The American Way of Birth
The New York Times recently published a major article by Elisabeth Rosenthal on “The American Way of Birth, Costliest in the World.”
The article is full of the usual, “The U.S. can’t do anything right: every European country is better than we are,” whining (it’s curious that the Left doesn’t apply the same thinking to abortion policy), but once you get beyond all that, there is plenty of food for thought here.
For one thing, we’ve been told for decades that American patients aren’t very well informed or assertive, so we need sharp-penciled experts to manage our health care for us. The experts will get us the best deal, and we don’t have to worry our pretty little heads about it.
Well, maybe not. The article says –
From 2004 to 2010, the prices that insurers paid for childbirth — one of the most universal medical encounters — rose 49 percent for vaginal births and 41 percent for Caesarean sections in the United States, with average out-of-pocket costs rising fourfold, according to a recent report by Truven that was commissioned by three health care groups.
Could the average consumer do any worse?
The article looks at the struggles of a couple of such consumers, people who do not have maternity coverage. One is Renee Martin –
When she became pregnant, Ms. Martin called her local hospital inquiring about the price of maternity care; the finance office at first said it did not know, and then gave her a range of $4,000 to $45,000. “It was unreal,” Ms. Martin said. “I was like, How could you not know this? You’re a hospital.”
Another such couple was the Sullivans. They bought a $4,000 “pregnancy package” from the local hospital, but it “did not cover extras like amniocentesis,” –
So when the obstetrician suggested an additional fetal heart scan to check for abnormalities, they were careful to ask about price and got an estimate of $265. Performed by a specialist from the Children’s Hospital of Philadelphia, it took 30 minutes and showed no problems — but generated a bill of $2,775.
The bill was ten times the estimate. It took them months of arguing but the hospital finally “honored the estimate.”
And that is what our system needs. Not third-party payers who know they can always raise premiums to cover these ridiculous costs so never bother to argue, but engaged (and sometimes enraged) consumers who refuse to be treated like patsies. Inject millions of such consumers into our system and we will soon see hospitals find a way to price services fairly.
Another such couple was Dr. Marguerite Dane and her physician husband, “both associate professors of family medicine and Georgetown Medical School.”
After her daughter was born five years ago, Dr. Dane was flabbergasted by the line items on the bills, many for blood tests she said were unnecessary and medicines she never received.
So when she became pregnant again in 2011, she decided to be more assertive about holding down costs. After a routine ultrasound scan at 20 weeks showed a healthy baby, she refused to go back for weekly follow-up scans that the radiologist suggested during the last months of her pregnancy even though medical guidelines do not recommend them. When in the hospital for the delivery of her son Ellis in February, she kept a list of every medicine and every item she received.
You can bet there isn’t an insurance company in America that would be so vigilant. When I was working at Blue Cross Blue Shield of Maine in the 1980s, we never bothered even looking at a bill under $5,000. It simply wasn’t worth the expense of paying professional staff review these items. Consumers are more than willing to keep track of all this — when it is THEIR money at stake.
But, of course, that is not how The New York Times sees it. No, they think it is a horrible thing that anyone should be burdened with such a responsibility. It is far better, in their view, to double down on using remote experts to define what care is delivered at what cost, even as they acknowledge that –
To control costs in the United States, patients may also have to alter their expectations, including the presence of an obstetrician at every prenatal visit and delivery.
But salvation is close at hand –
Starting next year, insurance policies will be required under the Affordable Care Act to include maternity coverage, so no woman should be left paying entirely on her own, like Ms. Martin. But the law is not explicit about what services must be included in that coverage.
So, you may not know what services you will get, or whether they are the services you would like to have, or whether your insurance company will be any more vigilant than they were in the past, but at least you won’t “be left paying entirely on (your) own.” And isn’t that the most important thing?
Yeah, well, this just illustrates the broken system we all know we have. Whenever my wife gets pregnant, our baby will be born at home, considering it’s assumed to be a healthy pregnancy.
“When she became pregnant, Ms. Martin called her local hospital inquiring about the price of maternity care; the finance office at first said it did not know, and then gave her a range of $4,000 to $45,000.”
