GECON200-Topic #5 Prices for Health Care

Given the Angies List article, “How Much? Who Knows!” as a starting point, I would like your input on how we might start to try and control health care prices in the United States. Kaiser, is a large health insurance company in the U.S., recently stated “The amount of unnecessary, inappropriate or wasteful care delivered in the United States is estimated to be quite high, so there is potential for substantial savings if care patterns could be improved (Kaiser p.27).” Health care costs are also anticipated to be an increasing share of expenses for the retired.

Regence, another health insurer, provides some links to information on health care costs, and CNN also has a list of a few of the problems that have contributed to rising health care costs.

You could look for sources from abroad that might have similar issues, or look into what insurance companies have proposed to reduce price growth. Remember, I am not asking you to talk about the rising cost of health insurance, or the ACA (Obamacare), although those might be related issues. Focus on ways to reduce the expenses related to health care.

  • What does the Angie’s List article suggest patients do for themselves to help control costs? Are there estimates of how much money this might save in aggregate?
  • What type of technological developments have occurred that have raised the cost of care? lowered the cost of care?
  • How does litigation play a role in the rising cost of health care? What role could government have in reducing these costs?

15 thoughts on “GECON200-Topic #5 Prices for Health Care”

  1. Medical malpractice litigation is also known as the ‘tort tax’ on doctors and hospitals, and its cost now constitutes the majority of health expenses, according to a 2005 report by the Manhattan Institute. Litigation is not the sole reason for the growing cost of health care, but it is a large and growing contributor. The liability system forces doctors and hospitals to practice “defensive medicine” and raise prices in order to pay for the lawsuits that are sure to come. Doctors and modern procedures aren’t perfect. Errors will happen, and when they do patients will be all too eager to try to get as much money as they can out of the situation. So the hospitals prepare for this by inflating prices above the actual cost of the procedure. Because this increases the cost of medical care, many people won’t be able to afford the procedures they need. Patients damaged by medical mistakes deserve compensation, but not when that compensation leads to other people not being able to afford life-saving procedures. Doctors should be encouraged to use utmost care and reasoning, but they should not be punished for mistakes that could have happened to anyone. Incentives can be offered for practicing high-quality, error-free medicine. Hopefully, a monetary incentive will reduce medical mistakes, and therefore litigation, and therefore the cost of health care.

    http://www.kaiseredu.org/issue-modules/us-health-care-costs/background-brief.aspx

    http://www.washingtontimes.com/news/2009/aug/23/medical-malpractice-litigation-health-care-reform/?page=all

  2. Amid a cloud of financial controversy looming over healthcare in America, one cannot help but to point to technology as a major source of increasing healthcare costs. In fact, some healthcare economists estimate that 40–50% of annual cost increases can be traced to new technologies or the intensified use of old ones (Callahan). With better technology and advances in medical procedures, such as bone marrow transplants, one should expect that society would have to pay more. According to Merrill Goozner of The Fiscal Times, “The latest devices – from heart valves and defibrillators to artificial knees and hips – are usually significantly more expensive than older devices, and the intense marketing surrounding the introduction of new devices has become a major driver of rising health care costs.” Not to mention, nowadays people are further intrigued by what science and medicine has to offer; these advancements, for example drugs and procedures for cancer, are seen as very expensive. Recently there has been talk of treatments for skin cancer and lung cancer. The combination of investing in a narrow cancer treatment that will most likely only affect a slim margin of patients means that the prices will be very expensive (Hensley). However, it is also noted that in certain instances, these new advances in treatments are not properly regulated and therefore may result in a waste of money. With increasing healthcare costs, our country cannot afford to waste money on technology that is not cost effective. To counter this issue, Steve Nissen, chairman of cardiovascular medicine at the Cleveland Clinic, states, “Better regulation of medical devices has the potential to reduce health care costs.” On another note, these innovative procedures, which are more resilient and reliable, may save money in the future because they are more durable than they were decades ago; there are now less invasive and less recurrent surgeries per patient because of improvements made on the procedures. Notably, technological change may bring costs, but it needs to be compared with its benefits – increased longevity, improved quality of life, less time absent from work – before assumptions about welfare can be made (Cutler & McClellan). So long as medical advancements are properly regulated and the benefit of investing in them precedes their costs, healthcare in America will always be worth the investment.

