Fixing Health Care Costs

         What is the greatest unknown about health care costs to the consumer? The answer: The true cost of providing the health service. How much of what we actually pay is to cover the cost and what is leftover in profit to the doctors, hospitals and drug companies? The three areas I will focus on are 1) Testing 2) Malpractice Insurance, and 3) Prescription Drugs.


1) Its only a test, so why does it cost me an arm and a leg?

Here is my theory: Some tests doctors administer are very expensive to the patient but cost the hospitals and doctors very little to perform. Take for instance a Colonoscopy. A doctor can perform 16 of these a day and charges each patient $2400 (based on services rendered in 2004). Total revenues from one day of Colonoscopies equals $38,400.

If the doctor were paid $1,000 an hour for his expertise, where would the other $30,000 need to go? Keep in mind, a Colonoscopy is a camera being guided through a person's colon. It is not a life saving procedure.

The same can be said of EKG, Cat SCans, MRI's and other health tests. Just because they are performed with exotic looking equipment does not mean they are expensive to perform. If we can get the cost of tests reduced dramatically, then HMO's can actually encourage additional testing instead of discouraging what it calls "escessive tests."


2) Why do I have to pay so much for the malpractice portion when I go to reputable doctors?

Malpractice insurance premiums are outrageously high because malpractice awards are completely ridiculous. Not only are there no limits to the jury awards, but the awards are being given even when reasonable care standards were administered. In our society, if someone has a bad outcome from a procedure, a doctor gets sued and a settlement is reached. The cost of litigation is so high, insurance companies would rather pay nuisance claims than go to trial and possibly risk a crazy jury award. Consequently the average doctor's medical malpractice insurance a year costs $250,000.

          By allowing standard payments for malpractice definitions (Negligence, Procedural error, unsubstantiated diagnosis) arbitrators instead of full blown jury trials, could pass judgements and speed up the process. Insurance companies would have a much better idea of their exposure, and could afford to drop premiums substantially.

If we fear a reduction in malpractice awards will allow doctors to practice loose and carelessly, we should penalize doctors another way. Publish their malpractice record. If a patient sees that his Doctor has been written up on more than one ocassion for poor work, they will think twice about going to that person. If a doctor is cited more than twice in one year, they should be put on probation or temporarily suspended from practicing. Keep in mind, the arbitrator would only find a doctor guilty if general standards of operation had been ignored or performed badly. Guilt would not be assumed as it is today.


3) "I can't believe this vial of pills costs me 250 bucks."

Prescription Drugs are touching more Americans lives than ever before. From cholesterol reduction, to erectile dysfunction, the drug companies are flooding the market with new medicines. At this point, our free enterprise system is allowing the drug companies to charge what the market will bear. When it comes to people's health, the market will bear a lot. But is this a subject or product that should be considered the same as other goods or services?


A person on heart medication said, based on the recent loss of health insurance coverage, "I can continue getting this medication, or I can buy my weekly groceries. I can't do both."
Sadly, too many Americans are faced with this choice.

In the case of medications, perhaps the companies should not be demanding what the market can bear, but charging what the people can afford to pay. There should be an absolute cap on any medication, and again it should be based on the cost to produce the drug.

(to be continued)