This is laughable.
“Consumers are more than willing to keep track of all this — when it is THEIR money at stake.”
Proper incentives work
But getting those incentives right is difficult if you want everyone to receive healthcare. There is a trade off.
Cut out the middlemen! Everything needs to be between the doctors and their patients!!!!
Something that I keep telling people is that the reason that making price comparisons of medical procedures is difficult is because we overuse third-party payment. If most people had high-deductible, casualty insurance, doctors and hospitals would bundle services and offer package prices.
Lack of transparency isn’t a valid argument for why we need third-party payment; rather it’s a reason to move away from third-party payment.
Exactly right!
Carving the PPOs out completely and using a plan that pays Medicare plus 30% is even better
“using a plan that pays Medicare plus 30%”
What “plan” would that be, Ralph?
John,
These are the kinds of plans I am designing for employers. They can reduce expenses by about 26% vs a PPO plan.
Interesting. Where specifically do the reduction in expenses come from?
John,
Hospitals bill on average 3-6 times the Medicare rate. BUCAH re-prices it, and thier “allowable” is usually 2-3 times the Medicare price. This is the number on the EOB, and charged to the employer. But then they usually pay 115% to 130% of Medicare to the provider, and keep what’s in between
Pregnancy costs are ridiculous. It’s a wonder how anyone can have children!
Maybe if the New York Times had bothered to check the web…
The package price quoted on the web for the Birth Center in Salt Lake City is $4,800. They say that a comparable hospital birth would be $14,400.
(http://www.utahbirthcenter.com/?page_id=703)
Cheaper by the doze here in Utah!
Nice article, Greg, and nice comment, Linda.
At MediBid we’re getting prices for well-child delivery ranging between $1,700 and $2,400 including 2-3 nights in hospital respectively.
Too many people have become dependent on the same BUCAH that lobbied so hard for obamacare, that they actually believe that it costs $4,000 to $5,000
My opinion on health care is every working individual should be and is responsible for their health care. We are required to have a percentage taken from our paycheck each week and our employer is required to match this amount. For a benefit that we can’t use until we turn 65 or become disabled. So why did we meed to reinvent the wheel here? It would seem to me that if we gave working people 3 choices 1. Sign onto you’re employers health plan 2. Show your employer you have coverage through private insurance & allow employers to make tax free contributions. 3. Require the employer to take an additional % out each week to get a medicare card if one of the 1st. Two options have not been selected. We could have avoided the delay in covering every worker and a 3500 page law thay known body seems to understand. Someone please explain to me why this wouldn’t have achieved what workers should be expected or required to do in taking responsibility for their and their families health care.
Greg is totally right about the power of enraged consumers. At HealthEquity one of our most common customer assistance areas is “this doctor bill is for something I didn’t receive!” Of course, all of our members are on HSAs and we make it easy to understand the bill, so of course people look at them! And you know what? A few customer,er complaints and the provider gets way more careful about what they put on the bill.
This is a basic building block of consumer empowerment.
Enough complaining. What we need is solution to get us to free-market medical care, defined as patients, not employers, owning their own individual non-cancelable insurance policies. People do not have this because of income tax breaks given to job-based medical care during World War II. Medical Savings Accounts and ending the income tax are good ways to stop this. The FairTax is a good way to end the income tax.
Bert the solution is really simple. Separate the insurable from the routine risk, shop for medical care using MediBid and Healthcare Bluebook, and have the plan pay on a schedule, not PPO allowables
Umm, Most private insurance policies are owned by employers so people lose their coverage when they lose of change their plans. If they have a pre-existing it is hard to lose coverage. I do not see how your comments address this problem.
Critical Illness insurance is part of the solution, and of course there’s COBRA then a HIPAA conversion, but a perfect solution is hard to find
The definition of a free-market is without government interference. The free market is not perfect because nobody has perfect information but it is the best we have. COBRA is a poor solution and workers who lost their jobs have to pay for it with after tax dollars. It is program of the central planners and I believe in liberty, not their solutions.
