You've got to remember that you're not just paying for their time, you are also paying for their risks (i.e. malpractice insurance and such) and probably most of all you are paying for some extremely expensive equipment.

For example, in many areas (particularly the east cost) OBGYNs are getting out of the baby delivery business because they can't break even, in spite of a $20k average bill for a delivery. Doesn't that just blow your mind, and perhaps make you consider that there is more than one side to the story?

For myself, I wish insurance would go back to being real insurance. That is, you gamble with the insurance company on the likelihood of your getting sick/ill/whatever, and if you get sick/ill/whatever the insurance company pays for whatever the doctor deems necessary (after whatever deductible, of course). Negotiations with the doctor for anything other than absolute price should not be possible (that is, refusal to pay for services already performed, like various diagnostic tests, should not be possible for the insurance company).

That does pose problems, however, because it opens things up for abuse by doctors and hospitals. However, that can be mitigated by things like discounted rates for going to less expensive hospitals/clinics, which insurance companies would be quick to implement, and competition between hospitals and clinics would shoot up. I believe that forcing insurance companies to act like real insurance instead of allowing them to be the arbiters of all things health care would go a long way to fixing the plethora of problems with the US health care system.

What you really need is a way to create a feedback loop between the customer and the doctor/hospital, so that doctor/hospital prices influence customer choice, and customer choice therefore influences doctor/hospital prices (that is essentially what your post says). What I described above I think would create a weak feedback loop. I don't really see how to get a stronger one without eliminating health care for the majority of the population. Insurance must be involved, because procedures are simply too expensive for the majority of people to afford, and that isn't like to change much considering hospitals fairly moderate average profit margin.

First of all, holy crap, keep writing. I’m loving your posts.

This hits home to me. At the beginning of August, I had a relatively not too bad but still pretty nasty bicycle accident. Front tire hit a curb, next thing I know my face is on the ground. With a nasty cut on my chin and three broken teeth. Went to a ER in an ambulance where they strongly suggested a CT scan because of my “head” injury. To the best of my ability, I try to tell the guy that I don’t want a CT scan because I fell on my chin and mouth. He kept pressuring me–“But you have insurance, man”–He kept pressuring me until I gave up from exhaustion and doubt about my own perceived condition.

Hospitals and ERs are vultures, man.

Back in the Spring of 2006, I mistakenly went to the ER for a cut chin. I sat there for 4 hours regularly asking the attendant how much the sutures were going to cost. She couldn't tell me. They finally get to me. 15 minutes and 4 stitches later, I'm off paying my $150 co-pay. As it turns out, my insurance paid them another $450 for a total of $600 for 4 friggin' stitches. The hospital made "adjustments" and sent me a bill for another $200 or so. All told, they charged my insurance company about $1000 for 4 stitches. They could not tell me while I was there how much they were going to charge. Had I known before hand that they were going to charge $250/stitch, I would have walked out and driven 2.5 hours to see my physician cousin, who would have sewn me up for a nice bottle of whiskey. It would have even been okay had they charged me some nominal diagnostic fee so that I could make a better choice. I now know about urgent care clinics. In another incident later in 2007, I went to the urgent care clinic. They took a look at my other cut and put a seal over it. All done for about $175. It healed nicely.

Like you observed in this blog post, we're not anywhere near a laissez-faire free market healthcare system. Does it really cost $40k to do surgery? Or, is our broken system fixing the prices somehow?

“As surgeries go, it was a minor procedure. It took only a few hours and I was out of the hospital that day, within an hour after waking up. And all went well: I’m fine now.

But the bill came yesterday. I’m putting it up just so you can see what these things cost in America. The cost of just the surgery was $32,094.84. That doesn’t include the pre-operative and post-operative visits, the fees for the awesome anesthesiologist, nor the two MRIs I had to produce scans to help guide the surgeon. All told, the total bill would be close to forty thousand dollars.” [source]

This is just the 2nd page of the bill…

Yes, if you notice in the image, there’s a charge for $8,240 for the first 30 minutes… which was apparently a discounted introductory rate because the next 15 minutes cost $7,064!

One commenter:

“As an Anesthesiologist practicing in Canada, I can tell you that the charges levied for the drugs you received are anywhere from 5-10 times the wholesale cost (the cost of what our hospital would pay) for these agents. This degree of profit margin would make a used car salesman or a mob loan shark blush.”

Yep, that’s 5-10 TIMES markup (500%-1,000%). Of the various retail markets I’ve worked in, markups have ranged from about .3-1 times the wholesale cost (30-100%). And… the margin usually goes down as the pricetag gets higher.

Anyway, it’s worth reading the rest of the post.

FWIW, I pay my dentist cash for my dental cleanings. I see now reason why I shouldn't be able to negotiate some fair rate of exchange directly with any other service provider (be it healthcare or otherwise).

As to my own situation, I still take insurance, rather liking the patient population. In my field most places I can live without taking insurance and work on the market, which would be fine by me too. I have my system very streamlined so the business of taking insurance is not as heinous as it is for most everyone else. There's enough work (even in my town which is literally 2-3 towns away from Newton that has the distinction of having the highest per capita number of psychiatrists in the *world*) I could see people 24/7 so I'm not worried about excess supply of psychiatrists any time soon. Cost and payment is a big part of the discussion but that may be a bit isolated to psychiatry – and plastic surgery and dermatology, etc.

For the most part the health-care market is completely insane, with incentives directing patients to follow the wrong advice and doctors/hospitals to deliver the wrong care, or spend much more time "documenting" good care than delivering it.

I understand your argument, but my point is that no matter how much you flood the market with practitioners of any sort you will not affect the price of healthcare THAT much because most of the bill you pay does not go to the practitioner (NP, RN, PA, MD, or *shudder* ND). Also, from my experience, whether you see an NP or an MD you pay the same office fee: the NP gets a lower salary and the corporation pockets the rest.

Yes- PAs and NPs must be 'supervised' by an MD, but that is generally a loose term for 'is there a doctor in the house?'. I've commented on another post about my skepticism of th effectiveness of medical training to encourage actual thinking while practicing medicine, however, theoretically, physicians have the education to understand the mechanism of action of drugs so as to prescribe one that actually works for what you're treating… unlike my experience above.

My point about NP's, RN's, PA's, or what have you, is the supply of healthcare providers would go up and the price of healthcare would come down. The last thing the AMA would want is a "proper" valuation of an MD degree. As I understand it, the NP and PA's that practice at urgent care facilities are coerced by law to be supervised by a MD.

As a consumer, where the money goes after I choose to spend it is really none of my concern. I'm more concerned about knowing up front how much I'm going to be spending.

One thing to point out is elective surgeries (plastic, lasik, etc) actually do compete on price, and to no surprise those prices do keep coming down.

market forces

Forces of demand and supply representing the aggregate influence of self-interested buyers and sellers on price and quantity of the goods and services offered in a market. In general, excess-demand causes prices and quantity of supply to rise, and excess supply causes them to fall. – emphasis mine [source]

In this case, the influence of self-interested buyers is wholly disconnected from price. Supply and demand (in terms of number of procedures available/required in the market) do not influence price either. Each individual represents the max limit on the demand curve regardless of the number of points in the distribution. Rather, there is no demand curve, only a point representing an equalized point of maximum (and minimum) demand.

The pricing mechanism is a function of what the economy (personal and aggregate) will bear and the theoretically infinite self-interest utility value of life-and-limb-saving procedures/treatments.