Several Outraging Things You Need to Know about the Health Care Industry

We all get sick or have health-related problems. And every time we do, all we want is to get better.

You would think the severity of your ailment would be the contributing factor to the price you pay for health services that will support your return to a normal quality of life. Unfortunately for us, this logical thought is untrue.

Before I tell you why I think the health care industry is stacked against us, the patients, I’d like to outline the players in one of the most lucrative ‘Big Business’ Industries.

Provider Systems – these are the organizations that employ doctors, nurses and clinical support staff (lab technicians, social workers, etc) that you encounter (or don’t) throughout your care experience.

Insurance Groups (Payers) – the folks you (or likely your company) pay premiums to every month so that your care is covered and you only pay a portion of your total cost of care.

Big Pharma and Manufactures– The companies that make drugs and medical devices. Think about all of the medicines you are prescribed or regularly take (helpful or not) and the myriad devices that are available to help doctors keep you alive.

Ancillary Services – Rehab and Therapy facilities, Lab/Testing/Imaging Centers, and other alternative treatment centers that offer things like chiropractors, acupuncturists or massage therapists that will support your return to a normal quality of life.

The United States Government – the governing body that sets trade and efficacy regulations, as well as the cost of care benchmark for health care services; this is what Medicare pays private Provider Systems for their services.

 


 

These players supposedly operate their businesses with patients’ interest in mind. This may be the case for keeping us alive, however when it comes to our financial health, they have proven that they do not give a rat’s ass. Leadership within these businesses have raised the prices of health care services more than 300% since the 1980’s. Technology has advanced significantly, however outcomes have not.

The price problem is founded in the ambiguity of value.

Since there are no definitive guidelines that specify how much procedures, drugs or additional services should cost – the people getting paid, get to set the market prices that consumers have to pay.

Generally, this is not how a free market works. In a free market, there are lots of sellers who can provide a product or a service. Change in consumer demand is directly related to the price point sellers are willing to provide these services. This means that the more people want something, the more sellers can charge, and vice versa.

When looking at Health Care, this numbers don’t reflect this trend at all.

Let’s think about why.

  1. Pharmaceutical drugs and medical devices are not priced on effectiveness – value (lower cost for better outcomes) is undefined by the government or industry standards. These companies charge whatever they want, regardless of how much it impacts you, the patient.
  2. Pharmaceutical and manufacturing companies entice hospitals and docs (through donations and perks) to prescribe patients with their overpriced, not definitively effective drugs, and to use the over-priced materials and devices when administering care.
  3. Patients’ demand for care has not increased. So the dramatic price increases of drugs and devices is unjustified.
  4. To combat the stupidly high cost of the tools necessary to provide quality care, Health Systems are gobbling up smaller hospitals and ancillary service centers to create bargaining power. This in turn, creates a smaller number of sellers. Fewer sellers = higher price for consumers.
  5. Since there is no agreed upon benchmark for value in health care, and it costs so much to provide good care, the Health Systems’ administrators get to raise the price of health services to whatever they feel insurance companies (their consumers) will pay them; this happens to be an extraordinary amount.
  6. Hospitals have become greedy. Rather than raise prices to create a reasonable profit margin on the Health Services they provide, they set prices to reflect margins greater than +100%. A great business, but not when the money is being gouged from people when they are at their lowest.
  7. Per US Law, Hospitals also get to bill independently for each unique service provided. So as the systems get bigger, they have more health services they can offer you to raise the bill.

Think about if you fall and bump your head. First you go to the ER to get it checked out. The Physician’s Assistant and ER Doc say your fine, but to follow up with your in-network primary care doctor in a week, which you do. He runs some tests and suggests a CT scan. You go to the radiology center (also affiliated with the Health System that owns the ER and Primary care office) and complete the scan, only to find out nothing is wrong and you just need to take it easy for a week and take some Tylenol.

Every encounter, test, and material used throughout your care experience has its own, ultra-inflated price tag. The whole shopping bill is what ultimately gets charged to your insurer; and so long as the hospital’s documentation is correct, your insurer pays the bill. Unfortunately for you, since you had all those extra services and interactions, the 15% chunk of the bill you’ve agreed to pay, is bigger too.

This high price point that insurers are requested to pay, as a consequence of unethically priced health care services, results in a chain reaction that affects us significantly.

Insurance companies have large networks of policy holders; and it is their responsibility to ensure they have access to care. Since Health Systems have begun to buy and offer more services, competition amongst sellers decreases, resulting in an inability for insurance companies to contract with alternative, lower-costing Health Care Provider Systems. They are stuck. And since they have no choice, they contract with the big guy, who as we learned, is greedy and gets to set the price for services at whatever he wishes.

This increase in claims paid to Health Systems, due to an arbitrarily-set, absurdly high cost of services “necessary” to provide treatment and ensure positive outcomes, results in decreased revenue for the insurers. This decrease is unacceptable for publicly traded companies, such are most insurers.

So how do they earn back those dollars?

Raise the prices of their policies; policies that happen to be paid for by us, the patients receiving this over-priced care.

It is a vicious cycle, and we, as the consumers who are supposed to drive the prices in a free market, are powerless to control the cost we pay for health care. Even if we all stopped seeking care (consumer demand decreases), the Health Systems wouldn’t drop their prices to encourage us to come back. They would raise prices to ensure the revenue keeps coming in from the people who are willing to pay, or from the people who are ignorant to their higher price.

The bar that represents the cost of Health Care services has been set uncharacteristically high, and the players in the Health Care industry have grown accustomed to fat checks and minimal control from governing bodies in their profit-oriented decision making.

Things need to change, and this change is only going to happen if we, the patients of the United States, stand up and say something about it. Empower yourselves today by reading, learning and questioning the costs that you pay for health care services.

Prepare yourself, so that you do not, like so many other Americans, fall victim to the system.

 


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I would recommend you read the book An American Sickness, written by Elisabeth Rosenthal, editor-in-chief of Kaiser Health News.

Her synopsis of the profit-driven relationships amongst the players of the health care industry proves that ultra-inflation exists as a result of lax governance and monopolistic business decisions that often times disregard patient outcomes. There are ways that we, the patients, can catalyze the transition to more value-driven (higher outcomes at lower costs) health care delivery; and you can find out what they are in her book.

Knowledge is power; and unfortunately, right now most of us are powerless.

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