Tuesday, December 22, 2009

The insurance problem

Spotted in the comments section on Megan McArdle's blog:
Here's a little example of how costs go out of whack when all care is paid by someone else. That family member had no insurance whatsoever.

A little over a 1 1/2 months ago a member of my neighbor's family got bad problems with his legs - as in they simply were not working. The GP referred the family to a state of the art facility. An MRI and other tests revealed a tumor in the spine. This required a biopsy that revealed the tumor to be non malignant. The doctors thought they could restore the use of the legs with fancy spine surgery, performed by a specialist.

The surgery was deemed successful but the patient had to remain in the hospital for 3 weeks getting intense physical therapy. After that, he was sent home with a strict regimen of physical therapy. Unfortunately, he developed an infection. That required him to go back to the hospital for about a week so they could administer IV antibiotics. Now he's home again and continuing with his physical therapy.

Since this patient had no insurance, the family had to pay out of pocket. The total bill came to 8 thousand dollars.

You see, this family member happened to be a dog. He received care equivalent in scope to that of any human, in a state of the art specialty "hospital". But, since all "patients" at this hospital are uninsured and not entitled to any government aid, the hospital has to respond to market forces.

What would the bill be for similar, insurance reimbursed, care for a human? Well, about 12 years ago, a friend of ours had the exact same thing. As I remember it, her bills came to somewhere in the area of 100 grand.
I keep making the point on this blog that one of the biggest problems with health care in this country is not the lack of insurance, but its overuse. Quite simply, those who use insurance have little incentive to control for costs and shop around for the best deal. It is only natural that costs will explode when someone else is footing the bill.

Instead of reining in the role played by insurance, however, we are expanding it. This will not end well.

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