    http://content.healthaffairs.org/content/20/5/11.full
    http://www.thefiscaltimes.com/Articles/2011/06/07/Soaring-Health-Costs-Pinned-on-Medical-Devices.aspx#page1
    http://www.npr.org/blogs/health/2011/06/06/137006007/as-cancer-treatments-advance-so-do-costs
    http://www.thehastingscenter.org/publications/briefingbook/detail.aspx?id=2178

  3. Medical technology has been a major contributor to the rising cost of healthcare in the United States. According to The Hastings Center article, “Health Care Costs and Medical Technology,” it is stated that “economists estimate that 40-50% of annual cost increases can be traced to new technologies or the intensified use of old ones.” Experts from the U.S. News article, “Cost of Medicine: Are High-Tech Medical Devices and Treatments Always Worth It?” assert that “new health technology makes up as much as two thirds of the more than 6 percent annual increase in healthcare costs.” These facts prove that increasing medical technology is also increasing the financial burden of healthcare on Americans. Technological innovation has proven to be critical in American medicine, providing us with vaccines, cancer treatments, and prescription drugs throughout the years that have allowed our citizens to receive increasing care. Although specialized medical treatment has been available to many throughout history, we can no longer afford advancements in technology. The United States healthcare system has been corrupted with the overuse of medical technology and now we can no longer afford to pay these bills without increasing taxes nationwide or paying more out of pocket for healthcare expenses. The main cause for increased costs of technology is due to low-risk patients receiving more costly, specialized treatments that are designed for patients with higher risk. By overusing these treatments on unqualified patients, the cost of healthcare is quickly rising. To reduce the increasing healthcare costs associated with medical technology without decreasing innovation, there must be policies enforced that only allow highly-specialized treatments to be used on high-risk patients. Unless Americans want to lose access to medical advancements and top-quality care, healthcare providers and doctors around the nation need to limit the use of highly-specialized treatments to only the most severe cases.

    http://www.thehastingscenter.org/publications/briefingbook/detail.aspx?id=2178
    http://health.usnews.com/health-news/best-hospitals/articles/2009/07/10/cost-of-medicine-are-high-tech-medical-devices-and-treatments-always-worth-it

  4. “40–50% of annual cost increases can be traced to new technologies or the intensified use of old ones.” “The same technology that offers hope for ever- increasing life expectancy is also leading to increased demands on the health care system,” and with this increased demand for health care, there becomes a scarcity from whom it must be decided who will receive healthcare and from whom it will be withheld. The Affordable Care Act (ACA) states that “any proposed rate increase by individual or small group market insurers at or above 10 percent will be scrutinized by independent experts to make sure it is justified.” Through this scrutiny, consumers will be able to see through the “unacceptable opaqueness” that is the health care system. By revealing this information, companies are now required to state their reasons for any increased rates, along with why they were reasonable or not. Other easy means to consult on non- life threatening cases are sending a text or email. Instead of scheduling a costly appointment for how to cure the common cold, a simple email could easily answer the question, while saving time and money. Some professionals are “encouraging a healthy lifestyle and in some cases rewarding healthy behavior with lower insurance costs or even cash back.” By having healthier behaviors, not only will this reduce the number of doctor’s visits, but the lower insurance costs and cash backs will allow for lower health costs by both the consumer and producer. Professionals agree that the responsibility is on the people to “maintain good lifestyle habits, ie stop smoking, avoid excessive weight gain, regular exercise” and make health- promoting choices. From Angie’s list, the Healthcare Blue Book is a “web based tool helping consumers find local or national fair prices for health care.” Further options are becoming more available as the rise of healthcare continues, but better lifestyles and revealing full disclosure to patients, are steps in the right direction to reducing healthcare costs.
    http://www.scu.edu/ethics/publications/iie/v3n3/homepage.html
    http://www.thehastingscenter.org/publications/briefingbook/detail.aspx?id=2178
    http://cciio.cms.gov/resources/factsheets/rate_review_fact_sheet.html
    http://www.replacetheruc.org/2012/05/17/how-technology-can-lower-healthcare-costs/
    http://www.scientificamerican.com/blog/post.cfm?id=is-obama-right-that-technology-can-2009-01-20
    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.

