Patient-Consumers and Their Nebulous Understanding of Health Care

High costs and profits undoubtedly have driven up the cost of health care. According to Kaiseredu.org, administrative costs account for 7% of the total U.S. health care spending (http://www.kaiseredu.org/topics_im.asp?imID=1&parentID=61&id=358) —though I believe a much higher percentage was quoted on the Frontline piece. In any case, it is no secret—particularly to us in this class—that health care costs are rising. Thus, it seems reasonable to think that those in the health care business are also seeing greater profits, since health care in this country operates in a free market. But why, then, do health care costs continue to rise at a seemingly unregulated rate? Should the forces of supply and demand not control health care costs as they would in any other industry?

I argue that health care is unlike any other industry. The high skill set and the specialized knowledge that go into health care delivery are possessed by few and are beyond the comprehension of all others; those “in the know” essentially make up an exclusive club. This characteristic of the health care industry makes it inherently un-transparent. Consider this: if the average Joe knows little about what makes up his medical bills, what sort of cost accountability can he expect from his health insurance company and health providers? The average Joe—only knowing that he spoke with his doctor, gave samples for and received lab results, laid still in a big clanking machine (MRI), etc—wouldn’t even know where to begin in questioning why his medical bills are so high. All he can do is concede and consent to pay what he’s been billed—as is the case with most people in this country, if they can afford to do so.

The lack of transparency in the health care system was touched on in article in yesterday's LA Times. It cites insurers' underpayments, or negotiated (lower) prices for services, as a main reason for the rising cost of medical care (http://www.latimes.com/business/la-fi-lazarus7-2008sep07,0,5859110.column). As part of a vicious cycle, insurance companies pay providers too little and, in turn, providers increase the cost of their services. Such things happen without the knowledge of health care recipients. Thus, the lack of transparency in the health care industry is really system-wide, not limited just to health care delivery and the billing of individual patients.

Clearly, not everyone can be doctors, pharmacists, etc.; so not everyone can be completely knowledgeable of all the details of the health care services they receive and what exactly they’re paying for in their medical and health insurance bills. However, there must be a way—on the part of both providers and insurance companies—to make the health care industry more transparent. In our present system, doing so would give health care consumers better understanding of what they’re actually purchasing, thus making health care more like a commodity in a free market, with costs responsive to not only supply, but also the demand of the informed consumer.