Controlling the Cost of Cost Control: Why Paying for Health Care Has Become Such a Nightmare
By Richard E. Ralston
June 1, 2005
The cost of health care will continue to rise for a number of
good reasons. We are living longer, and the retirement of the baby
boom generation will increase demand on health care. Cutting-edge
technology and new drugs will improve the quality and length of
life—but at high cost. The irony, however, is that the efforts to
limit costs will actually increase them more rapidly. We have
created a bureaucratic monster that none of us can afford.
This is the inevitable result of any “third party” payment
system. When payment is separated from those receiving a service,
demand expands much faster than supply. Insurance companies
receiving health insurance premiums from individuals or employers
can’t pay for everyone’s health care no matter what it costs. They
have to establish limits on the nature and amount of health care
provided. High deductibles for coverage, aggressively negotiated
group rates for services, and usage restrictions on the most
expensive drugs and procedure can only slow the hemorrhage, not stop
When government intervenes in health care it makes the problem
much worse. Medicare regulations currently exceed 130,000 pages. No
hospital, physician, or patient can read or understand them. It is
probably impossible for any health care provider to comply with some
provisions of these regulations without violating other provisions.
A couple of years ago, ABC News reported that the Duke University
hospital system had more employees in their billing department than
they had doctors and nurses. If your hospital bill includes a charge
of $25.00 for an aspirin, it’s not because they have to pay that to
a drug company. Nor does your doctor get a commission on aspirin
sales. It’s because of the system’s administrative costs, which
exist as a vain effort to control costs.
Hundreds of thousands of administrators must certify that you’ve
acknowledged that they’re protecting your privacy as they place your
health records on government computers. They must also decide what
procedures are allowed, what can be charged for those procedures,
how to ration them, which facilities are allowed to order new
equipment, how many unnecessary medical tests to order to cover
themselves against frivolous litigation, how much liability
insurance they need and how to add it to their overhead, and how to
protect themselves from prosecution if they code Medicare forms
Fearful of producing too many doctors, one of the greatest recent
successes of regulators has been a deliberate reduction in the
number of graduates from medical schools and teaching hospitals.
Unfortunately, as it turns out, there are not enough doctors. And
people wonder why the increase in health care costs in the last
forty years is in direct proportion to increased government
intervention in health care.
All of this is the necessary result when an illusion comes into
contact with reality. We may all wish that someone else would
provide us with all of the health care we desire. But no employer,
no insurance company, and no government can afford to do that. Each
individual and each family must place a priority on providing
themselves with the highest quality health care they can afford.
(What, after all, should have a higher priority?) Decent government
policy can make this affordable for the maximum number of people
through Health Savings Accounts and tax deductions for
high-deductible insurance policies. Policymakers can also eliminate
the tremendous administrative expenses that have been created by the
heavy hand of government. That will do more to keep the cost of
health care within reach than any regulation, law, or bureaucracy.
But the ultimate responsibility is our own.
The only real alternative is the most likely one—to force
everyone into a uniform system tightly controlled by the government.
Paul Krugman, writing in The New York Times, denounces the
only obstacle to this as “ideology.” He defines ideology as
“competition and personal choice.” He is quite correct. All we need
to do is jettison freedom, and government can take over.
If this happens, one day you’ll discover that a government that
provides and pays for all of your health care has come to think and
act as if it owns your body. Otherwise, you’ll be free as a bird.
Richard E. Ralston is Executive Director of Americans for Free Choice in Medicine.
Copyright © 2005 Americans for Free Choice in Medicine. All rights reserved.
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