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U.S. healthcare system is bleeding us to death by design

U.S. healthcare system is bleeding us to death by design

Picture of Steven Weissman
Skyrocketing health costs
Skyrocketing health costs

The U.S. healthcare system is produced and fueled by crony capitalism. Activist investor Dave Chase bottom lined the result (Forbes): “the Middle Class is in a 20-year long economic depression that is at least 95% due to healthcare.” Studies show our healthcare industry is providing worse care than many other wealthy nations, at an astounding 50% per capita higher cost than the next most expensive nation.

Ask the price of any service and you always receive the same answer: “What insurance do you have?” Billing is determined by how much can be extracted from each patient on a case by case basis, often when the patient is at his or her most vulnerable. By any definition, this is a predatory, non-competitive system.

So called price transparency initiatives serve to perpetuate this system in which prices can vary by a factor of 100 for the exact same service performed by the same provider. Healthcare is the only consumer industry legally permitted to shield itself from the usual requirement of legitimate pricing and competition. Patients have been rendered powerless. Ethically, this is institutionalized fraud.

To stop the bleeding, Congress need only require that healthcare providers publish “legitimate pricing” which means, they can continue to set their own rates, but - a different rate for each patient - must be prohibited. Without legitimate pricing, price competition will never exist and healthcare costs will continue to skyrocket.

Consumer protection laws are applied to virtually every other industry and require both that (i) prices be disclosed; and (ii) prices be stated in a common format. Gas is uniformly priced in gallons (not pints, quarts, ounces or liters). Food is generally priced in ounces and pounds and state agencies protect consumers by inspecting scales. Scores of regulation specify precisely how annual percentage rate must be calculated and disclosed in all credit transactions (i.e. the price of borrowed money). Healthcare’s exemption from consumer protection laws is a national disgrace.

Healthcare providers, like other sellers of consumer and financial products, must be required to publish their rates in a uniform format such as industry standard CPT codes or a percentage of Medicare rates. Every citizen would be empowered to search any medical procedure online and see pricing for all providers within X miles. It would be as easy and familiar as checking the price of any other goods or services.

Legitimate prices mean networks will be obsolete, along with the administrative burdens, tremendous costs, and limitations on patient choice which they impose. Health insurance will function like homeowner’s, fire or auto insurance. When a house burns down, the price of drywall and paint does not depend on whether the home was insured by State Farm or Allstate. Patients would buy health insurance providing a reimbursement level that they select. For example, 100% of Medicare rates. Consumers could shop every provider in the nation and easily determine their out of pocket costs.

High amounts of corporate debt have been incurred acquiring medical facilities on the assumption they could continue to impose predatory pricing. Disruption of current business models will lead to bankruptcies. Just as in all other industries, currently non-competitive providers will be acquired at low cost and be operated by more efficient providers. Ultimately, the industry will adjust to a competitive environment and offer health services at far lower prices.

University of California researchers reported that a consumer-oriented incentive to generate competition, known as reference pricing, lowered hospital costs by more than 20% for the 1.3 million members (and their families) of the California Public Employees' Retirement System. The insurance plan stated the maximum amount it would pay for a group of common medical procedures, thereby incentivizing participants to shop prices. Lower-priced hospitals saw market share growth of 28 percent prompting many higher-priced hospitals to lower their prices.

Legitimate pricing, would be a far more powerful stimulus to competition than mere reference pricing. Legitimate pricing would compel wide open free market competition and in this author’s opinion, virtually overnight, reduce U.S. health expenditures by a minimum 33%.  Disposable incomes and prosperity would boom. The U.S. deficit would shrink.

Lower underlying healthcare prices is the sole and exclusive way to materially lower health insurance premiums. Anyone who says otherwise is, to be kind, incorrect.

Reform is difficult because the healthcare industry spends more on lobbying than the defense, aerospace, and the oil and gas industries combined. The American public understands our predatory pricing system is morally and economically unjustifiable and is demanding change. A Petition to End Predatory Healthcare Pricing and to require legitimate pricing rapidly gained more than 100,000 signatures this year.

To the many polarized groups in our nation, we have added free market verses single payer devotees. While this author takes no position on this issue, legitimate pricing is an essential prerequisite to either system.

Nobody knows what prices would look like in an open market. For example, a study by The Department of Health and Human Services compared Medicare allowable prices for lab charges to the negotiated prices paid for 20 high volume and high expense lab tests by health insurers. While providers generally complain that Medicare rates are too stingy, the study found that prices paid by Medicare exceeded fair market value: “Medicare could have saved $910 million, or 38 percent, on these lab tests if it had paid providers at the lowest established rate in each geographic area.”

Without legitimate pricing bureaucrats administering single payer would have no basis on which to negotiate or set rates. That will likely leave lobbyists in control of pricing. For many Americans this concept evokes memories like the Pentagon's purchase of $1,000 hammers and toilet seats. If we didn’t know how much those items cost in hardware stores (i.e. legitimate prices), there would be no reference point and nobody would have even batted an eye.

To reverse our nation’s financial bleeding, Congress must empower citizens by mandating legitimate healthcare pricing.

Comments

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I think this would be a heavier lift than Obamacare. However, it is necessary for the health of the U.S. economy and so if need it if the great American experiment is not to perish from this Earth. We can already see in the current political situation the great danger of perpetuating the current unhealthy healthcare pricing system.