  5. With the costs of health care seemingly rising by the day, the question on everyone’s mind is how can we reduce these costs without losing the effectiveness of the care? Today, Americans spend $2.7 trillion on health care, almost 18 percent of our GDP. The federal government spends more on health care than on defense, Social Security, or any other single expenditure category. The rising costs of health care can be attributed to a number of factors, but the one factor that has been the most critical to these increasing costs is the complete lack of understanding of how much it costs to deliver patient care. Today, most Americans receive their health insurance through their employers. Without realizing it, employees shoulder most of the cost as the more health care costs for employers, the less is paid in wages. If the costs of care were more transparent, individuals would be able to shop around for the most affordable procedures that would not only lower the costs for them, but for their providers. If the prices became lower for the providers, then rates across the board would be lowered and employers would not have to fit as much of the bill and could then in-turn increase wages to employees. If the costs of care were more transparent, providers would be better able to assess which areas of care need improvement and which areas do not. While increasing transparency will not completely solve the problems of skyrocketing health care, it will help lower health care costs for all parties involved and is a significant step toward making our health care system more efficient and cost effective.
    http://www.cnn.com/2012/06/28/opinion/horwitz-levy-obamacare/index.html
    http://hbr.org/2011/09/how-to-solve-the-cost-crisis-in-health-care/ar/1
    http://www.economist.com/node/21546059

  6. Parika Kavilanz of CNN asserts that “Average premiums rose 8% for individual coverage and 9% for family coverage,” which clearly demonstrates how the increasing rates of health care and medical coverage are growing faster than the 2% inflation rate. With that in mind, it becomes apparent why many cannot afford their medical bills or their increasingly high health insurance rates. One reason for the higher rates, brought to light by sources such as CNN and MSNBC, is difficult financial positions faced by doctors. Recently, doctors have been facing a larger debt from school coupled with rising business costs. As a result, there is a general trend for doctors to oppose an unfair bill on patients that most usually accept without checking, putting many Americans into medical debt. Americans should be capable of and encouraged to check with many practices for a general quote on procedures well before they need them done. Doctors who respect their previously made quotes should be praised, while those who go against the quotes after the procedure should be held responsible for any bill unable to be fully paid back. Angie’s List points out that a procedure can vary by up to $180,000 between two different practices, an exorbitant cost that can easily put anybody into debt. Another keen factor in the rising costs is related to the insurers themselves. “Insurers make annual changes to the prices of their plans to factor in their own cost of doing business… shifting more of the payment onto customers through higher co-payments and co-insurances,” according to Stephen Smith of CNN, showing how insurers can easily play with bills to receive a larger profit. Insurers should be held to a minimum percent payment of medical bills, regardless of what the procedure entails or what network it took place in. This would hold insurers to some payment of all bills, but still allow them to make a profit through leaving some payment on the consumer.

    http://money.cnn.com/2012/06/27/smallbusiness/doctors-practices/index.htm?iid=EL
    http://topics.cnn.com/topics/health_care_issues
    http://money.cnn.com/2012/07/12/news/economy/health-care-costs/index.htm

  7. The complex relationship between employers, insurance companies, hospitals, and doctors is overwhelming to the average consumer and patient. I always assumed that there was a “method to the madness”, but after reading this article from “Angie’s List” and seeing the huge variation in prices being charged for the same service, I’m not so sure. For example, the cost of a colonoscopy could range anywhere from $705-$3,820.
    There is a great deal of money being wasted when it comes to health care spending. According to the Institute of Medicine, “in 2009 alone, the U.S. wasted more than one-third of the $2.5 trillion dollars we spent on health care.” The calculation includes the “excessive variation in service prices” but also notes fraud, inefficient operations, unnecessary services, and even duplication of bills as other causes.
    The amount of services that America’s health care system can provide is rapidly increasing due to new technologies (like robotic surgeries), more information due to scientific research and discovery, as well as increased availability of drugs. The health care sector will grow faster than the rest of the economy. Therefore, health care costs will continue to rise, despite proposals for reform. However, there are policies that can slow down this increase for both consumers and health care providers.
    To combat this, the U.S. has recently adopted the practice of “comparative effectiveness research” in which new technologies are assessed for their approximate benefits and costs prior to being widely implemented in medical practices. This can ensure that only the technologies that will improve the overall efficiency of the health care system will be put in place. This can help reduce wasteful spending.
    Another important aspect of reducing health care costs is to have more consumer-driven plans in which patients are more financially responsible and therefore, more involved and invested in their treatment. Patients will be more likely to make smarter decisions regarding which treatments and services they elect to receive, as well as be encouraged to research cost information before walking into a procedure.

