Broken Arrow Family Drug blog
Why is healthcare so expensive?
Boy, do I hear that question all the time. Why is Product X so expensive? Why does it cost so much to have this particular test? I got a bill for my hospital stay, and it cost me so many hundreds of dollars per day! Isn’t that ridiculous? Why is it so expensive?
I’ll tell you why it’s so expensive. It’s not because of greedy insurance companies, or greedy drug companies. It’s not because your doctor lives in a mansion, or because your pharmacist is paying off his new pool.
The primary cause is that the American public has allowed health insurance to become something other than insurance.
Health insurance is the ONLY insurance that we expect to pay for everything. Think about it – you don’t expect your car insurance to pay for new tires and gasoline. You don’t expect your homeowner’s policy to pay for your replacement of a leaky faucet.
If you were to file claims for that ding in your door on your car insurance, what would happen to your insurance premium? It would go up. You know it, and I know it. You even EXPECT it. And that’s why you don’t file minor claims against your insurance. You only file for EMERGENCIES.
Contrast that with your current health ‘insurance’. Go to the doctor? Pull out the card. Need that prescription filled? Pull out another card. Going to the hospital? Don’t forget your card.
It doesn’t matter how minor or major the event, we expect the health ‘insurance’ company to pay for it. We’re now even at the point where we not only expect, but DEMAND that our health ‘insurance’ pay for over-the-counter items. I frequently have folks bring items to the register and ask that they be filed on their ‘insurance’ (without an order), as if their ‘insurance’ were a magic debit card that paid for everything health-related.
Paying premiums into a group pool and expecting EVERYTHING health-related to be paid out of it is not risk management, and it’s not ‘insurance’. It’s a very expensive game of poker where you hope to get more out of the pool than you put in.
But Todd, that doesn’t explain why healthcare is so expensive! Actually, yes, it does. You see, the ‘insured’ American public doesn’t CARE how expensive something is, because they aren’t paying for it. Someone else is. I pay the ‘insurance’ company my monthly premium, and the ‘insurance’ company pays for the item/procedure/surgery, minus my copay.
To the ‘insured’, they’re paying a $25 copay for the item regardless of whether the item actually costs $50 or $500. And everyone behind the scenes knows that.
When a person is paying a set fee for an item (that $25 copay), there is no incentive for the provider to decrease COSTS of producing that item. To illustrate, let’s take the example of Prempro, an estrogen. I went through paperwork from 2001 (yes, I have to keep paperwork for 10 years, another government mandate and another story), and saw that a month’s supply of Prempro cost our pharmacy about $28. The pack now costs the pharmacy about $56. This is NOT your copay. This is how much it costs ME to purchase and resell to you. There is no incentive for Wyeth to lower the cost of Prempro, because it’s not the public who’s paying for it directly anyway. The public simply pays their copay, and goes about their merry way – knowing that someone else is going to pay the actual COST.
And then the public is surprised and angry every year when their premiums go up.
I experience this cost/copay dynamic frequently when dealing with seniors covered under Medicare Part D. If you recall, Part D was another entitlement program created in 2006 to help seniors with the cost of prescription drugs.
Every June or July, we start having seniors go into their ‘coverage gap’. This is the point where the government has paid out about $1,750 on the patient’s prescriptions, and now the patient is responsible for the full contracted price. The patient may have been paying $40 per month on that Lipitor previously, and when they get into the gap, their price goes to over $100.
People didn’t know and (more importantly) didn’t CARE that Lipitor COSTS over $100, although they (the patient) are only paying $40. Only when they become responsible for the full cost of the product do they realize the true COSTS of their healthcare.
In contrast, the groups of people who FULLY understand the costs of healthcare are the uninsured, underinsured, and those with health savings accounts. When faced with the necessity of paying $1,000 for an MRI, you begin to look at the importance of having such a procedure.
Andi and I have a health savings account as our insurance. Note that I didn’t put the word insurance in quotes this time. That’s because the HSA has a deductible of over $5,000. Yes, we’re responsible for the first $5,000 of our family’s healthcare expenses every year. But if something catastrophic (an EMERGENCY) comes up, we aren’t bankrupted by it. We’re covered. THAT’S insurance.
One last note. Do you know the only two areas of medicine that have had prices DECREASE over the past 10 years? They are plastic surgery and laser vision correction. Insurance (in general) doesn’t cover them.
Next post – my solution to high healthcare costs. You won’t like it, and it’ll never happen, but it’s my blog and I can dream if I want.