Then maybe you shoudl create a solution. Government does not solve problems. That’s not thier mandate, nor are they capable. They create problems because we turn to them and ask them to solve problems
I still cannot understand why normal OB and Maternity expenses are even part of health “insurance” discussion. These services should be packaged and sold by physician groups and hospital facilities like laser eye surgery or a general contractor bidding on a kitchen remodel. Someone please help me out.
Viewing prospective parents as consumers, as we would on this blog, the idea to have these consumers bear out of pocket the full cost of a birth actually deals with two consumption decisions at once:
First, the decision whether or not to consume the marginal baby, by which I mean, of course, whether or not to have an additional baby ( which may be the first).
Second, conditional of the first decision being in the affirmative, where to have the delivery of the baby.
Presumably, the correct sequence here is to put out the birth to potential vendors for bids, as one would for, say, building a house or expanding a kitchen, and, given the best price obtained at way, making the decision whether or not to consume the additional baby.
That would be the efficient way to do it.
I have not solved in my mind how to fit abortion into this scheme, but I am sure others will have ideas on that.
Fortunately, we don’t have to speculate. Paying directly for maternity services is not some wild, crazy, right-wing idea. It is the way it was done within (some of) our lifetimes.
Child birth was affordable and hospitals had payment plans. Then Congress passed the Pregnancy Discrimination Act and screwed up a pretty good system.
Ralph,
Thanks for your coment. As an emploer I don’t want to be responsible for my employee’s health insurance. But each week I must take money out of their pay checks and contribute the same amount that they get no benefit from until they turn 65 well out of child bearing years. I feel my employee’s should have a choice. Buy there own. Sign up for ours. Or decide the government’s plan is what they want for their families. Our plan is a HSA with major medical. So the employee makes their choice on where they spend their $ . And they don’t lose what they didn’t spend in their HSA account unlike the major medical portion.
John,
That’s good. I like HSAs. Can still make the major medical part of it more efficient than a network plan is
As I understand it, employer paid medical care is deducted from FICA and income taxes while individuals cannot deduct their FICA taxes. Is this fair?
If you pay an employee $3,000 a month and they have a $500 health plan for which you pay $300 and they pay $200 you have a few options. Personally I would recommend you reduce their salary to $2,800 and pay 100% of their premium. This would be the most tax effective given current tax code.
Why does everyone assume that delivering a baby has to be such an expensive proposition? It doesn’t have to be that way. We need insurance for the costs incurred when the rare expensive problem exists.
Delivering a baby is not all that difficult. For the most part the baby comes out by itself. I have heard rumors that childbirth was a common occurrence before the construction of the first hospital and before doctors were licensed. 🙂
If Ralph is correct, then Blue Cross and other PPO plans are committing fraud every day.
The Medicare charge for a procedure is $2,000. The PPO charges $4,000 to the employer’s plan as the claim paid.
But he says that Blue Cross only pays the hospital $3,000 and keeps #1,000 as profit.
Sometimes I think the insured’s co-payment is based on the $4,000 fictitious claim.
If this is true, then health insurance premiums could come down not with an elaborate ACA, but just with anti-trust law enforcement.
Bob Hertz, The Health Care Crusade
Bob,
You are correct and the federal ERISA courts agree with you. If you google “Blue cross hidden fees case” you will see some of the court rulings
Ralph, from personal experience I know that some Blue Cross plans began to face state state court judgements as long as 20 years ago, because of their failure to disclose the full amount of provider discounts. You have suggested that private commercial companies engage in the same practice, even to this day. I assume you know of hard evidence of that. Can you please point to it?
Thanks –
John, follow this link http://www.law360.com/articles/444703/blue-cross-hit-with-5m-judgment-in-hidden-fees-case
Ralph the link you supplied is about BCBS Michigan. (btw, BCBS Michigan is one of the Blue plans that has been in hot water over this very thing since at least the late 1980’s. Apparently it can’t get an honest management on board.)
But I did not ask about Blue plans. I asked if you have any hard evidence that the private commercial plans engage in the same practice.