For several decades and still today, few Americans actually look at their medical bills. That’s because someone else was and is paying them – generally an insurance company. Despite the steadily growing army of uninsured in the U.S., over 80% of Americans still have health insurance, principally through their employers. Retirees have Medicare and the very poor have Medicaid, both originally designed to publicly cover typical medical procedures for these two groups generally not covered by employer-provided healthcare.
Most people covered by private or government health insurance rarely scrutinize their medical bills because they rarely get to see the entire bill. At best they might glance through a limited itemization for their co-pays. That persistent financial neglect of the real costs of U.S. healthcare may be the most significant factor in the uncontrolled escalation of healthcare costs in the U.S.
During the past decade and accelerating with each passing year, employee co-pays for employer-sponsored healthcare insurance, and actual premiums charged to businesses have risen each year far in excess of inflation. However, the monthly increases for employees and employers are just a small fraction of what the total bills are for most medical treatments, surgeries, and tests as paid by insurance companies. We continue to maintain our collective disconnect between what we individually pay for healthcare and what it costs systemically.
Under the solid and dependable principles of risk-spreading, insurance companies do not disclose many specific bills for medical care to their clients. So long as the overall costs remain less than total premiums collected, their executives and shareholders are happy. That pervasive non-disclosure covers the fact that many bills are negotiated between providers and insurance carriers, and that some procedures are denied in order to contain costs. Since this billing scrutiny is done in private by private companies with limited public disclosure or oversight, the majority of Americans are still unaware of the real cost of U.S. healthcare on a per capita nationwide basis.
We don’t seem to mind insurance companies surreptitiously rationing or negotiating healthcare costs as part of their ongoing business operations. It is rather inconsistent and inexplicable why many Americans fear that our government should not do the same in public for everyone to see, debate and regulate for the benefit of the general public. Possibly after years of Republican control in Washington, it has rendered most governmental agencies ineffective in the minds of some Americans.
Employer-sponsored health insurance is not taxable as income to employees and is a fully deductible business expense for employers. This huge federal tax subsidy makes it less likely that individuals or business people will scrutinize the actual medical bills. We have collectively created a “black box” with respect to understanding real healthcare costs in the U.S., much of it to the detriment of federal tax revenues.
Medicare and Medicaid (both administered by the states through a complex system of Federal and State financing) have been steadily reducing their reimbursements to healthcare providers, leaving more to be paid by the elderly or poor, or the bills are eventually spread throughout the system surreptitiously. However, those co-pays are still only a fraction of the total bill which is simply paid out of federal or state general funds. Again, no one within or outside the healthcare system really takes an independent auditor’s view of the original bills. There is just too much paperwork and money changing hands to permit enough people or time to be allocated towards actually auditing the massive systemic financial mess. The fact that many healthcare providers no longer take patients covered only by government insurance only perpetuates the overall lack of any possible and objective oversight with respect to total medical billing.
Some of the few people who actually look over their medical bills are those without insurance or those with huge co-pays before insurance coverage kicks in due to pre-existing conditions, age, or other situations that cause insurance companies to consider them higher risks. Of course, even these people don’t negotiate in advance or later audit the multiple, massive and incomprehensible bills, which often contain many errors and over-billing. They generally come after treatment is rendered, not before, and most people are not experts in the arcane field of medical coding and billing, and the real mark-ups in medical services and products to consumers.
After the initial shock of these massive charges, most uninsured people who cannot pay their medical bills can either just file for bankruptcy, or they can try to apply for public assistance (State Medicaid) if they qualify under the abysmally low thresholds enacted by most states. After a few months or years of unsuccessful collection efforts, many unpaid medical bills are simply subsumed into the overall system. The physicians, hospitals and other healthcare providers merely increase their bills submitted to insured patients to make up for those unpaid bills, many of which are more than twice what is paid by insurance carriers for the same services. Certainly the overall healthy profitability of the entire U.S. healthcare system is not being negatively affected by the uninsured and a limited number of unpaid bills.