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Are we prepared to let the insurance industry determine what profits our doctors and hospitals will earn? Currently, each insurance company will negotiate rates with each doctor or clinic separately from any others, and the same is true for hospitals. With that in mind, the doctors and hospitals charge the private patient more, hoping to show a bit more profit at the end of the cycle. Of course, they don't always get paid by the private pay patient, so have to factor in, not only the direct loss, but also the cost of using bill collectors to attempt to recoup that loss. With a preset price, insurance companies are still going to negotiate for a lower price than John Q Public will see,simply because they pay for so many more things in a year's time. For a fixed rate system to work, EVERYONE must pay the same price, whether it is a one time event for themselves, or multiple events for an insurance company's subscribers.

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I agree with the writer. We need a reference point for medical costs. And also that it would be essential for single payer as well. It is distrurbing that healthcare costs so much. Where does all the money end up? It's certainly not helping the middle and lower classes very much as evidenced by astronomical prices and not astronomical outcomes. And a huge lack of efficiency which negatively effects providers and customers/patients.

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It is a disgrace what has happened in Heath care costs. When insurance premiums cost more than house payments every month and then there are deductibles and co payments
how can a average family afford this. This is so sad for our country!!!!

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Runaway crony capitalism is putting it lightly. When you consider that the rest of the "industrialized" (I dislike this term) world is so far ahead of us, it's embarrassing to consider the USA's position in the world. Sincerely, an expat.

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This is the horror of this era. Price gouging and corruption go hand-in-hand. BOTH must be stopped ASAP !!!!!!! We The People appear to no longer matter. So ends Democracy and enters Corporatocracy !!!!!

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Thank you for telling us the truth. Let's demand our politicians serve the people and fix this huge drain on our country!

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This is healthcare EXTORTION. Government-sanctioned, no less. It has already sent millions of Americans to early graves and bankrupted millions more. It is abusive, morally bankrupt and economically indefensible... and cruel.

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Great article Mr. Weissman! It is a total shame that in order to have any type of medical procedure the first question out of the medical entity rep is, "What type of insurance do you have?" We are in a sad state of affairs in our country when so many of our citizens have to decide to either buy food or have a test done, go to the doctor or by medications. I work at a Area Agency on Aging and we see it every day. Such a shame! WAKE UP AMERICA!

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Amen! Medical costs, together with climate change, constitute the most important issues facing our country. It is time to move beyond the existing structure which is completely controlled by Big Medicine and institute a system that works for the people of this country: a Single Payer system with Medicare-style cost limitations.

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WHY IS THIS LEGAL?

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It is time for congress to care about the people who vote them in office or get rid if them.

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Legitimate pricing is such a simple commonsense approach. How did we ended up with such a complicated impractical system that costs many times more than needed?

Dare I say it's because politicians like the status quo? From their point of view, as long as they don't anger anyone too much (especially a very powerful lobby, such as those the insurance companies have), they can keep getting elected until they die--another complicated impractical system that could be solved with a simple commonsense approach.

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While your article is very good, I wonder why it doesn't include a petition for ppl to sign demanding Congress to pass legislation for Health Provider Legitimate pricing?

Also, if Obamacare currently 'forces' enlistment for the uninsured. If Obamacare was simply a low price option for great Health Insurance, ppl wouldn't have to be 'forced' into signing up....they would be more than happy to enlist. With set limits on Health Provider payouts, not only will millions of ppl sign on but Health Providers will have significantly less leverage to 'play with pricing' when half the population can''t be played with.

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Gina, a little ways up from the bottom of the article there IS a petition... on change.org. Click on the link "Petition to End Predatory Healthcare Pricing" and you will be taken to the petition.

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i am on a widows pension and in January my monthly insurance cost is jumping from $389 to $763 so my budget is a nightmare.

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End the practice of pricing based on the healthcare policy one has. One price for all should be your mantra!

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This article is SPOT ON. Legitimate pricing is necessary and the consumer should be able to tell the provider " what is your price? Who my insurance provider is, IS NONE of your BUSINESS UNLESS I DECIDE TO COME TO YOU FOR THE SERVICE." EVERY other business in the United States works that way. When you need work done on your car, the garage doesn't give you a different rate for your oil change based on if you use a Visa or Mastercard or Discover to pay for it, nor do they ask you HOW are you are going to pay for it UNTIL after the oil change is done.

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lab tests and prescription drug prices may be more simple to acquire than consultation fees; however a good start beats nothing at all... keep it rollin'!

cosmic/peace
sulaiman

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This is a great article. We've got to get published prices adopted in the health care industry, but electing politicians who refuse to take campaign donations from the healthcare providers.

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I am disgusted at the way the US handles healthcare. This is, as the author has stated, not a fair trade free market it is simply a murky predatory one. Legitimate pricing is essential and if we fix the problem with astronomical healthcare costs it makes sense that this country fixes a lot of other problems also like putting food on the table. There should be more employment because people will be able to afford to be self-employed and small businesses could afford to hire employees and pay them a living wage. This is not rocket science.

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I compared two hospital stays of three days in Tampa over a three year period. the amount billed as 19,161 down to the penny in both cases. One required equipment and procedures whereas the other did not. Of course that excluded doctor and lab fees - double dipping in my view. It is ridiculous that a patient or family cannot ask for any prices up front.

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I was just remembering when I found out I was pregnant and went to the doctor's office. I was so humiliated to be sent immediately to the billing office to see how I would pay for the baby. I didn't even get to see the doctor first, just straight to billing. It turns out I had insurance, but I barely got in the door before I felt pressured for money. Then after delivery I was in a room with a poor lady who had her second child and still hadn't finished paying for the first one. I was so embarrassed for her when they were hounding her for a payment schedule. Kind of takes the joy out of it.

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