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The NEW but old problem with the healthcare system

An open healthcare market, which allows for patients to compare prices, may be the solution for overcharging and overutilization by doctors.

Photo by David McNew (Getty Images).

In the capitalist world of today, professionals are banding together to provide efficient care to their customers.  An engineering firm of 600, a medical practice of 60 doctors, or a law firm with 300 lawyers can all efficiently and effectively provide a specialist that can handle any personal need of a client.  However, where these large firms are beneficial, the main concepts behind a professional relationship have changed.

Today the demand for doctors has steadily increased in the United States and, as a result, the time that doctors have with each patient has drastically decreased.

In the healthcare field, some doctor’s offices and hospitals have converted their personal relationship with a client into a business relationship.  These offices track how much time it takes for a patient to be treated and out the door, what equipment is used, inventory spent, and costs of everything used.  Yet the healthcare industry was not always this way.  The hospital is by no means a recent invention, but for years, doctor visits usually occurred in the individual’s home.  The doctor would receive a call and arrive at the house with a little black bag full of his equipment.

As times progressed, it was more efficient for one doctor to oversee a number of patients without the travel time.  The doctor office was born and the doctor patient relationship remained.  Today the demand for doctors has steadily increased in the United States and, as a result, the time that doctors have with each patient has drastically decreasedBedside visits last mere minutes and patients are charged for an hour-based rate.  This rate is well founded based on the doctors training and the need to have malpractice coverage.  The doctor’s time however, is not the main charge to worry about.

Prior to the passing of the Affordable Care Act (ACA), hospitals had the burden of providing free care.

The charges for doctor’s visits have been extremely high recently and with the government in the insurance field, the charges are not going to get any better.  The problem with healthcare is a mix between insurance claims and the overcharging of healthcare needs.  In many locations a simple IV saline bag is marked up 1000%.  The problem may be a shortage that arose in 2013-2014 flu season; however, the price to purchase a saline IV bag online does not reflect the claimed demand problem.  The more realistic cause is that healthcare companies continue inflating their pricing in order to recoup costs.

The problem with the United States healthcare system does not stop there unfortunately. Care recipients from around the country have reported other overcharged items such as rooms and medical equipment used in recovery rooms.  The reason why many hospitals overcharge individuals for care is because hospitals are required by law to treat whoever walks into their facility.

Prior to the passing of the Affordable Care Act (ACA), hospitals had the burden of providing free care.  The only way to offset this cost was to raise prices for those who could pay and create a differentiated pricing system.  In an interview with the New York Times about emergency room bills, Dr. Jesse M. Pines of George Washington University stated, “It’s kind of like the airline industry, it’s rare that two people on a plane will have paid the same amount for their seats.”

The ACA may have reduced the burden on hospitals; however the hospitals have been hesitant to pass the savings on to their customers.

The idea behind the ACA is to reduce that burden and bring the cost back down.  The ACA may have reduced the burden on hospitals; however the hospitals have been hesitant to pass the savings on to their customers.  In some cases, since the ACA, the government has pressed charges on hospitals who have allegedly overcharged government insurance.  These problems are not limited to a single hospital or area.

The problem has survived the ACA because there is no regulation on prices to the hospitals or healthcare facilities.  Unlike an open market where a consumer can compare prices, many consumers do not see the bill from their healthcare provider until well after they have received the care.  This is because the consumer does not usually pay the cost.

According to Devon M. Herrick and John C. Goodman of the National Center for Policy Analysis, “prices are usually paid not by patients themselves but by third parties — employers, insurance companies or government. As a result, patients have little reason to care about prices.”

The problem falls not on the consumer in the long run, but the third parties who end up paying for the care.  From tort judgments to insurance claims, someone has to bear the cost.  When they do, they must in turn do something to be able to pay.  The insurance agencies bill higher amounts, the government goes into a larger debt, and many individuals turn to bankruptcy.

According to a study by the John Hopkins Bloomberg School of Public health, “collectively this system has the effect of charging the highest prices to the most vulnerable patients and those with the least market power.”  It’s how people end up with “exceptionally high medical bills, which often leads to personal bankruptcy or the avoidance of needed medical services.”

The problem with non-disclosure is that patients do not use market forces in order to determine what doctor’s office to go to.

A major problem is that the need for government spending relates directly to the inflated costs.  These costs have not driven political reformation because the taxpayer is billed through taxes and not care directly.  Their insurance premiums may increase, but it is easy to blame that on the economy itself instead of the medical field.

This issue is not limited to hospitals.  Medical practitioners and specialists also charge large amounts for routine care.  Where their charges are not as significant as a visit to the emergency room, many doctors’ offices do not disclose costs for the similar reasons stated above.

The problem with non-disclosure is that patients do not use market forces in order to determine what doctor’s office to go to.  The supply and demand is limited to a factor of location and accessibility instead of reasonability of cost.  Other offices require that patients have “precautionary” tests so that they may give an “accurate diagnosis of the problem” even when the tests are not necessary.  This is referred to in the healthcare field as overutilization.  Charles Piper of the Association of Certified Fraud Examiners states, “paying for doing more adds a strong financial motivation to what is often a slim clinical rationale for an intervention.”

Some states have begun to require hospitals to list their prices; however, this requirement as of now only applies to hospitals.

Where the open market cannot stop doctors from over-utilization, the consumer can get different estimates from doctors in the area and determine the optimum care package for their needs.  Basically, the consumer can look at the prices between doctors’ offices just as they may compare prices when grocery shopping.

If the healthcare industry is forced into an open market, the cost to insurance providers, government agencies and the consumer would properly be evaluated based on supply, demand and quality of care.  Some states, including North Carolina, have begun to require hospitals to list their prices; however, this requirement as of now only applies to hospitals.  There would not be a discrepancy from how much one individual pays versus another based on non-care related issues.  The insurance market has properly been regulated and now it is time to get the healthcare market on the same page.

Cyrus Corbett V, Associate Editor Emeritus
About Cyrus Corbett V, Associate Editor Emeritus (16 Articles)
Cyrus Corbett V is a 2017 graduate of Campbell Law School and served as an Associate Editor for the Campbell Law Observer during the 2016-2017 academic year. He is from Murrells Inlet, South Carolina and received his Bachelors in Arts in Government from Wofford College in 2014. Since July after his first year of law school, Cyrus has interned at the North Carolina Retail Merchants Association in downtown Raleigh focusing on the Retail Merchants Handbook. His interest is in jurisprudence of the law and negotiation/ mediation.
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