Free health care sure isn’t cheap

Another way to cut down on medical costs -- younger doctors. (PRESS FILE PHOTO)

Another way to cut down on medical costs — younger doctors. (PRESS FILE PHOTO)

My campaign for public office is unlikely to go very far once the voters hear my exciting slogan of “I’m going to make you bums pay more directly for your health care!” But it might be the only that makes a dent in rising health-care costs.

As Veronique de Rugy points out in this blog post at the free-market oriented American Enterprise Institute, consumers were directly responsible for just 11.9 percent of the total spent on health care in 2008, down from 43 percent in 1965. By directly responsible, it means we pulled money out of our wallets or wrote a check directly to the doctor, hospital, etc. In contrast, the percentage paid by Medicare, Medicaid or private insurers has gone up pretty steadily.

At this point you might be saying, “Hold on, I’m paying more for my health care than ever before!” That’s probably right. But the percentage of the bill you handle directly has dropped significantly. Most now goes through insurance, which you pay for out of deductions from your paycheck and from money that your employer pays that might otherwise go directly to you. With Medicare and Medicaid, it’s a similar story, except the money comes from our taxes. 

So in other words, we’re still paying for most of our medical costs. We just funnel more of it through insurers, Medicare and Medicaid before it gets to the doctors and hospitals. And that’s the problem, because that masks how much we pay. The more we have the illusion that “someone else” is paying most of the bill, the less incentive we have to shop around.

I’ve argued this point before. Obviously we need insurance for the truly unexpected, and no one’s in a position to shop around when they’ve been in a car accident. But there’s a lot of routine health-care expenses we all incur regularly, and the data indicate the more we look at those expenses as free or heavily discounted, because “someone else” is paying the bill, the more we tend to incur. That’s probably not a coincidence.

That’s only a start. There are lots of other problems that need to be addressed. For example, doctors and hospitals get paid based on doing things, not on whether the patient gets better. If you argue this gives them an incentive to order more tests and procedures than needed, they’ll counter that they need the protection of those extra tests because costly medical malpractice suits are such an ever-present threat. So that’s an area that needs reforming too.

But we need to do something to make ourselves more directly responsible for the expenses we incur. In signing up for this year’s health plan, I had to decide whether to pay more out of my own pocket under a plan with much higher deductibles, or pay more through higher deductions from my paycheck. I chose the latter, chiefly because I made a bet that my family’s health expenses this year wouldn’t be enough to make the higher deductible worth it. And maybe because I’d rather keep the illusion that “someone else” is paying the bill.

After all, someone has to pay for the machine that goes “ping.”



About Dennis Carmody

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One Response to Free health care sure isn’t cheap

  1. diskullman says:

    I have trouble with the accounting in the healthcare industry. It seems everything is inflated to adjust for discounted payments from the insurance industry, A recent Explanation of Benefits letter for a doctor visit showed my doctor billed Insurance for $125 for my visit, less my $50 co-pay, $75 balance. The Insurance company settled the rest of the $75 balance for $5. It seems to me that insurance covered 1/11th of the total bill, not the 60% you may have thought. It would have been more efficient if I just paid the doctor $55 cash so he wouldn’t go through all the paperwork and waiting for $5.
    In the early 90’s , insuarce companies spent 95 cents of every dollar on healthcare. Nowadays, that figure has been reduced to 81 cents. A poor return on investment, unless you’re investing from the other side.