have their cake and eat it too here. Did you see the Chronic’s article today on the rise in HI costs for employers?
If employers are getting their margins squeezed by hyperinflationary health care costs, then one possible idea may be to defer more HI itself to the employees themselves. Deferring plan costs themselves is inefficient and does not account for the substantial overhead and transactional costs of administering or paying someone to adminster a large health plan. Why not just pass the entire responsibility to the employees?
If the answer is in fact, as you point out, because of the tremendous tax breaks employers enjoy when they self-insure, you’ll understand if I’m not so sympathetic to their concerns over the rising costs of health care.
In my view American health care systems would be a substantial improvement on the present employer insurance-based system.
There is something seriously out of whack about 10 therapy sessions that cost more than a month’s worth of hospital bills in England. Still, while costs in U.S. hospitals might well have become exorbitant because of too few incentives to keep costs down, the British system has simply lost sight of costs and incentives altogether.
In my view the health care system of a nation reflect its socio-economics and cultural standards,therefore we need to improve our health care system.