Saturday, August 29, 2020

Free Market Health Care

Anesthesiologist Kevin Smith was a guest on Econtalk.  He established the Surgery Center of Oklahoma in the late 90s.  The goal of the center was to offer posted prices for various surgical procedures.  Amazingly, by removing insurance and providing cash-only procedures, the surgery center costs a fraction of what it does under the predominant system. The repeated example during the discussion was a back surgery that was listed at $100,000 on the hospital bill. The insurance company 'negotiated' a payment of $13,000. Wow, that sounds like they did a great job. The surgery center provides the same procedure for $10,000. That is a tenth of the 'supposed' price and even 30% below the 'negotiated' price. How does any of this make sense?

According to Kevin, insurance companies take the 'savings' to their customers and then ask for a percentage. Thus, in the case of the back surgery, they 'saved' the client $87,000 and request 10% of the savings, $8,700. The client is still only paying $22,700 for a $100,000 procedure. It's still a deal, right? On the other side, the hospital can report $87,000 of uncompensated care to get money from government funding. An inflated list price benefits both the hospital and the insurance company.

Also noteworthy was the number of Canadians who travel to Oklahoma and pay for a surgery despite the fact that they have full coverage under the Canadian system. What's up with that? It turns out that a single payer system leads to long wait times. You can wait 3 months in Canada or come to Oklahoma.

Our health care cost structure is intentionally indecipherable because the complexity benefits insurance companies and some in the health care industry. Smith has no trouble luring surgeons to his center on a piecework basis; cash work pays better than the headache of Medicare, Medicaid, insurance submissions, etc. Smith holds that a movement toward free market health care is underway and will transform the health care industry.

Faster, please!

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