Is Paying for Medical Care Out Of Pocket Really a Crazy Idea?

We're so used to paying for medical things by insurance or through government programs that it seems crazy to suggest that we should pay directly out of pocket like we do everything else. How can we afford those high prices? What does the ordinary person know about what tests or treatments he should have? One of my liberal friends laughs at me and asks me if I'm having a heart attack how I bargain with my doctor or hospital over the price.

OK, well what about the high prices. How can we afford them? Think about it. Who does pay them. Well we all do. If we pay our medical bills through insurance that we get from our job that premium is part of the compensation for our work. We get it instead of wages. And Medicare is paid by our taxes and premiums and add-ons to the national debt. It's not some rich guy being forced to pay, it's us.

OK, in reality we pay the bills. But really, what about the high prices! Well technology is expensive, that's true. But we buy lots of expensive things by ourselves, like houses and cars and vacations. And a lot of medical stuff isn't all that expensive. The monthly Comcast bill is as much as the average doctor bill. The statistics say that most of us actually pay more for entertainment than for health care.

Actually if we paid for most of our medical care directly out of pocket it would be much cheaper. What?? How could that be? Well here's how the economists tell us the free market works. Consumers actually run the show, not by bargaining as my uninformed liberal friend thinks, but by choosing what most satisfies them at the best price. If something costs way too much they go without it if it's not that important. Or if it is important they substitute something else that works for them. Like I might look in the Mercedes showroom but I buy a Chevy which basically does the job I want. But why do economists say that consumers run the show? Aren't they at the mercy of the big boys. Well actually the producers have to figure out what the consumers want and then compete against their rivals to make something worthwhile at a price they'll pay. If they do that they prosper. If they don't they go out of business and go to work for somebody else. So the free market works to give people what they want at the best possible price and if you do that really well you get really rich. Take good old Henry Ford for example. In 1908 when he started he sold about 6000 Model T's for $850 apiece. By 1916 he had got the price down to $360, he sold 577,036 and he became the world's richest man.

Despite all this, in our country we have this idea that when we're buying medical care we shouldn't have to bother our heads about the price. I can actually see where that idea comes from. Medical care is pretty important and some of us really might be in that position of having to go without unless we get a little help from our friends. On the other hand we pay directly for lots of things that are just as important, like food and shelter. For these things if someone's on hard times we help them out but we don't revamp the whole darn system. Any guesses what would happen if the government took over paying for all our food or houses?

The other argument I've heard is that the common folks just don't have enough technical knowledge to make the right choices. How arrogant is that! We're just going to do this little operation on you, and don't you worry, it's free. When I'm picking out a car do you think I inspect the engine and decide based on all those technical specifications they have in the brochure? Yet somehow I come out with something in my price range that fills the bill. On the other hand in the area of medical care I do know what I'm looking at when I peek under the hood and I can tell you a couple of things: 1. you pesky patients have an awful lot of opinions on what you want and how things are done to you, and 2. there's a tremendous amount of flexibility in how we can do most things you want done. So if you're paying the bill we can work with the price. For that matter, if I ask you to get some lab work done, how much technical knowledge does it really take to go to the place with the lowest prices. But has any of you ever seen a lab that advertises its prices?

Here's the main point. Our medical care isn't free; we're all paying the bill. And not only isn't it free, it's very, very expensive, largely because we've got this arrangement that makes us act like it's free. And added to that there are tremendous wasted administrative costs both for the payers and for the providers just to make the system operate like its free. AND added to that we get the hell regulated out of us so we have to ask permission just to get what we're paying for. So which system is really the crazy one?

I'm going to keep going. I've got lots of good examples to prove the point.

Fixing Obamacare Will Not Fix Our Health Care System

Chuck Schumer says he knows that Obamacare is flawed but that we should fix it and not repeal it. What exactly is the problem with Obamacare and how is it to be fixed? In the eyes of the politicians, specifically all of the Democrats and many of the Republicans, the illness of our health care system is that some of us are "uninsured" and that the government should arrange to "insure" those who are lacking. If we work that out they will have done their job and everyone will be happy.

That fact is that the problem with medical care economics in our country is much more fundamental. Our peculiar system of indirect payment and insurance company and government intervention where none is needed is responsible for price inflation, wasted medical goods and services and gross bureaucratic interference that produces no health benefit at all. Obamacare is the wrong treatment for the wrong diagnosis and "fixing" it will not cure our illness. It simply adds more people to a bad system and does a lot of counterproductive things at the same time.

I recently visited a doctor for my own problem. At the registration desk I waited 10 or 15 minutes for the lady in front of me to get all her insurance information recorded, get her picture taken, put her signature on several items and on and on. We're all so used to this nonsense that we think of it as normal. In my practice there were personnel whose whole function was to attend to billing. Others oversaw adherence to Medicare and Medicaid regulations. My nurse spent hours daily seeking pre-authorization rather than interacting with patients. I was obliged to buy expensive computer systems and pay regular high IT fees just to comply with billing activities and documentation to justify my claims to the payers. The bill payers on their end required personnel and computers to handle similar administrative work. All of this activity depends on a system of extensive coding of each of thousands of medical items and services. Millions of dollars are spent paying organizations to devise these coding systems. Millions more are spent on bureaucrats and consultants to meet, categorize and devise value to each code.

To make claims to the payers for my service I used these codes and I documented what was necessary to justify each code. Such documentation requirements were far in excess of what I would need for actual medical communication and took large amounts of time from patient interaction. Many doctors because of this have added a new employee called a "scribe" whose function is to attend to the documenting, another layer of personnel cost. One study recently estimated that 50% of physician time is spent on administrative work.

Space limitations preclude a full description of the regulatory cost and time loss of our present system just in this one area of the doctor visit, none of which has any patient care value. It is a tremendous waste of resources, the cost of which is ultimately borne by medical consumers.

The alternative to this system would be simply for the patient to pay at the desk by cash, check or credit card. With direct payment major personnel and equipment reductions as well as the office space to house them would occur. In addition major diversions of doctor and nursing time would return to patient care. My best estimate is that direct payment would translate to at least a 25% reduction in my office fees and at the same time an increase of about 20% in time spent with patients. I cannot estimate the savings derived from decreased involvement of insurance companies and government bureaucracies but they would clearly be substantial.

I often hear people say that they had such and such a procedure and didn't pay a cent. It's an illusion friends, a scam really. Not only is your treatment not free, it is very, very expensive. All these billers, coders, clerks, scribes, bureaucrats and consultants must be paid and none of them are doing a blessed thing to attend to your medical problems. And all these goings on are just the tip of the iceberg that is the wasteful, inefficient, paternalistic, bureaucratic system that we've become adjusted to over the past 50 years or so. Stay tuned.