Wednesday, December 8, 2010

Health Care Costs

In response to my last post, from a colleague:

Hi Budd,

We all have our stories. I had radiation therapy for cancer. 12 weeks, 15 minutes a day. The charge was $3500. Per day. That’s 60 days treatment at $3500. $210,000. BCBS paid at 100%. I am lucky to get 80% on a $85 office visit.

What is going on here, with these costs? As I've said before, let's forget utilization - what about prices? There is just no curbing them at present, and to my mind no prospect of such. Here in the East Bay, the rising cost of health insurance, which is a consequence of these prices, is simply driving more and more people to Kaiser, which can control its prices. This exodus from private insurance reduces the pool of private patients at Sutter and elsewhere, who respond by raising prices even higher. This is what is called a death spiral.

Nothing goes on forever, so there will be an end to it, but it's hard to see right now what that end will be. I wish I could be brilliant and see it, but I'll leave that for the often-wrong economists. The idea of ACO's, like HMO's before them, is for a group of providers to be able to look at a group of patients and plan rationally for their efficient care, saving money and distributing it to themselves and kicking some back to the government, but it's a speculative program and will take some time to take effect. In the meantime life goes on, trends continue, and anti-trust is silent.

Budd Shenkin


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