Growing Medical Costs
Today’s landscape of rising costs, and arbitrary discounts for PPO members, has catapulted common medical supplies and procedures into 400% - 1,000% markups. Steven Brill brilliantly exposed this trend in his Times piece, “Why Medical Bills Are Killing Us.” He describes at great length, and with a multitude of examples, the burying of common sense and replacing it with a hidden Charge Master, confusing coding practices, and the lack of cost transparency.
There are accounted examples of consumers paying $77 for gauze pads, $36 for a blood draw, accompanied with a dozen or so $78 lab charges adding up to over $15,000 for one man. Then there is the actual heavy duty medicine. For one cancer patient who received Rituxan, he was billed $13,702 per treatment. The cost of that drug for the doctor comes in around $3,000, giving the hospital a 400% markup!
“…those who work in the health care industry and those who argue over health care policy seem inured to the shock. When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?”
So what if a network member receives even 50% off the billed price? That means insurance companies, and those responsible for their out- of- pocket deductibles are still paying of 200% - 500% of the cost to provide the service!
It is estimated that Americans spend 20% of their annual income on medical care. We are by far the highest spending country in the world. In fact, we spend more on healthcare than the next top ten countries COMBINED.
There is little pushback because the players who have the power are the ones who are writing the checks, and providing care, not the consumers. In the event of a medical catastrophe what options are available for controlling the cost of receiving attention from medical personal? The pricing of services are under lock and key by hospital administrators. This document is known as the Charge Master, and it is as difficult to decode, as it is to receive access to it.
Consumers and new thought leaders in the medical industry, such as MBA and ELAP do have one weapon in the arsenal of lowering payouts. Hospitals and providers are required to disclose the actual cost of doing business, in order to qualify for Medicaid and Medicare patients. The government mandates transparency in order to make payments for care to those who receive government benefits. These payments better reflect what supply and demand economics has been built upon for centuries.
A simple method creates extraordinary results: rather than working from invoicing backwards, what if an employer partnered with a medical benefits manager that made payments based on the provider’s cost of doing business, rather than exorbitantly inflated prices?