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Tuesday, November 01, 2005

U.S. Health Care

I expect to see a few more, but this is hopefully most of them. (Hmm, actually some major ones are still missing like the anesthesiologist.)

10/03/05ACTIVE LIFE INC$144.48
10/11/05-10/12/05GLENDALE ADVENTIST MED CTR$2,776.00
10/11/05-10/12/05GLENDALE ADVENTIST MED CTR$43,226.00
TOTAL (so far)$59,061.98

The hospital bill includes four separate charges for "PHYSIOTHERAPY performed at Hospital inpatient" totaling a little over a thousand dollars, which as best I can figure is for the two PTs who separately wandered through my room during the one day I was there and had ten-second conversations with me along the lines of "do you have stairs at home?" "No." "Ok." ("That'll be five hundred dollars please.") There are a number of other highly suspect items on the bill, but their descriptions are no more specific than the above so it's hard to guess what they're all for.

I'll be paying the first $3,500 out of pocket, but beyond that it's all on my health insurance so it's not directly worth my while to fuss over it. And I have a much higher deductible than most, so most people have even less incentive than I do. You would think, then, that the insurance company would be highly motivated to audit these things, but they don't seem to be the slightest concerned about it.

I suppose that they are fundamentally competing with other insurance companies over rates for claims paid against the system as it is, and that policing the system would likely benefit their competitors as much as themselves, which means there's a tragedy of the commons going on. (For various reasons, one insurance company cannot simply police its own claims and hope to come out ahead -- they are already pre-negotiating rates with the providers, and so are in competition with each other for the providers as well as for the insured. They surely have implicit, if not explicit, agreements not to nitpick bills any more than other insurance companies as part of this negotiation.)

So, effectively, the insurance companies are immune to inefficiency in the health care system because the same inefficiency affects all of their competitors--and further only strengthens the extent to which their paying customers are a captive audience by making self-coverage all the more impractical. Thus the true bearers of the burden--the insurance premium payers--are almost completely insulated from the individual purchasing decisions and invoice scrutiny, eliminating the primary natural feedback that would push for efficiency.

Worse, since the insurance companies are fundamentally going to be taking a percentage, they are actually financially motivated to keep the whole playing field as high/expensive as possible (as long as it's roughly level), with the only push-back being from individuals who drop out entirely and risk being uninsured (i.e., the members of their captive audience who jump from the frying pan into the fire).

I know many free-market advocates (which I am in general but not without reflection) would claim the above scenario is impossible in a truly free market, so if you are one of those I would be curious to hear your analysis of how the above scenario--or your own explanation for the current state of US health care if you like--is properly resolved.

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Simon Funk / simonfunk@gmail.com