Most people carefully look over the bills or costs of most every other good or service in their lives, often shopping around for the best possible deal. This frugality is normal, particularly if payment is being made out of current income (via cash, check or debit card) or if it is being financed by a credit card or a loan. Unfortunately, when we move towards financing a particular good or service, most people do not understand basic mathematics, compound interest, late fees, penalties, and most of the terms and conditions of those finance documents – and most of the representatives of the financial institutions do not either. (What’s got 50,000 words but nobody reads? – Our finance agreement – or our insurance policy. These mindless documents were written by lawyers for lawyers in order to ensure perpetual legal employment arguing about and litigating the lengthy, complex and highly nebulous terms and conditions.) Part of the mortgage foreclosure debacle strangling this country is due in part by no one really understanding what those documents meant, and whether the property was actually worth anything close to the amount financed after they were bundled and sold off to third party investors around the world.
Elected officials and leaders in the healthcare industry always claim they are working to cut or control costs, but nothing has ever been accomplished if one measures success by the persistently large annual increases in premiums. Except for insurance companies, very few people ask physicians, hospitals, pharmaceutical companies, medical equipment and supply providers, or anyone else who provides healthcare products and services, to justify their fees and charges. Considering no one is offered competitive bids before medical care is provided, the bill is the bill. There is almost a social stigma in America for even discussing what one pays for medical care or healthcare insurance.
Those who seek surgery or treatments not covered by insurance are the only true capitalists and cost-minimizes within the system. They shop around to get the best physician, services or products at the best possible price. An interesting development over the past decade has been that many people have found excellent and inexpensive medical care in various countries outside the U.S, frequently at less than half the price for the same services provided within the U.S. This is a win-win situation for both the American patients and the foreign medical service providers.
Unlike in the U.S., all the people in these transactions openly and honestly discuss the costs in advance and then everyone wins when there are true cost savings. This is probably the only true free market within the U.S. healthcare system – and it exists because there is no insurance coverage involved.
A growing number of Arizonans drive to Yuma and simply walk across the border into Mexico where there is a plethora of medical, dental, and optical clinics with well-trained bilingual staffs ready to handle a variety of treatments. They also frequently include an overnight stay in a comfortable motel as part of their already deeply-discounted medical fees. In addition, the place is full of discount pharmacies that do not require prescriptions to provide any prescription drug possible for a fraction of the cost of U.S. medications. (Mexico has drug price limits with most all U.S. pharmaceuticals – unlike Medicare or Medicaid.)
Perhaps we could get true cost containment in our healthcare system if we simply eliminated all health insurance. People would be forced to discuss costs in advance and a real free market would actually develop between buyers and sellers of healthcare services. Since that is completely unlikely, there are other viable alternatives.
One of the reasonable concerns about enacting any type of single-payer universal healthcare system in the U.S. would be its massive cost. Without contemporaneously enacting serious cost-containment and cost-reduction laws and regulations, and simply imposing a national insurance policy for everyone under the current system, the new single-payer public or non-profit insurance carrier would quickly collapse financially. Considering the U.S. healthcare system is a multi-trillion dollar collective enterprise, not even our Federal Government and all taxpayers could possible absorb the current costs of this bloated system. That is because we are not addressing the essential problem with the current system: No one has an incentive to look at, yet alone negotiate, the bill.
Everyone pays a federal payroll tax of 1.45% on all their wages in order to fund Medicare and Medicaid, permitting the premiums charged to retirees (deducted from their social security checks) to be artificially low. To pay for a single-payer plan for most Americans under the current system without cost containment, either the payroll tax must go up significantly, or premiums increased, or both. (There is no free lunch but one can eat rather cheaply in many hospital cafeterias.)
Even the best foreign single-payer plans are struggling with cost containment issues, and the U.S. would also have to face that reality as well. Considering most highly-regarded universal healthcare systems are within countries with populations ranging from 10 to 80 million people, covering 300 million Americans would be a colossal fiscal challenge.
