partly
, partly on
Quote:
Originally Posted by DixieGal
[SNIP down to the part I want to comment on...]
Pay attention now, this is what I've been getting to: Those pts who are poor and don't have insurance are covered under a govt program called Medicaid. Medicaid only pays us a fraction of the cost of the medical care, and we are forbidden to try to collect the remainder. This is a contractually binding agreement. We take a large loss on these pts versus pts who have insurance. Nobody makes up the difference. It is mutually agreed upon by us and Medicaid that we will take whatever pittance they give us and be satisfied. We understand that we can not count on our majority population of poor urban pts to support us and that the excellent care they receive from us will be free to them.
[and SNIP some more]
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This part of DixieGal's post is very important! It indirectly explains much of the reason why healthcare in the US is more expensive than in many other countries -- and it's our own darn fault, too!
There's an economist -- I'm blanking on his name, darn it! -- who got his Nobel prize for explaining the effect you get on prices when a market is partly price-controlled and partly not. Especially when the price-controlled portion is both (a) large relative to the total, and (b) pays below market-equilibrium prices for what it consumes. I'll skip over lots of economic theory that I probably didn't understand correctly anyway, and jump to the bottom line:
First the obvious part -- providers in the market shift costs from the controlled portion to the uncontrolled portion. They must recover their costs somewhere, after all, and they're not allowed to charge more in the controlled part so... But the NONobvious part is this: the upwards pressure on prices in the uncontrolled part of the market is much worse than you would expect. It turns out to be seriously non-linear. And the larger the controlled fraction of the market is, the more non-linear the pressure becomes on the uncontrolled part -- up until the whole edifice collapses because the few remaining players in the non-controlled part of the market can't afford to subsidize the below-cost controlled part any longer. <Whoeveritwas> quantified the non-linearity... but I don't remember the numbers <sigh>
The work cited for the Nobel prize was done on rent control, but he and others have since taken a close look at the US health-care market.
I'm about to get a bunch of numbers wrong here (I'll mark them with a *), so someone more expert than I should correct me. That said, the general sense of what follows is correct, even though the specific percentages are wrong...
Medicaid (for the poor) and Medicare (for the elderly) pay below-market rates by statute. A government agency computes the "reasonable and customary" charge for each procedure in various parts of the country. These programs then reimburse providers (doctors/hospitals/etc.) at a standard rate and on a standard time-to-payment (much more delay than private payers, and usually later than that, too!). The rate is 60%* of the reasonable and customary charge. The agencies also take advantage of a very interesting law affecting government procurement, to wit: when the government buys something or pays for something that is a standard procedure with a price-list (rather than via competitive bid), they must always be given the lowest price ever given to any other buyer. (Yes, this means that when they buy one widget, they must be given the quantity-one-million-widgets price!). But this rule is applied to the r&c charge for procedures, before the 60&* of r&c payment rate.
One might think, for example, that a customer who walks in with a suitcase full of $20 bills should get the very best price. After all, there's no question of credit or time until payment -- he's offering cash on the barrel head. But Uncle Sam will pay no more than 60%* of either the r&c price or the lowest price given to any other purchaser.
Needless to say, the cost-shifting results I almost cited above (would have cited if I was less lazy) tell us that the costs not covered in the controlled market get shifted to the uncontrolled part of the market, while being non-linearly inflated on the way. Various studies have suggested that most (although not all) of the "higher cost of health-care" in the US is due to this cost-shifting problem. Having Uncle Sam pay full freight would remove that part of the problem. But it would require Uncle Sam (which is to say the Congress, and so in the end the voters) to admit to the true cost of the health-care provided at taxpayer expense. And that, in turn, would affect the budget, and...
It's a mess.
Xenophon