    http://www.kff.org/insurance/upload/7670-03.pdf)
    http://www.regence.com/transparency/regence-and-reform/what-drives-up-health-care-costs.jsp
    Angie’s List: “The Spin on Prices”

  8. In “The Spin on Prices,” a large deal of emphasis is placed on the range of prices throughout the health care system (i.e $705 to $3820 for a colonoscopy). Although there are large price differences, I feel that some major factors are not being considered. One major factor that is overlooked is the location of the procedure. Some operations are performed in small outpatient surgery centers where they have to buy all of the equipment, which produces debt, while others are performed in large hospital networks where obtaining capital is far from a problem. Obviously, this creates a price difference. Another factor that must be considered is malpractice insurance. Although mentioned briefly in the article, it does not allude to the full problem. According to CBS, a doctor paid roughly $23,000 in malpractice in 2002. This price steadily grew to nearly $84,000 in 2007, a 265% increase over the five year period. It is simple; if people want to sue for negligence, a doctor must buy protection. Unfortunately, the price of the protection is expensive and that price trickles down to the patient. Finally, the cost of school plays a large role in the prices that the patients receive. According to the American Medical Student Association (AMSA), nearly 86% of doctors incur educational debt. Furthermore, the mean debt is between $119,000(public) and $150,000 (private). All of the money that is borrowed is subject to interest, which contributes to patient costs. As you analyze these three factors, I feel it apparent that people forget that being a doctor is actually a job and requires the acquisition of capital.

    http://www.cbsnews.com/8301-500262_162-610102.html
    http://www.amsa.org/AMSA/Homepage/About/Committees/StudentLife/StudentDebt.aspx

  9. The Angie’s List article suggests that patients use price tools, such as Healthcare Blue Book, to compare prices and find the best priced option for their healthcare, similar to Kelly Blue Book. The savings for this cost control depend on the procedure or medical services that are utilized by the patient. These savings can be from $300 to $9000. The article also says that patients should ask their doctor about the price of the procedure or about the costs that they may incur. This can also include asking about whether they are fully covered in their health insurance or if there are hidden charges, such as if the hospital is “out-of-network”, that will not be covered. Just asking these simple questions can save a patient anywhere from a few hundred dollars to a multiple thousands. The largest potential money saver, that the article discusses, is to higher medical advocates to help find errors and overcharges that can significantly increase your costs. Medical providers may even double bill a patient for two operations that occur at the same time. This kind of gross overcharge can be drastically reduced by these advocates. There is no readily available number to know how much is being saved, especially because it will depend on the advocate, and their fees. One potential savings, a very high one, that was not mentioned in the article is if patients do not request unnecessary lab tests and procedures. If the wasted resources are minimized, then prices will be easier to reduce and the health providers won’t be able to gauge prices.

    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.
    http://money.cnn.com/2012/07/12/news/economy/health-care-costs/index.htm
    http://guides.wsj.com/health/health-costs/how-to-research-health-care-prices/

  10. Technological advancements in the medical field since the 1970’s has led to many increases in prices consumers must pay. Technological advancements can include changes in procedures, equipment, or processes that the hospital may use. One example of changing technology for a pretty regular issue is the changes in heart attack treatment. In the 70’s, cardiac care units and lidocaine was used to manage irregular heartbeat, In the 1980s, blood-thinning agents were used after a heart attack to prevent re-occurrences, beta-blocker therapy evolved from short-term therapy immediately after a heart attack to maintenance therapy, and angioplasty was used after patients were stable. In the 2000s, better tests became available to diagnose heart attack and new drug strategies were developed for long-term management. From 1980-2000, the overall mortality rate from heart attack fell by almost half, from 345.2 to 186.0 per 100,000 persons. Yet, with all these increases, heart attack care has risen to 760,000 for a severe heart attack, or an average increase of 1.8 billion dollars spent by Medicare. But with the benefits of additional years of life for many people, the cost has been deemed as well worth the cost.

