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No 'invisible hand' in health care

Posted: May 13, 2013 - 11:01pm

Imagine while visiting friends in the remote Alaska community of Bethel that you’re experiencing the severe symptoms of a urinary tract infection. You have no health insurance, so you shorten your trip in order to go to one of the Anchorage area hospitals. As it turns out, that decision defies Economics 101, because if you needed to be admitted it would cost three to six times more than the same treatment you’d receive from the Yukon Kuskokwim Delta Regional Hospital. It seems the normal rules in our capitalist society don’t really apply to pricing in the health care profession.

Those cost disparities were made public when the federal Centers for Medicare & Medicaid Services released data last week for inpatient care at more than 3,000 hospitals nationwide. For treatment of a urinary tract or kidney infection, the cost at Anchorage area hospitals ranged from $14,000 to $27,000. In Bethel it’s only $4,800. And if you had to be hospitalized in New Jersey the bill may run as high as $58,000.

Reporters who covered this story failed to make any sense of the huge discrepancies. But the general consensus was that it’s not related to geographical differences. Take the analysis by Miami Herald columnist Carl Hiaasen. He found that a cardiac pacemaker implant costs $66,000 at Jackson Memorial Hospital and it’s almost double that right across the street at the University of Miami Hospital. And according to Leah Binder, a frequent health care writer for Forbes, “the quality of care has nothing to do with it” adding that “incoherence, not logic or common sense – dictates the rules of hospital finance.”

But this is America where capitalism is supposed to rule. Prices are supposed to set by the law of supply and demand. Competition is supposed to keep the playing field reasonably level. All that requires transparency though, and generally speaking, there’s no one looking. Most Americans don’t pay attention to the details of their medical bills because they’re covered by health care insurance.

The costs are visible to Medicare and private insurers though. They negotiate discounted rates for all treatments and procedures. So why is that through the long debate we’ve been having about the rising costs of health care that they’ve never let this cat out of the bag?

The problem began finding the light of day in March after Steven Brill wrote an article in Time Magazine that described the exorbitant hospital bills sent to six uninsured patients. They were charged up to ten times what Medicare would have paid for the same procedures. And deep in the itemized details were charges like $24 for a 5 cent over-the-counter tablet of Niacin and $18 for diabetes test strips that are available from Amazon for 55 cents.

In any other business that would be called price gouging. But this is different than when an entire industry unjustly profits by overcharging all consumers. What makes this worse is some hospitals are taking advantage of only people without health care insurance and profiting excessively from the unfortunate circumstances of their illnesses. This isn’t fallout from ‘Obamacare’ either. It’s a practice that’s grown ever since hospitals began being prioritizing the business of making money alongside, or even ahead, of their responsibility to provide quality medical care.

We’ve been debating the runaway costs of health care for decades and it’s only getting worse. It seems we’re paralyzed by the capitalism versus socialized medicine argument. Like a few other industries, the health care profession is straddling the line between the two. But it’s not only government interference that’s compromising the capitalist ideals. Competition and the laws of supply and demand aren’t performing the invisible hand acts of regulating the free market.

The word capitalize is commonly associated with stocks and business assets. But it also means “to take advantage of”. In our Christian based society we should readily recognize that allowing some businesses to exploit the pain and suffering of others to make a profit is absolutely wrong. We need to explore socialized medicine not necessarily to implement it, but rather to pry open our collective imagination and broaden the search for an economically just health care model that’s yet to be envisioned.

Moniak is a Juneau resident.

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