Surgery Center of Oklahoma Blog

April 13, 2011

High Cost of Health Care Background

Filed under: Uncategorized — surgerycenterok @ 1:16 pm

Health care costs too much.  I think that everyone agrees that this is the case.  This is a fairly new situation, however.  Hardly anyone had health insurance 50 years ago and the prices of the delivery of a baby or the repair of a hip fracture were such that most people could pay for it without difficulty.  What happened?  Medicare happened.  No physician wanted to take part in this system because the money came from the government (cough…taxpayers).  Taking this money was seen as the first step to becoming an employee of the government.  Most physicians also knew that divorcing the patient from who was paying for the care was ultimately a bad idea, as the source of the money would finally determine what if any care was going to be available to the patient.  So the government told the physicians that if you will participate in this scheme we will pay you 100% of your charges…that’s right…the doctors were promised to be paid whatever they charged.  Guess what?  As Dr. Walter Williams would say, “if you guessed that the doctors dramatically increased their fees, go to the head of the class!”  The combination of the distortion of guaranteed payment along with the payment coming from a faceless third party shifted the price point and removed the normal market discipline imposed on those whose price is higher than what economists call the market clearing price.  More to follow.

G. Keith Smith, M.D.

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  1. In lieu of your comments in this post and the previous, with limited resources compared to government, how can we combat the current healthcare culture? How do we bring early pre-medicare models into this day and age? I understand catering to uninsured, high deductibles, and Canadians, but can you ever include low deductible and medicare patients for those who want a particular surgeon because they are the “best” at your facility. And if so, do you bill their insurance and maintain their deductibles or is it all out of pocket…in the later case (foregoing their insurance coverage) I assume their incentive is the particular surgical care that they want as well as a very nice outpatient facility and care? I love the model and would love to see more of it, but outside of privately held ASC’s who are willing to start with friendly competition, it is difficult to envision David beating Goliath. So we need more ASC’s!!!

    Comment by Tim Murray — April 13, 2011 @ 2:22 pm

  2. Check out Leonard Read’s “Anything That’s Peaceful.” He makes the case for doing what we can do as individuals and not worrying too much about the herd/group. Unless and until there is market competition and its inherent discipline, prices will stay high and quality of care will be lower than it would be otherwise. Medical practice was only recently invaded by insurance and hopefully will get there again. Indeed, many people have chosen to forego health insurance in spite of the ability to pay for it gambling that the likelihood of a catastrophic and unaffordable event is so remote that the cost of the premiums cannot be justified. I think our goal should be the end of traditional health insurance at the least, the exception being a high deductible catastrophic policy perhaps. The absence of insurance would drive costs through the floor, as facilities and physicians would have to look the patient (the one paying) in the eye and justify their fees. Physician-owned hospitals (mostly specialty hospitals) are well positioned to enter this arena of free market medicine with transparent pricing. Medicare is another matter entirely. As the “beneficiaries” of Medicare realize that they are being rationed to and denied care they may demand an alternative to this broken down system. Until the patients are clamoring for a change, I believe that no change will occur. Medicare has adopted all of the old failed policies of the Soviet block like price controls that invariably result in shortages, famine and death. Leave it to the folks in D. C. to institutionalize this outfit and cram it down everyone’s throat.

    Comment by surgerycenterok — April 13, 2011 @ 6:24 pm

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