    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.
    http://www.cbsnews.com/8301-505146_162-39940799/how-much-would-a-heart-attack-cost-you/
    http://www.kff.org/insurance/snapshot/chcm030807oth.cfm
    http://www.wpri.org/Reports/Volume19/Vol19no10.pdf

  11. The Angie’s List article mentioned that often times patients are billed twice for certain procedures. The suggestion is that patients check their bills to make sure this has not occurred. On top of that, it is possible to negotiate prices, so patients should attempt to negotiate the price of their operations. Also, many different surgeons will demand different prices for the same operation. It is essential to try to figure out what you will be charged, and compare that with different prices to get the best deal. While patients have control over these things, the government needs to figure out how to solve the problem of our inefficient health care. In order to increase the efficiency of health care, there are so many little steps that can be taken. For example, integration of electronic transactions is estimated to save $21.9 billion annually, according to americanprogress.org. Integrating administrative and clinical health systems is estimated to save another $4.2 billion annually. Having a national provider enrollment and credentialing program, standardizing reporting requirements, stabilizing enrollment in public programs, and widespread automation together can save another $9.6 billion-$19.5 billion. If we look for new and advanced ways to improve upon health care, we could significantly increase the efficiency of health care in the United States.

    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.
    http://bostinno.com/2012/08/07/11-ways-to-reduce-healthcare-costs/#ss__198077_161669_0__ss
    http://www.americanprogress.org/issues/healthcare/news/2012/06/11/11805/3-strategies-for-reducing-health-care-administrative-costs/
    http://www.tc.umn.edu/~parkx032/CY-COSTS.html

  12. Health care’s increasing prices has been a confusing puzzle the US government has had to face for many years now. Some of the causes behind these increases are impossible to fix, such as an increase in chronic illness within the population. Other causes such as an increase in technology and prescription drugs can be fixed by the government, but not without consequences. Limiting the development in technology could also limit improvements in health care. Instead, the government should aim to limit the availability of technology. Many expensive procedures using state-of-the-art technology is over-prescribed by doctors causing prices for average patients to sky-rocket. It is hard to know where to draw the line when potential consequences could lead to patients getting the right procedure. Another problem the government faces, which is pointed out in the “How Much? Who Knows!” article, is the huge lack of transparency in prices for patients by health care providers. Many health care providers refuse to or are unable to give prices before procedures, which puts patients at risk to be over-billed. Some states now require providers to publish their prices and perhaps this policy could be applied at the federal level. Another way prices could be lowered is by raising deductibles for patients. This would make patients more conscious of prices and their own health, causing them to spend less on health care as well as shop for lower prices. Health care has a long road to becoming perfect, but these are a few ways that could motivate reform.

    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.
    http://money.cnn.com/2012/07/12/news/economy/health-care-costs/index.htm
    http://www.kaiseredu.org/issue-modules/us-health-care-costs/background-brief.aspx#footnote6

