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Home / Finance & markets / What is the price of your health?

What is the price of your health?

It is a situation that you really don’t want to be in. You’re sick, tired, anxious and most probably willing to use all your resources to get yourself out of this terrible situation. 44% of the time, this means you’ll end up in the Emergency Department of the nearest hospital, searching for some relief. The chances are quite high that you’re a non-urgent case ,which means after conducting blood tests, plain x-rays and god knows what other diagnostic wonders, your doctor will say “there is nothing serious”. He will give you some pills and advice you to rest. At the end of the day you will end up with a bill that will cost $500 on average.

But is it really what your visit really cost? No, actually it depends. It depends on what insurance you have or if you have it at all?
Hospitals all around the world use same thing called the charge master, which is basically the menu of the services and the prices they offer. Hospitals, very rarely, reimbursed the prices on their master lists. Private insurance companies usually pay hospitals between 20 to 30% at discount. This means for every $100 hospital charges, the insurance company depending on its negotiation power will pay at a discount, say $80. On the public insurance side, the situation is much more dramatic. Hospitals in US are reimbursed on average 30% of the charges (70% discount). In this same case, this means the hospital will get $30 for every $100 it charges.

There is something really wrong with this picture. No one is innocent; everyone has its own sins.

Knowing that the insurers will buy “at discount” health care providers will charge at incredible margins. Private providers have 300-400% profit margins on lab tests, relatively mild margins (around 50%) on invasive procedures. Insurers, knowing that the hospital charge ridiculous prices, will negotiate to death for the discounts. The state, knowing that everyone is cheating, will punish everyone by dictating purchases ranges from 60 to 90% discount (for example Medicaid pays 12 cents per $1 in US).

So, what is the real price on your hospital bill? Assuming that you get the same medical services, and thanks to Hippocrates you get the same most of the time, how come there can be 3-4 different prices for the same service?

This complicated and confusing situation has further implications.

People are living longer each and every day. Life expectancy is increasing, but living longer does not necessarily mean living healthier. People have more co-morbidity; they become medically and financially more complex cases to manage. This creates an inevitable financial pressure on the health care systems around the world. Currently US spends nearly 18% of its GDP on healthcare. The Affordable Care Act, known as the Obama Care, is searching was to reduce this burden. But yet there is another challenge. Fresh out of one of the worst crises of capitalism and a painful recession US economy depends on the growth of the healthcare industry, since it consistently creates more jobs every day.

Beyond anything healthcare is about healing people, but when you see the other side of things you start to question the trustworthiness of it.

Image source: Flickr

Murat Uralkan

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