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September 8, 2014 - Kim Moore [see other posts]

Grocery Bills are Not Like Medical Bills

Grocery Bills and Medical Bills

Health care in America is very expensive. For years, American consumers were protected against rising health care costs by employer insurance, Medicare, Medicaid, and other third-party payment mechanisms. As employers and government attempt to control the costs of these insurance programs, they are passing along more and most expenses of health care directly to consumers -- especially front-end costs -- through high-deductible plans, co-payments, and greater share of premiums. This development means that providers will more and more have to collect money from consumers before and after services. The Affordable Care Act is getting millions of Americans insured, but the question will be: is that insurance really adequate to protect families' financial resources and assure access to care? At the Health Ministry Fund, we have been trying to talk about underinsurance for a number of years, and now we suspect there will be a real discussion of the subject.

I confronted it most directly during a safety net planning meeting when a board member of a safety net clinic complained about patients who would not get any groceries without paying their bill but felt they should not have to pay for health care. This person felt there was not any difference between grocery bills and medical bills.

I beg to differ. There are almost no similarities between most medical bills and grocery bills. Let me give you a few differences:

1. You almost never know what the final price will be for medical services you are buying. In fact, not infrequently a health care provider will dismiss your price question with something like "it's covered by insurance, why do you care?" Sometimes, the provider does not have any idea of the price to the full pay consumer.

2. You frequently don't have a real idea what you are buying as a discrete set of services. "We will send you in for some tests" is very open-ended. One thing invariably leads to another and determining when and where to stop is generally delegated to the "salesperson."

3. The health care provider in most cases will have no idea what is the actual cost to provide the service. Oh, they know what the charge is once the service is coded, but there is virtually no cost accounting in health care. As a 2013 TIME magazine story illustrated (starting 4:30 into video interview), hospital charges are derived from a file known as the "chargemaster" which is not very tailored to the particular provider. The cost, the charge and the price are principally determined by what payors will pay.

4. There is rarely a quantity discount. Using a volume of services does not change the cost per unit in most cases.

5. What the consumer will actually pay of the charge is a product of rules and limitations of third-party payors which are byzantine at best. Benefits must be "coordinated" with other payors. Was it caused by an accident? Did it happen during employment? Annual deductibles must be met. Co-payments may or may not apply.

6. The bills are usually not voluntarily incurred. There is no real choice when you have a broken arm, a heart attack, a high fever for ten days, etc. This is not always the case; there are people who make visits to physicians part of their social calendar and there are some cosmetic and other choices for care (annual physicals, for example). But overall, there is no evidence that Americans over-utilize most health care services just for the fun of it. Providers would respond that many Americans do not take care of themselves and create their own health situations (point taken).

7. You have no direct relationship with quite a few of the people who sell you health care services. You gave some written consent in an adhesion contract that you would pay all the related charges your provider needs to care for you. You get a bill with names of medical groups, labs, radiologists, anesthesiologists and others who you don't even know and frankly don't have any idea what they did for you. They will charge you their standard charges (or whatever the third-party payor permits, if you have some form of insurance).

8. The charges are not in themselves reasonable in amount from a middle or lower economic class viewpoint. $10 for an aspirin in the hospital. $125 for a 10 minute office appointment. $700 for a root canal. $2,000 for a 30 minute eye surgery. When you place these amounts in terms of the hours it takes a person not in health care to earn those funds, they are hard to understand and accept. They are simply beyond the ability of 70-80% of Americans to pay in the absence of very protective third-party payments (that last statement is going to be tested a lot in the immediate future). We know that more than 50% of all bankruptcies have medical claims as part of the financial problem (I have never seen a good source for this statement, but it is repeated by all sides of the health care debate).

9. There is no price competition in health care. There are virtually no advertised prices, although that is starting to change around the fringes. It is still very, very difficult to price shop in health care. There is even an awareness that price competition is discouraged in health care -- drug prices can't be negotiated in some cases -- and, unlike most fields, new products almost never lower cost (such as technology) but are dramatically more expensive (patents protecting new drugs and equipment).

I am sure that the person comparing grocery and medical bills would find all of this analysis puzzling and beside the point: YOU OWE THE BILL and that is the same. Well, I am suggesting that we may see an erosion in the moral, ethical culture around paying health care bills. These differences I am pointing out will affect the sense of fairness and duty people have when they incur health care costs, especially when those costs are in more than minimal amounts and are destined to change their whole lives with ongoing sacrifice. We can hope that greater transparency, more price competition, more room for consumers to negotiate prices, closer scrutiny of "costs" versus permitted charges (by providers themselves), and new bundled care payment mechanisms are going to create a new framework where medical bills can be seen as more reasonable and fairer to consumers.