Why Are Medical Costs So High?

by Vin Suprynowicz

Original: http://www.lewrockwell.com/suprynowicz/suprynowicz100.html

You’re a doctor. You need to bring in $3,000 apiece for your most common procedure. But Medicare and Medicaid – which pay for about half your patients – have just told you they’re only going to pay you one-third of what they’re billed. What do you do? You don’t need to be a CPA to know the answer is to start billing everyone $4,500 for your procedure. The half of your patients who pay full price thus pay $1,500 extra, covering the $1,500 shortfall for each Medicare/Medicaid-covered procedure.

Now the tricky question: If someone who’s NOT on Medicaid or Medicare visits your medical office to have this procedure done, and promptly pays his or her $4,500 in full, how much has he or she paid you, this year?

And the answer is: $6,000. Those who are not on Medicare or Medicaid are known as “taxpayers.” Where do you think Medicare/Medicaid got the $1,500 to pay for the welfare patient? The taxpayer pays $4,500 for his or her own procedure, and then an extra $1,500 in taxes to fund someone else’s.

For all those who have written in insisting that we need government to pay our medical bills because they’re so high, let’s keep this simple:

Medical bills are really high because the government promises to pay most of them, the same way government-backed “college loans” have driven up the cost of college, by allowing colleges to charge you whatever you can afford plus whatever the government will loan.

Perhaps it’s still technically a minority of Americans who are currently “covered” by Medicare and Medicaid. But since the old and the poor (the latter often skimping on health maintenance and prevention) use the most medicine and medical care, the majority of medical COSTS are covered and “paid for” by these two socialist programs.

Some say as much as two thirds.

If we switched over to “cash only” medicine tomorrow – no government or even private insurance payments allowed – what do you suppose would happen to medical costs?

Remember, the doctor who’s been accustomed to billing $4,500 for a procedure really only gets $1,500 from Medicare/Medicaid, a scheme that’s already jacked up YOUR cost by 50 percent.

Of that $1,500, another $500 (and that may be understated) goes to pay doctors’ non-medical office staff who negotiate bills and payments with the private and government “insurance” firms.

So the doc who “billed” $4,500 expected to get about half that. The rest is only “in there” to buy off this unholy private-public “insurance” bureaucracy.

If he could fire all those non-medical “billing” people in his office, and if the doctor could again assume that most patients might pay the full amount billed on a timely basis, in cash, he or she could drop many posted charges from $4,500 to $2,000 overnight.

And what if that still didn’t produce enough business? Could our M.D. somehow manage to drop that price again, to $1,500, advertising “Lowest rates in town”? In a true free market, he’d have to. Streamline his costs of “regulatory compliance,” and he could probably do even better.

Not only that, in a “cash” environment, conversations might be heard in the examining room which are virtually unknown today. Conversations starting with:

“There are three ways we can handle this problem. The middle course will cost $500 and probably not do much good, which means you’ll just have to come back for the $5,000 ‘third-choice’ procedure, anyway. But first we may want to try something real simple that’ll take a few weeks but will only cost you fifty bucks …”

Or: “There are three medicines I can give you for this. The first two were recently patented and would cost you $500 a month and the salesgal who comes by to promote them has great knockers and wears short skirts and gives me all kinds of free notepads and ballpoint pens. On the other hand, there’s an old generic drug that’ll probably do just as well or better for five bucks a month. Want to try that first?”

Doctors long ago fell out of the habit of discussing things this way. It sounds “unprofessional.” But it’s no more “unprofessional” than a roofer telling you about something he can try to repair your chimney flashing before you go to the expense of replacing your entire roof. The difference is that roofers know you’re likely to contact someone else – someone who won’t make them wait a month for “an appointment” because the number of practitioners in that profession aren’t as artificially limited by the state licensing agencies – if they get too arrogant and don’t tell you all your options.

As medicine has gotten better, some treatments have been introduced which are just plain more expensive. But a true free market always works to reduce such costs. Compare the inflation-adjusted price of a color TV today to one in 1963.

Government, on the other hand, pays on a “cost-plus” basis. Far from creating pressure to make things cheaper, this creates an incentive to jack prices up, which is why taxpayers pay 20 bucks when a candy-striper brings a Medicare patient two aspirin in the hospital.

If government had undertaken to start buying us “free” color TVs in 1963, from only “licensed” suppliers, they’d still be clunky 300-pound “console” models and they’d now cost $12,000 apiece.

No, from regulation designed to limit entry into the field (reducing price competition), to licensing, to socialist government “insurance” schemes, it’s primarily government meddling that has made a nightmare of our medical costs. So now we’re prepared to believe the politicians when they tell us the solution is not a return to the free, unregulated, pre-1916 market in medicine, but rather … more government meddling, by the same people who have been busy “fixing” the banking industry since 1913?

And to those who say, “That’s unthinkable! Snake oil and charlatans! We want regulation! It makes us feel safe!” – First, licensing and regulation are protection rackets. They keep supply down and prices up. If regulation guarantees our safety, why can’t we sue the regulators when the doctors they “regulate” screw up?

But second, answer me this, just once: America was supposed to be made up of 13 – now 50 – sovereign states, little greenhouses free to try all different ways of doing things. I’d gladly move to the one state – one out of 50 – where medical liberty is restored, providing it also imposed no state income tax, no helmet or seatbelt or anti-smoking or “endangered species” or “global warming” or rural “speed limit” laws, that it “allowed” incandescent lightbulbs and full-sized rifle magazines and full-sized toilet tanks and encouraged the private ownership of machine guns.

(I just described all of America in 1912, a place where our grandparents seemed pretty happy, only without the racism that CREATED the Wars on Guns and Drugs.)

Which state is that? If there are a couple million of us who want to try it another way, why can’t we have just one state to call our own? We’re even willing to settle in the most inhospitable, God-forsaken desert you’ve got.

If you liked all the taxes and regulations back in California or Illinois or New York or wherever you came from, why did you come here, determined to try and make this state just like the one you fled?

Do you know the meaning of the word “hubris”? Has it never occurred to you the miners and ranchers who were already living in Nevada might have set things up just right for conditions here, and that you might want to check with them before you blithely insist on changing things in America’s last endangered refuge of freedom to be just like that decaying, jobless hellhole you ran away from?

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