Macro Economics
Health Care Train Wreck

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By Glockenspieler
October 29, 2008

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As the world watches, transfixed by the massive derailment and subsequent fireball of the Wall Street Express, another, slower train wreck is underway: the collision between health care providers, insurance companies and patients. As people lose jobs, this issue becomes increasingly important to the public and I would not be surprised if it influences the voting decisions of a significant number of Americans 10 days from now.

Just as the market was tanking a few weeks ago, an urgent health issue came up with one of our children. My comment to my husband was that the rest of our economic situation didn't matter, "as long as we have health insurance." It's amazing how certain events focus the mind. I know that we aren't the only higher-income family who is suddenly concerned about the availability of health insurance in the near future. Small businesses have been struggling with these costs for a number of years, and job losses mean more uninsured or underinsured middle-class folks hoping that they and their children don't get sick.

The cost of health care is simply out of control in this country. My degree is in a health care field, and I know that the hourly rate hospitals charge insurance companies is approximately 6 times what they pay my colleagues for that hour. My husband recently had the experience of spending an evening at the ER, resulting in a bill to us of $75 and an extraordinary bill to the insurance company. There was a charge of $870 just for the privilege of sitting in a X curtained-off space the hospital calls a "room". The doctor's services were an additional $637. Then there were the various testing fees, and, in addition to all of that, an emergency room general charge of $1781. Luckily for us, he was fine. Unluckily for the insurance company, the final cost was over $7000.

Three weeks later he was scraped up pretty severely in a biking accident in Germany. He was knocked out briefly and needed stitches, but was otherwise OK (his cognitive status is normal -- only because he was wearing a helmet). He was stitched up and returned for two follow-up visits. He reported that he was treated like royalty because he was "private pay." When he asked me what I thought that it cost, I thought about a general U.S. charge and lowered it considerably and then pulled a number out of thin air -- 700 Euros. No, the real charge ... are you ready for this? 100 Euros. For all three visits, with stitches, without insurance. Granted, they weren't as thorough as they should have been, and he may need some more tests this week to see if anything was broken, but still, 127 dollars? Absolutely unbelievable. I couldn't figure out how they even pay the doctor with that charge. That's not much more than our co-pay.

The German system is not government run, but everyone is required to have insurance. There is inexpensive, subsidized insurance available for low-income individuals. I don't know the details, and I know that their health care system is also under considerable pressure. Physicians aren't paid particularly well, and I'm not sure that's a good thing. I would like to keep the best and the brightest highly motivated to study medicine and make it through a grueling residency. However, it should not cost 25 times more to receive health care here than in another first-world, respected medical system (I am using the general fees that were charged here without the various tests that were performed). I can understand five times, for more highly compensated physicians who had to pay for expensive, but excellent, medical training, but 25 times? Where's it all going?

I am seeing great concern when my friends talk about possible job loss. Small business owners are worried about the drop-off in business. These are people who have or have had high incomes and have saved up enough to weather downturns, but they can't live on their savings and pay for health care costs out-of-pocket. Can they pay for insurance for a family until they find another job or until business picks up again? It depends on the situation. The cost of health care will be the next big issue in this economic morass as it affects more and more mainstream, well-educated Americans who never would have imagined themselves among the uninsured. This collision has been going on in slow-motion and is less spectacular than watching the entire financial sector jumping the track, but it may, in the end, result in greater public anxiety and the next major paradigm shift.