  13. According to Dr. Rene Hsia, a study of 19,368 patient records with similar cases of uncomplicated appendectomy found that hospital charges ranged from $1,529 to $182,955, with the median at $33,611. This equates to a range of $181,426 for a patient with similar health, a similar procedure, and in the same state. The lack of a standard price for various surgeries and procedures is the key problem for patients when trying to budget for health care expenses. The Angie’s List article, “The Spin on Prices” has a variety of suggestions for patients to help control their costs when seeking medical services, which include: analyzing Healthcare Blue Book, becoming cost-conscious consumers, and fighting health care cost errors. Angie’s List states, “Most providers have a standard list price for services. Insurers negotiate with them to pay fees – known as allowed amounts – that are far less than list and vary widely.” (p.33) This creates an asymmetric situation where the seller knows more than the buyer before the transaction, but Healthcare Blue Book helps alleviate this problem by calculating what consumers should expect to pay by taking a sampling of national prices ranges. Another part of the article discusses how consumers can become more cost-conscious through three steps: check whether their plan would cover care, develop a budget to manage health care expenses, and check the price of service before receiving care. When consumers check to see if they have coverage through their plan, it allows consumers to avoid higher deductibles and out-of-network hospitals. Lastly, patients can help themselves control costs by analyzing medical bills for errors and overcharges because according to the Medical Billing Advocates of America, 8 out of 10 hospital bills contain errors. A mother in Colorado, who recently lost her son to esophageal cancer, hired Holly Wallack for $240 dollar deposit up-front when the mother thought she was being overbilled for several procedures. Miss Wallack reduced a $135,000 radiation treatment bill to $65,000 because of evidence of double billing and then stated, “I’ve never seen a bill without a mistake.”(p. 27) Miss Wallack also advises to call providers and insurance carriers to confirm cost estimates and medical billing codes to avoid errors.
    To reduce the cost for consumers, the cost to suppliers must first be reduced. According to the New England Journal of Medicine, $30 billion a year could be saved through a task force consisting of payers, providers, and vendors by simply monitoring use rates and setting binding compliance targets on the administrative side. An additional $21.9 billion could be saved by simply adopting electronic transactions, according to the Health and Human Services Secretary Kathleen Sebelius. Whatever the case may be, it is clear reforms must be made in order to reduce these absurd prices.

    http://www.americanprogress.org/issues/healthcare/news/2012/06/11/11805/3-strategies-for-reducing-health-care-administrative-costs/
    http://www.nejm.org/doi/full/10.1056/NEJMsb1205901#ref15
    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.

  14. Health care has become a confusing series of bills, pricing, insurance, regulation and treatments. With so many factors and such ‘little visibility’ it is easy for patients to be taken advantage of by the system. As the price of health care grows, it is important for the nation and its citizens to reduce expenses and contain the cost in as many ways as possible. The Affordable Care Act has gone through great lengths to make sure health care costs are controlled. One important program involves funding for Comparative Effectiveness Research (CER). CER gathers the best possible information about various treatment options in order to make the most informed, beneficial, and effective health care decisions on anything from drugs, medical devices, surgeries, new technologies, and much more. With this research, the patient can now establish the best possible treatment plan for their price and their condition. CER is an important tool that can be used by both patient and doctor to understand the concrete facts of different treatments, helping to reduce inefficient spending and refocus attention around the patient and their health. This valuable information can help in reducing much of the expensive and unnecessary care patients often receive while also assuring that patients are educated about where their money is being spent and every option they have for treatment.

    http://www.kaiseredu.org/issue-modules/us-health-care-costs/background-brief.aspx
    http://effectivehealthcare.ahrq.gov/index.cfm/what-is-comparative-effectiveness-research1/
    Brady, Mathew. “How Much? Who Knows?!” The Spin on Prices October 2012. Print.

  15. It is startling to find out that the cost of healthcare is rising at 8% compared to the 2% inflation of everything else. But is this an unavoidable reality due to the nature of healthcare? William J. Baumol explains in his book, “The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t”, the concept that personal services such as healthcare, education, and even performance arts require a human touch that cannot be replaced by machines. Most other goods, however, can be reduced in price by the invention and implementation of new technology. In the healthcare world, technology seems to have an opposite effect. Technology just raises the cost of healthcare. The closest doctors are getting to replacing humans is in robotic assisted surgery. This technology is rapidly developing a nearly triple usage from 2007 to 2010. The benefits are clear: shorter recovery time, less chance of complications, less blood needed, and a smaller scar. Unfortunately, each unit can cost anywhere from $1 million to $2.5 million and also requires costly maintenance. It is estimated that on average, consumers will pay an additional 6-13% for robotically assisted procedures. Overall, the rising cost of healthcare may be unavoidable when compared to inflation, but that is not to say that it is hopeless.

    http://www.nytimes.com/2012/10/07/business/cost-disease-offers-a-case-for-health-care-calm.html?pagewanted=all&_r=0
    http://www.nejm.org/doi/full/10.1056/NEJMp1006602

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