Shopping for Health Care

I missed this article the first time around, but Arnold Kling makes a point that I have been trying to make coherently for a long time:  The biggest problem in health care is not under-insurance or efficiency or drug company profits.  The biggest problem is the insulation of the consumer from health care prices.

For health care providers, insulation is a bonanza. Because
consumers are not spending their own money, they accept doctors'
recommendations for services without questioning them and without
concern for cost. Faced with an insured patient, a health care provider
is like a restaurant catering to convention-goers with unlimited
expense accounts. The customer will gladly take the most high-end
recommendation and not worry about the price.

Consumers are
happy as well. Insulation relieves the patient of the stress of making
decisions about treatment. The patient also does not have to worry
about shopping around for the best price.

The problem with
insulation is that it is not a sustainable form of health care finance.
Individuals, employers, and government are all under stress.

Health care plans on the table basically put decision making for a) making price comparisons and b) deciding if a given procedure is worth the price -- in one of two people's hands:

  • The individual being cared for or
  • The government

That's it.  Its one or the other.  The current system of "nobody" is not sustainable.  To the extent that people have grief about their employer or their insurer, it is usually because the insurer is trying to make these decisions (someone has to) and the individual is resentful that the insurer is not making decisions the way the individual might like.  In this context, it is nuts that many people see the solution not as "let individuals take over this decision" but as "let the government do it."  I'm sure that will turn out well.

By the way, I have been with a high deductible policy for a while now, and the medical care shopping process is a real eye-opener.  I really highly recommend it -- not only am I managing the costs but I am learning more about the care itself.  For those of you who don't want to price compare,  Michael Cannon of Cato makes the very good point that everyone does not have to price shop - only a few people need to for all of us to get the benefit.  I never even look at the price of toilet paper, but I know it is probably a good price because there are folks out there who DO compare.

  • I went through the coverage shopping process as well, and as you said, it was extremely interesting. A few things that I found:

    - the choices are immense. Companies offer dozens of plans with varying deductables, copays, etc. One provider essentially offered an a la carte plan, where you enter in your preferred deductible, out of pocket, etc. and they created a price for you.

    - the web sites and sales groups were pretty awful. Many of the sites were simply ugly, where others failed regularly.

    - pricing was quite cheap... much less than I expected. High deductable individual plans were often less than $100/month, and even moderate deductable plans were not that much more. I spend more on car insurance.

    I'm guessing that the poor customer support is a result of what you mention... that the insurance company's are setup not to serve the individual, but the buyer of insurance, which is generally everyone else. Sure, you could blame the industry, but the automotive insurance companies have _much_ better sites and customer support, because they deal directly with the consumers of their service.

    The other thing that seems to be a problem is that there is so much regulatory difference between states. Again, look at car insurance, where national companies use economies of scale to lower rates. But even national health insurance providers have completely different plans depending on the state, and this has got to hurt their ability to improve efficiency. I doubt a 'GEICO' for health insurance could exist in the current environment.

  • Mesa EconoGuy

    This is why 1) we should not be purchasing health care from our employers, and 2) why government shouldn’t be involved at all, much less the universal provider:

    My daughter is currently in a minor medical treatment, which was questionable by our coverage standards, but they said submit the claim anyway. So we did. Nothing happened, we paid for the procedure, which we were prepared to do all along.

    Last week, we got the healthcare notice: We [Healthcare coverage] pay $0 You [customer] pay $2500.

    The trouble is, we only paid $1500. Time to call the clinic: “Hey, why’d you guys charge $2500 for the procedure?”

    “Oh, ignore that. You already paid us up front (we did). Whenever we submit costs to insurance companies, we always add on an extra $1000 for processing fees, and such. Since you paid cash up front, that’s not an issue.”

    Wow.

    When I was in East Germany (back when it was, traveling overnight – nice place to visit, wouldn’t want to live there), I came across a foul stench, but since it was July and warm, tons of possibilities. So I asked the porter what the smell was. Coal. Local municipalities were burning coal in the middle of summer, because if they didn’t use their allotment this year (this was back when it was still Communist), they wouldn’t get as much next year.

    That’s serious market distortion, just like my previous example, not to mention “global warming-type” pollution. Which is fake.

    So, those of you who still think that government-sponsored universal healthcare is the answer, you’re out of your collective minds.

  • glenn

    It is not just about price. It is also about the necessity of a given proceedure. We have a high deductable plan. When my wife got pregnant they wanted to do 3 ultrasounds. I didn't care to know my son was a boy before he was born so I asked why and they really had no good reason.

    The first one I could understand to check on the baby but the others were just a unnessary procedures either to earn more money or to reduce potential legal liability.