A dentist I know told me of an experience he had a few years ago with a local hospital. This dentist did not have the facilities for certain more invasive dental procedures, so he would rent an operating room from the local hospital whenever he needed to do this procedure. He only performed the procedure every few years, so this worked well for him. On the occasion a few years ago, a friend of his family needed this procedure. He rented a room at the hospital and performed it. When he got the bill from the hospital, he was very surprised to see that the bill was somewhere around three or four thousand dollars (I forget the exact figures). The last time he had rented a room for this procedure, which was several years before, the bill for the room had been around twelve thousand dollars, three to four times the cost. He asked a hospital employee why the price had dropped so dramatically. He was informed that it had not dropped. The difference was insurance. Specifically, the previous patient had been insured. The current patient did not have insurance, so he got the lower, discounted rate.
Evidently, this is common practice for hospitals. It is actually not that uncommon for private practices, though typically much less dramatic. Our chiropractor in Alaska charged between $60 and $70 when our visits were covered by insurance, but gave us a discount, charging only $35, when our visits were not covered (actually, part of the discount was because we were students; he does not give this discount to insurance companies though). Other practices that we visited will typically give uninsured patients a 10% to 20% discount.
While it might not be obvious, this is a major problem. The reason that most hospitals do this is because they know that uninsured patients cannot afford the higher price, so they give a lower price. This is not because they want to be fair or kind to uninsured patients. This is because patients that do not have much money are more likely to make payments for a smaller bill than for a bill that seems impossible to pay off. You might think that hospitals recoup their losses for this by charging insured patients more. This is also not true. At $3,000 for a room rental for a 2 hour operation, the hospital is not loosing money. Actually, given that the room would not have even been occupied if it had not been rented, they are profiting $3,000 subtract maybe $100 (probably less) for a janitor to clean the room afterwards. Charging $12,000 for the room is extortion.
Why is this a problem? First, it increases premiums for medical insurance. This is bad, but it is not the part I am most worried about. My problem is that Medicare and Medicaid are insurance, so they get the higher rates. This may not bother some people, since this money comes from taxes, and taxes come from rich people (actually, this is a false assumption; the majority of taxes come from the middle class). Consider, however, how many people need medical aid, but who do not qualify for Medicare. If hospital costs for Medicare patients were the same as those for uninsured patients, we could afford to put 3 to 4 times more people on Medicare, without increasing taxes. (Similarly, if hospitals were required to give their uninsured patient discounts to everyone, insurance prices could drop dramatically, which would allow many uninsured people to afford health insurance.
There is one more thing about this that makes it even worse. Obamacare is going to aggravate this problem. Most insurance companies will not pay the entire bill. This dentist said that his earlier patient had been required to pay a $5,000 copay of the $12,000 out of pocket. Had this patient been uninsured, the out of pocket cost would have been $2,000 less. Forcing poor people, who are not eligible for Medicare, to buy health insurance will actually increase their out of pocket health care costs, at least for hospitalization. Of course, we could pass a bill requiring insurance companies to reduce their deductibles and copays, but this would further increase the price of insurance, so people would pay the added cost either way.
Obamacare has attempted to solve a lesser problem, while ignoring the real, bigger problem. Before any insurance reform is going make a positive difference, we need to address the issue of medical costs, and especially the extortion of insurance companies. Now, I am not saying that the insurance companies are good, or that they do not deserve it, but added costs for insurance companies ultimately leads to more expensive insurance. The insurance companies are not going to suffer from this, their customers will. When you consider the effect this has on Medicare, the people who need the insurance the most, those who do not qualify for Medicare, but cannot afford private insurance, will be the ones who suffer the most. I believe that the biggest selling point for Obamacare was that it would help this specific class. Ironic, isn't it?
I suggest that a good solution to this would be to prohibit hospitals from giving discounts based on insurance status. Instead, they should be encouraged to give discounts based on income status. This will help Medicare the most, since Medicare patients typically have the lowest incomes. The Medicare money saved by doing this will allow Medicare to be extended to shrink or even close the gap of those who do not qualify for Medicare, but cannot afford insurance. Lower income people who can afford insurance may be able to get lower rates, since their health care costs may be lower. This by itself might be enough to make Obamacare obsolete. This is much simpler than Obamacare, and it would be much more effective, because it attacks the root of the problem, instead of just trying to cover the problem up.
Lord Rybec
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