To start with, let me give you an idea of my credientials in this area. I worked for a PPO network in the state of Washington for about three years. Then I spent a year working for a midwestern health insurance company. Then I moved to Scotland and worked for the NHS for a few years. I have gathered enough information at these jobs to understand why an aspirin from the drug store costs about 3 cents, while the same aspirin in a hospital costs $35.
When a doctor opens a general medicine practice, they go around to all of the major health insurance companies and apply to be a Preferred Provider. In some cases, if they’re part of a big clinic, that clinic makes them automatically signed on as a Preferred Provider. The Preferred Provider agreement that they sign with the health insurance company means that they promise to be generally a pretty good doctor, and in exchange, the health insurance company guarantees to pay them for their services according to a set fee schedule.
Let’s make up a doctor. Dr. Smith just joined up with SuperClinic, and so he is on a bunch of Preferred Provider lists. This means that he gets a ton of new patients and he is guaranteed to get paid by all of them. He decides that he wants to charge $50 for every 15 minute consultation. The fee schedule from the health insurance company will only allow him to be paid $40 per appointment, but that’s ok. He just writes off that extra $10 as a business loss, because as part of the Preferred Provider network, he can’t bill the patient for it. If a patient comes in without insurance, he charges them the full $50 and gets it.
A year goes by and the health insurance company revises their fee schedule. The fee schedule is set based on the average that doctors are billing and the health insurance company finds that doctors are charging more than $40, so they raise their rate for a consultation to $50.
Now Dr. Smith is getting a full $50 for every insured patient and $50 for every uninsured patient. He decides that’s great, but he could be making more. If he raises his prices, he gets to write off some loss from the insured patients, and get more cash from the uninsured. So he starts charging $60 per appointment. If you are his patient, and you have insurance, you never even notice that he raised his prices because your insurance company handles all that.
This occurs every year. Health insurance companies do not pay doctors based on the actual cost of providing services, but based on the average that doctors decide to charge. Doctors have figured this out, so most of them continually charge just slightly higher than the insurance company will pay, in order to ensure that they get themselves a raise every so often.
This same thing happens with hospital services. They started out billing insurance for the actual cost of an aspirin, but then found that they could get more just by telling the insurance company that it cost more, even if it didn’t. Whether they charge $0.30 or $30, the health insurance company pays it.
Because the health insurance company is throwing money around to doctors and hospitals, they have to charge their customers more. And refuse coverage to anyone who is likely to need to go to one of these expensive doctors or hospitals. It is a free market, so the doctors have the right to charge whatever they want, and the health insurance companies are powerless to say, “That aspirin didn’t really cost that much.”
This growing number of people who can’t get insurance end up having to pay the full price for a doctor (which is more than the doctor makes from his insured patients). Those people end up bankrupt from major medical expenses, or they end up chronically ill because they can’t afford a doctor. People who are sick can’t work. So those people end up on welfare rather than just getting the health treatment that they need in order to get healthy and get back to work. This effects the entire economy of the US. Fixing healthcare in America is part of fixing the economy in America.
In a government-managed health care system like in the UK or Canada, everything is cheaper. The doctors are paid a generous yearly salary, based on experience and education. The government pays all of the expenses based on the actual cost of care rather than based on what the doctor feels like charging. So it costs a fraction of what it costs in a free market system for medical care, and it is available to everyone, regardless of pre-existing health conditions.
I’m not saying that government health care is perfect. No system is perfect. But government-run healthcare can provide decent health services to the most people for the lowest price.
In light of the Occupy movements, there have been a lot of articles analysing who is in the top 1% of incomes in the US. People in the medical field make up about 15% of the “one percenters”. Not only are regular people being denied healthcare, but it is primarily because a portion of medical practitioners are grossly overpaid. So again, the answer to wealth inequality and the poor economy in America should start with complete reform of the health care system.