There may be a far more economical and rational alternatives. Today, there are private U.S. enterprises affiliated with U.S. health insurance companies currently operating joint-venture medical clinics in Mexico and other countries that are geared principally to serving the various medical needs of Americans at greatly-reduced costs. The private sector is already finding a solution to uncontrolled medical costs in the U.S. The Federal Government should do the same as this is really not “rocket” science.
The U.S. government could sign a number of healthcare bilateral agreements with various foreign countries to treat all Medicare, Medicaid, and uninsured Americans. This new program would also help the U.S. airline industry since every American needing any medical care would have to be sent outside the country under competitively negotiated huge group travel rates. (To speed up airport security, we could all just put on those silly too-small and revealing hospital gowns before boarding.) For those Americans who live closer to the Canadian or Mexican borders, private charter busses could also see a boon in business. If the healthcare traffic is large enough, it might justify building high-speed rail lines between major American cities with various Canadian and Mexican cities, another economic stimulus for the entire economy funded by potentially significant federal savings on healthcare costs.
The foreign medical clinics would provide access to most regular physician visits, prescription drugs, most surgeries, and standard treatments for various diseases. The only service not possible in a foreign country would be for emergencies. However many uninsured people use emergency departments for conditions that could have been better addressed through preventative and regular checkups. Thus some of that problem would also be addressed through the new system if they just flew overseas a few times a year for medical care. For those with real emergencies, then we could lease out ER departments in most U.S. hospitals to various foreign corporations and governments under the same special bilateral agreements. The U.S. could essentially eliminate Medicare and Medicaid, and cover all the uninsured, for a fraction of the total cost those programs run today. Considering the massive savings, dental and optical coverage could be included in this new system as well.
The U.S. has shifted much of its manufacturing base overseas, along with millions of jobs. Now many service and professional jobs are being outsourced. These outsourcing activities are occurring solely to reduce costs. Essentially many working Americans have priced themselves out of existence in a global economy.
We can manufacture most all of our consumer products, electronics, cars, and similar items far cheaper overseas than producing them domestically. We are now moving computer programming, accounting and legal work, tech support, and other Media/Internet work to lower-cost foreign workers living outside the U.S.
Therefore, if we can get far cheaper medical services and products by contracting for them outside the U.S., they should be outsourced as well. Just as we see thousands of abandoned factories littering the American landscape, millions of homes empty due to foreclosures, then many hospitals and physician offices could also be closed and shuttered as they would also be considered excess domestic real estate capacity.
Most American insurance companies would likely follow suit to principally cover medical care provided overseas. If the U.S. government can by treaty avail itself of a far cheaper national healthcare system operated outside the U.S., then even those with health insurance will be shipped overseas for identical medical care and overall systemic cost savings. Costs for private U.S., health insurance companies would go down significantly and their profits would still go up. (Capitalism dictates that not every cost savings is always passed onto the consumer but rather to the company’s top executives and shareholders.)
Certainly those foreign medical clinics will have to be staffed with people. If we concentrate most of these clinics in Mexico and Canada (using NAFTA as a pretext) then many of the illegal immigrants in the U.S. might return to at least Mexico to work in those new facilities serving Americans. The work would likely pay better than the illegal and below minimum wage stuff they now do in the U.S., and they would not have to leave their families and friends. The U.S. would create a win-win situation. Americans would finally get very affordable national healthcare (albeit overseas), and we would greatly improve foreign relations by expanding economic development within the various countries that sign bilateral healthcare agreements.
Every American industry, professional, and worker, now must deal with global competition, thus price considerations are frequently paramount. The only U.S. sectors artificially protected from global competition are financial/banking and healthcare. That explains their outlandish costs, profits, and unregulated operations that have and continue to do serious damage to the American economy.
Of course, the unemployed U.S. physician would be in the same position as the unemployed U.S. autoworker: Both desperately in need of retraining. But retraining would be easy: In order to compete globally, they just have to be willing to work for $2 per hour and learn Spanish or Chinese.
Marc Pascal