That's a pricey MRI

Discussion in 'Healthcare/Insurance/Govt Healthcare' started by Greenbeard, Aug 20, 2010.

  1. Greenbeard
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    Greenbeard Gold Member

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    Bloomberg has a good read today: "Why Baby Costs Less Down the Road in Silicon Valley". It's essentially an article on how provider consolidation is driving up health care prices:

    This is a point I've brought up before, in a thread on the courts overturning Massachusetts' cap on insurance rates and a thread about a possible alternative to the public option concept (all payer rate setting). Providers are playing a role in our rising spending and the consolidation mentioned in that Bloomberg article is a good illustration of that. To quote from a paper from a few years ago:

     
  2. auditor0007
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    auditor0007 Gold Member

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    I've been pointing this out for a long time. The prices charged, and paid for by the insurers, by many of the big players in healthcare are completely out of line in comparison to the actual costs. I have to have an ultrasound done of my liver once per year. When I was having it done at the hospital, and paid for through my insurance, the cost was billed out at over $1600; my insurer paid a bit over $1200. Last month I paid out of pocket to have this same ultrasound done at a private imaging center. Cost? $220.

    I also have to have a phlebotomy every 10 to 12 weeks. In the past, I went to the hospital's infusion center. They billed out over $600, and the insurance company paid out a bit over $400. Now I go to an infusion center at a doctor's office. Actually it's a hematology and oncology practice with multiple doctors, and they have their own infusion center. They charge me $145 cash.

    Here is the real problem; since the insurance companies have no real competition, other than other insurance companies, they readily accept these much higher rates as it increases costs. As costs increase, they can justify charging more, and in doing so, they make more money. As a basic example, if the insurance company can only realistically charge $200 per month for a policy, and they make a gross profit margin of 10%, then they bring in a gross profit of $20 from that policy. On the other hand, if they can charge $400 per month with the same gross profit margin, their gross profit increases to $40 per month from that policy. So in the end, the insurance companies want costs to increase. And knowing this, the providers, especially in situations where they can create a near monopoly, charge as much as they want. Why not if the insurance companies are going to pay those rates?

    This is where a public option really could come into play and work, if it was done right. A public option could be offered, and run at a much lower cost per person without any tax subsidies. Unfortunately, those at the government level don't even understand this. If they did, costs for Medicare and Medicaid would be much less than they are as those programs would better utilize these more competetive providers.

    The bottom line is that the only way we will ever really reduce costs is by forcing providers and insurers to be competetive. How we do that is the real question.
     

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