Our family has health insurance. But our plan has a high deductible. We pay for first $5,000.00 in medical expense each year before the insurance kicks in. Part of the reason we got a plan with such a high deductible is that it saved us money on premiums. The other reason is that, after watching our premiums soar up year after year, we wanted to be responsible for our own health care utilization. With $5,000 of our own money on the line we had an incentive to consume health care services wisely. We would be the change we were looking for.
But managing your health care bills is not so easy. We learned that the hard way.
The Case
At first our decision to go with the high deductible plan looked like a good bet. Other than routine checkups, we had minimal issues. Then I got the call. One day last spring Christine fainted at work. She felt woozy all of sudden and sat down. The school nurse checked her out, called for an ambulance, and called me. I ran over. I arrived in time to check in and see how she was feeling before the ambulance took her to the emergency room.
At the ER, we were mostly ignored while the staff dealt with more severe cases. Eventually a doctor appeared. They ran a few blood tests. They ruled out anything that was an immediate concern. Then they kind of shrugged and sent us home.
Over the next few days Christine’s wooziness and weakness came and went. She always felt a little “off”. Sometimes she was too weak to stand. She missed a lot of work. Christine visited her doctor twice. They ran a few more tests. Then her doctor suggested an MRI.
We scheduled the MRI. Christine started to feel better and we thought about cancelling. Then she had another dizzy spell. Whatever was causing these spells had been doing it for three weeks now. Something was wrong and we had no idea what it was. We kept the MRI appointment.
We didn’t hear the MRI results right away. Christine started to feel better. And the problem went away. Eventually, we learned that the MRI didn’t show anything interesting.
Whatever the problem was, it went away on its own. At no point did Christine take any medication or undergo any treatment. We never even got a firm diagnosis. In this case, the outcome was the same as if she had never gone to the doctor at all.
The Bills
The ride in the ambulance cost: $758.60
The visit to the ER cost: $2,061.38
The visits to the doctor cost: $524.49
The MRI cost: $3,367.52
Health Care Economics
Before we consider the economic factors at work here, I would like to consider this question:
Why do I have such a crappy television?
We have a old, not at all flat, and rather small television. I have considered purchasing a new television on several occasions. There are lots televisions available. There are many manufacturers. Sometimes there are sales. Each year the price of new 42” flat-screen gets lower and lower. Over the years we have spent lots and lots of money on lots of different things. But we have consistently chosen to not spend our money on a new television.
This is classical market economics at work. There is competition based on quality and price. Information is available on the cost and features of each model. Retailers compete to get me to buy from them. I can make an informed decision about whether the product is worth the cost. And I can decide not to purchase anything at all.
Notice that when it comes to health care, none of these basic market principles apply.
The school did not consult with us or get a quote from the ambulance service before calling for it. The minute you set foot in an ER the meter is running and nobody is going to tell you how high. As she handed over her credit card, Christine asked the woman at the intake desk how much her scheduled MRI would cost. The response was “How should I know?”. When you get the bill, learn what the MRI cost and decide maybe it wasn’t worth the three thousand dollars, you can’t return it for a refund. And since you’re dealing with your health, something more important to you than money, you can’t opt out.
The principles of competition and selection that control costs everywhere else don’t apply to American health care. In other countries the government is paying the bills and sets the price -- controlling costs by fiat. But not in the US. With neither market forces nor government price controls, the entire system is price-blind, and costs rise without constraint. Even if we can’t control these costs we still have to pay for them - through rising insurance premiums, higher taxes, and shocking bills that arrive in the mail.
Bringing our nation’s health care costs under control will require application of some basic market principles, stronger government intervention, and a cultural shift to recognize the costs and limitations of modern medicine.
Our doctor would likely be shocked by the suggestion that she factor in the costs of tests and treatment. The doctor has a hard enough time sorting out sets of vague symptoms and trying to keep us healthy. She’s recommended the MRI because it might show something serious she can’t detect with a stethoscope. Her instincts, training, concern for her patients, concern for malpractice suits, and her own salary are all aligned. All of her incentives are pointing in the direction that says do more. But the doctor needs to recognize that, while we are deeply concerned about our health, it is not our only concern. She does us no favors by being blind to or concealing the costs. The patient is on the hook for the bill. The cost portion needs to included in the cost-benefit analysis.
We also need to recognize that, when it comes to our health, and the health of those we love, traditional cost-benefit analysis does not always apply. In an emergency, when dealing with a horrifying unknown, or with any serious medical condition - we will want more than we can pay for. The rational answer to the question of “Shall we save your life?” will always be “yes”. Cost be damned. You can’t take it with you. It is assured that some people will require vastly more medical resources than others. And at some point in our lives, most all of us are going required significantly more medical care that we can afford. We need private and public insurance plans to insure, at any given moment, the the large number of healthy people are paying in, and covering the costs of the few who need the most. Government regulation is needed to insure access and costs are broadly distributed. When market forces can’t produce an efficient outcome we require governmental intervention.
The major shift that needs to happen is cultural. Americans don’t like to talk about money. We don’t like to talk about our health. And we definitely don’t like to talk about, or even know about, our medical bills. But we are the ones who vote for the those who enact policies. We are the ones who either ask the questions of our doctors, or don’t. We are the ones have to pay the taxes, pay for the premiums, and pay the bills.
P.S. This isn’t really meant as a tale of personal woe. Paying out $5,000 sucks but won’t be an unbearable burden for us. In that other great American tradition, we recently refinanced our home to a lower rate. We took out a little extra to help cover the bills. Maybe we’ll even buy a new television.
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