An Unreasoned, Ill-researched, Uninformed, and Biased Analysis of the Rise in Health Care Costs by a Guy Why Doesn't Know Anything
With our first spawning of progeny, the wife and I mostly concerned ourselves with the types of things all new parents should be thinking about: what color to paint the nursery, how to assemble this diaper bucket thing, where’s the crib going to go, sweet mother of Krumpus what I have gotten myself into this time? Our anxiety and excitement centered around this precious new life that would come screaming, glistening and pallid, into our rapidly shrinking world.
This time around the anxiety has shifted. Partly because we’ve danced this fandango once and know enough moves to at least fake it, but mostly it’s because this time around our insurance just isn’t doing much for us. This kid will be birthed straight from the wallet, metaphorically speaking.
So rather than looking at books about newborns, or baby-proofing supplies, or bottle warmers that seem like the height of opulence but in reality are fantastic to have, we’re spending our time staring at ledgers and medical bills. A five minute consultation with the dietitian and — poof! — $300 has disappeared. A fifteen minute visit and three ounces of blood and $250 are drawn. It’s not the doctor I fear, it’s bill.
So all of this has me asking myself: where are these costs coming from?
Of course there are lots of complicated and nuanced sources for all costs medical. There’s fat people, er, I mean the obesity epidemic. There’s the aging baby boomers. Administrative costs. Insurance overhead. Lawsuits. Regulation. Research and development. The full-sized grand piano in the lobby with the gold inlay and ivory keys that can play itself.
But I don’t think those things necessary contribute significantly to the rise in medical costs. As with most things I life, I blame marketing.
Now I’m not talking about advertising, that’s a different thing. The money spent on putting soft-focused images of smiling, racially diverse doctors on the TV must be generating returns or no one would bother. No, I’m talking about that delicate dance between demand, supply, the market, and other unnamed external forces, and how this complex ballet shapes pricing. Did I say ballet? I should have said mosh pit. Yeah, pretend I said mosh pit, because I still haven’t found the backspace key. Or the speel checker.
There are a few things at work here.
First, you can’t market your hospital on price. No one wants to drive down to Honest Harold’s Health House for Tuesday’s two-for-one appendectomies. No one proudly proclaims their doctor was the cheapest in the yellow pages. No one wants to hear the nurse say, “Oh we only wash the sheets every third patient — you know, to keep costs down.” There’s a strong perceived correlation between cost and quality, and an inflated cost can inflate the perceived quality. How good was your surgeon? Well, the procedure cost more than I’ll make in the next 3 years, so he/she must have been very good.
Second, price doesn’t matter when you think your insurance is going to pay for it, or when you have no hope of ever paying the bill. In these conditions, the choice between a hospital with lower costs but fewer amenities and any other is simple: people will pick the one where the MRI sings them lullabies as it scans their brain.
“Yeah, I go to Santo El Coche Hospital. Their five star cafeteria chef is also a mariachi! I mean, I’ve got insurance. It’s not like I’m paying for it, right?”
“Dude, when I clap my hands, the curtains draw themselves closed and the heart monitor starts playing light jazz! I have no idea what this is costing me, but I know it’s more than I’ll make in my lifetime. Might as well go all out, right dawg? YOLO!”
Then there’s your negotiating power. Spoiler alert: you have none. Pretty much your only tool is refusal to pay, in which case the hospital just sells the debt to a collection agency. The hospital still gets paid (though less) and you get dozens of collection calls a day while your credit rating evaporates. Great strategy! Way to stick it to the man!
The nerds call this “inelastic demand.” If you go to a broom store, and every broom in the store is $300+, you can say, “I guess I don’t need a broom that bad. Why is there a store that only sells brooms!?” But you’re not going to tell your doctor, “Gee, that’s a lot of money. I guess I can live with only three heart valves. Right? I mean, that is possible, right?” It’s hard to turn down medical services.
The point is: there is no incentive to reduce costs; there is incentive to increase costs. Cost will go up.
Of course, this all ignores the larger problem of gremlins, but that’s another day.