The Real Cost of Health Care Remains Unanswered for Consumers
Aug 01, 2019
The definition of a free market is an economic system in which the rule of supply and demand dictates transactions, without government interference. In a free market, the price of goods and services are determined by competition throughout the market. For example, if a manufacturer overproduces a good, the seller will lower the cost of the item which, in turn, drives its public demand up.
However, if a seller encounters a shortage of a high-demand good, it will elevate the price of the good to lower the demand. How does this apply to health care? In an opinion piece penned by Steve Weissman for the Center for Health Journalism, he states that health care is the only industry in the United States that is exempt from the parameters of the free market system. Instead, billing is determined on an individual basis based on how much money can be extracted from each patient. For many Americans, the cost of care is financially devastating. Yet, while the demand for health care rises, so does its prices. Why?
According to the American Medical Association (AMA) Journal of Ethics, the true cost of health care is obscure. Lost in a sea of jargon and complicated accounting, it’s difficult for the average person to understand how their medical finances are determined, and it’s difficult for doctors to explain it to them. In sum, there is little correlation between the cost of a service (what the patient pays out of pocket) and how much is charged (the amount on the bill).
The per capita spending on health care is 50 to 200 percent higher in the U.S. than other developed nations. However, the U.S. ranks 26th in the world for life expectancy, and even worse for other quality of life indicators, according to the AMA Journal of Ethics. Harvard Health Publishing states the U.S. remains the only developed nation without universal health care, a system where the federal government offers quality health services to all citizens regardless of their ability to pay.
For the health care spending that does exist, much of it is wasted. The Health Affairs Blog writes that wasteful spending involving health care exceeds $1 trillion - an amount that doubles the overall funding of Medicaid. Of the many determining factors that result in wasteful spending, one is pricing failure. U.S. News & World Report describes health care as a market failure, due to consumers’ inability to know how much they’re paying for a service or procedure before they agree to it. Additionally, the health care industry has no competition driving its prices. In most parts of the country, all hospitals are owned by one or two of the same entities, and just a few insurance companies have the market cornered. Therefore, hospitals and insurance providers are free to charge whatever they want without fear of being undercut by any competitor.
According to Weissman, patients who are uninsured or out of their insurer’s network are charged more than 10 times over. Additionally, laws in favor of Big Pharma prevent Medicare and Medicaid from negotiating the costs of prescriptions. With this reality, it’s safe to assume that the cost of health care is the reason why so many American citizens resort to crowdfunding their care. In a TIME article, the CEO of GoFundMe.org revealed that more than one-third of the site’s campaigns are aimed at covering medical expenses.
In 2009, the American Journal of Public Health discovered that approximately 45,000 Americans die annually due to lack of health coverage. Additionally, 530,000 families file for bankruptcy every year from medical expenses.
The concept of price transparency pressures elected representatives into requiring that health providers either publish price ranges or the average price of their services. In addition to disclosing the actual cost of health care, price transparency demands that insurance companies make public the amount of money they pay physicians and hospitals. However, providers are still allowed to bill patients differently for the same services based on their coverage.
Contracts and non-disclosure agreements usually prohibit health care providers and insurance companies from lifting the veil on their pricing. Consequently, states throughout the country have struggled to implement price transparency throughout their health care systems. Weissman suggests that Congress make it a requirement that all providers publish their prices, just as it is expected of any other business or industry. Full price transparency, with the addition of universal coverage, could possibly allow patients to seek care where there is the best value. The desired outcome is that less people die because they couldn’t afford to live.
A Troubling Practice: More Americans Looking at Lawsuits
Who Can’t Pay for Doctor Visits & Hospital Stays
By Rian Souders, Staff Writer
In most states, there are reports of hospitals suing patients for unpaid medical bills. In some cases, paycheck garnishments total anywhere from 10 percent to 25 percent of after-tax pay. This leaves some patients in financial ruin.
An article titled, The U.S. Hospitals Suing the Poor Over Bills They Can’t Afford, published by The Guardian, details the story of 63-year-old Carrie Barrett who owes Memphis, Tennessee - based Methodist University Hospital about $33,000 for a two-night stay. The Guardian says if Methodist doesn’t add any interest to Barrett’s debt and she pays as ordered, she will pay it off in 330 months. She will be 90 years old.
Many of the health care systems suing patients are nonprofit hospitals. They receive large tax breaks since nonprofit hospitals are considered charities. These entities don’t pay federal or state income tax or local property tax. In return, these hospitals are obliged to provide financial assistance or charity care to lower-income patients. Unfortunately, many low-income patients are still subject to court cases because they are unaware of assistance programs.
National news sources are exposing this practice. In 2014, NPR and ProPublica began investigating the way lenders and collectors pursue consumer debt. That same year, they published multiple stories about Heartland Regional Medical Center, which now goes by Mosaic Life Care. The nonprofit hospital in St. Joseph, Missouri sued 6,000 patients from 2009 to 2013 – many of whom were low income.
The investigation produced public scrutiny. In late 2015, the hospital revamped its financial assistance policy and forgave the debts of thousands of former patients.
A recent NPR story, When Hospitals Sue for Unpaid Bills, It Can be ‘Ruinous’ for Patients, led Virginia-based Mary Washington Healthcare to stop suing patients to collect medical debts.
Although media attention has motivated many hospitals to reevaluate their medical debt collection process, many more health care systems are still filing lawsuits against their patients.
"If you're a nonprofit hospital and you have this mission to serve your community, [lawsuits] should really be an absolute last resort," Jenifer Bosco, staff attorney at the National Consumer Law Center, told NPR.