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Just How Insulated Are We From Health Care Costs?

01 Sep

My wife had some routine blood work done on July 28th. We got the billing statement from her provider in the mail yesterday. Having worked as a phlebotomist at least part-time for four years, I was shocked to see the breakdown of her bill. First, I was amazed at the itemized billed amounts:

Venipuncture: $20.00
Specimen “Handling” Fee: $20.00
Test 1: $72.00
Test 2: $60.00
Test 3: $65.00

Then, I was shocked–and thankful–to see how little of the costs we were being asked to pay:

Total Bill: $237.00
Allowed Amount Paid By Insurance: $62.88
Amount Written Off: $158.41
We Owe: $15.71

Yep. We are responsible for paying about 7% of the total bill. If we apply numbers like that to the rest of health care costs, it’s little wonder that people are unconcerned about the $2 Trillion a year we spend on health care. That’s because, if they only feel 7% of it, $2 Trillion only feels like $140 Billion. That’s still a lot of money, but it’s not much when you divide it across an entire country.

What else is wrong with this picture? How about the regressive tax that is the venipuncture and specimen handling fees? Together, they amount to $40. That’s true whether you undergo one test or ten. Therefore, provided we don’t harm our health by delaying things a while, it’s in our best economic interests to save up all the doctors’ orders and have all of our labwork drawn at once, rather than being hit with these fees each and every time we pop in for a stick.

Then there’s the actual cost of the tests themselves. There’s no way they cost what the labs are charging for them. You see, almost all lab work these days–be it chemistry or hematology–is done by automatic analyzers. Yes, there are skilled lab techs who run the equipment and occasionally do things the “old fashioned” way, but technology calls the shots in the lab. Sophisticated analyzers can cost nearly $1 million. It makes sense for labs to charge so much for tests, right? They have to pay off the cost of these machines. Actually, no. Most labs sign contracts–just like you and I do with our cell phones–that allow them to lease the machines at no, or reduced cost, as long as they agree to purchase the necessary chemical reagents from the partner company. The reagents aren’t cheap, but the amount used for a metabolic panel certainly doesn’t cost $60. Don’t believe me? Look to the amount the insurer paid: $62.88. In this case, it’s a buy-1-get-2-free deal.

I mention all of this as just one example of the way in which those of us with insurance are isolated from the “costs” of our care. There’s the amount we are billed, there’s the amount things actually cost, and there’s the amount we actually pay, and none of these amounts seem to agree with each other. Imagine going into a store without any pricetags on the items, picking out a shirt, and taking it home. A month later, you get a bill in the mail. It says the shirt costs $120. It then says your “shirt insurance” paid $20 for the shirt, $90 was written off, and that you owe $10. That’s confusing isn’t it? Wouldn’t it have been easier to go into the store and decide if you wanted to spend $10 to buy the shirt? Of course it would. But as Dan Belsky and I wrote yesterday, health care doesn’t work like other goods and services. This is just one example.

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Posted by on September 1, 2009 in Uncategorized

 

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