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Original article URL: http://bridgemi.com/2011/09/health-costs-decide-health-of-mich/

Economy & competitive position

Health costs decide health of Mich.

“Higher doctor fees drive U.S. health care costs, report finds”

Well, no surprise there. And no, I’m not saying doctors should work for free or for a pittance. The story behind the story on this is why there’s such a fee differential between the U.S. and the rest of the Western nations. This story is at the heart of almost every issue now being debated in public life:

People don’t shop for health care.

Those of you who have read my previous blog at my previous gig know this refrain, but bear with me as I elaborate on it again.

A consumer is supposed to be price-sensitive. We all may want to drive a Caddy coming off the Grand River Assembly’s line in downtown Lansing, but most of us can’t afford it, or choose to deploy our funds in other ways. If GM finds that its Cadillac prices are too high to sell enough of them to make money, theory says the firm will lower the price.

Is that what you do when you visit the doctor’s office? Do you walk up to the receptionist, discuss the office fee (or co-pay for the insured) and then decide it’s too high and drive down to the next doctor’s office? Nope. In our health-care system, there are few cost constraints because everyone just wants the service, either for themselves or a loved one.

Ever witnessed anyone standing in a hospital room telling a doctor that the surgery is too pricey and Grandma is just going to have to take her chances with other remedies?

Health-care costs (for employees and especially retirees) are running Michigan’s cities toward bankruptcy. Health-care costs (via Medicaid and benefits for employees) are chewing up the state budget. Private businesses in Michigan look at health inflation and wonder when they have to choose between coverage for employees or losing a competitive position vs. overseas entities. This is a Michigan issue, folks, with a capital M and capital I.

Pay particular attention to this line in the piece: “For U.S. primary care physicians, public insurance paid 27 percent more and private insurers 70 percent more for office visits. The fees charged for hip replacements by orthopedic physicians were even greater: 70 percent more for public insurance and 120 percent more for private.”

Wait, isn’t government supposed to be the spendthrift, throwing away money? Isn’t the private sector supposed to be squeezing every penny?

In fact, both the public and private insurers are trying to squeeze every penny — as much as their client base (voters/customers) will allow. When the public sector does it, people yell that the government is meddling in Medicare (a government program, in case anyone has forgotten); when private insurers do it, people yell that they are being abused and demand government tell the insurers they have to do certain things at certain prices and let the details fall where they may.

So, the next time you see your local government or the state cut a program, reduce services or the like, stop and ask yourself, “What am I doing, as a consumer and a voter, to be a diligent overseer of health costs?”

3 comments from Bridge readers.Add mine!

  1. KG-1

    This isn’t even the half of it.

    Remember this:

    “If you think health care is expensive now, wait until you see what it costs when it’s free.- P. J. O’Rourke

    If you thought that health care was too expensive right now…

  2. Jeffrey L. Salisbury

    Good grief O’Rourke… do you even know the difference between health care costs and health care spending? If more people are buying insurance through the mandated exchanges, then OF COURSE health care spending is going to go up. As for “insurance premiums” the obvious conclusion is that rates will DROP as more healthy people are insured thus spreading the risk more broadly over the general population. Payments for medical procedures to physicians, surgeons and clinicians will drop as the exchanges’ billings will likely be more tightly controlled. The exchanges will in fact mean more insurance customers paying more premiums, so yes, insurance companies are quietly snickering at all this. The Affordable Care Act will be a winner for insurance companies and that’s the good AND bad news.

  3. Jeffrey L. Salisbury

    And Melot, if people truly started “shopping” for health care services, what do you suppose happens when and if they decide, “Heck, I am not going to pay THAT much. Maybe I am not as sick as I thought. I’ll just work through this.” — What will physicians and surgeons and clinicians do? Lower their rates to get more “customers”? Lower their own salaries? Lower the salaries of their nurses, assistants and officer personnel? Or raise their fees to make up for the loss of “business”? By all means, shop around, be a better overseer of your health care costs. Cut back where possible. Don’t go to the doctor unless you’re really, really sick. I am positive that insurance premiums will go down. Not.

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