Passing More Costs to Patients
My daughter’s back-to-school checkup came to $747, a hefty sum--none of it covered by insurance. My insurance plan, a preferred provider organization, does not cover annual exams for children. The bill was a classic example of “unbundling”--health-care jargon that means the doctor or hospital charges separately for each test, procedure, or part of a test or procedure.
In this case, the bundle included $150 for a routine physical; $160 for two chickenpox vaccines; $225 for three doses of hepatitis B vaccine; $10 to stick the needle in my child’s veins; $68 for immunization administration; $50 for a second office visit for the second shot; $25 for handling a blood specimen; $29 for a tetanus immunization; and $30 for a routine hearing test.
Years ago, these charges would have been rolled into one bill--one much lower bill--for the physical. That all-inclusive price would have reflected only the cost of providing the service with nothing extra thrown in.
Did chickenpox vaccines really cost that much? Why the $10 charge for puncturing a vein or the $25 charge for labeling a vial of blood if that’s what was meant by “handling” a blood specimen? Why weren’t these included as part of providing the basic service of administering vaccine or taking a blood sample?
After the initial sticker shock, I concluded that the doctor was probably loading extra costs of maintaining her practice onto my bill. Managed-care plans have drastically reduced the fees they pay to doctors on behalf of the insured patients they cover. When doctors are getting paid less than they think they deserve, some will try to make up for it by charging more to other patients--but not just any patient.
Unbundling works best with patients who have no option but to pay the full price and have no insurance carrier bargaining for them. That means people whose employers don’t cover certain services such as well-child visits, and people without insurance, and the poor. “Cost shifting is part of the whole American ethos in health care,” says Uwe Reinhardt, a prominent health economist at Princeton University in New Jersey. Health care providers try “to shove the cost onto someone else’s budget. The weakest buyers get stuck with the overhead.”
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Los Angeles health-care executive Dr. Robert Margolis says physicians are getting pushed hard these days. “They weren’t getting paid in a timely manner,” and insurers were “downcoding” some physician services in order to lower payments, he contends. So, Margolis says, there continues to be unbundling by physicians. “If they can charge for more separate pieces,” he says, “that adds up to more than the whole.”
The last few years have not been kind to docs. The California Medical Assn. says that almost one-third of all physician organizations in the state have declared bankruptcy or closed their doors; the politically influential doctors’ group also says that payments to doctors from health plans are about a third lower than the U.S. average.
“When money is tight,” says Margolis, “table manners go out the window.”
For more than three decades, as medical spending has continued to rise, doctors, hospitals, insurance companies and employers have locked themselves in a power struggle that involves trying to shove the cost burden onto one another. When the federal Medicare program began in the mid-1960s, doctors and hospitals shifted costs to the federal government, which pretty much sent checks with no questions asked. In the 1980s, Medicare finally clamped down, and employers became the open spigot, paying higher and higher costs to provide medical coverage to workers. By the early 1990s, that well, too, dried up. Employers demanded that HMOs and other managed-care plans put the squeeze on the profits of doctors and hospitals.
The managed-care industry seems to be running out of ideas for controlling costs; insurance premiums are swinging back to double-digit increases this year. Now, the players in the health system are shifting more costs to patients. Simply put, that means you will pay more.
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Wellpoint Health Networks, a big managed-care firm based in Southern California, is leading the effort to make popular prescription drugs such as Claritin and Allegra available as nonprescription, over-the-counter medications. If you need the drug, you would now pay the full cost--not just the $10 or $20 co-payment required when your health insurer picked up most of the tab.
There’s also talk in California of making employees pay extra if they want to go to pricier hospitals--sometimes, large, prestigious research institutions. Health insurers already have set up tiered programs for prescription drug benefits; basically, if you want to take a higher-priced drug, you pay more. And the California Public Employees’ Retirement System, which buys health benefits for 1.2 million state and local workers and retirees, has shifted more of the cost to members in the form of higher co-payments for office visits and prescriptions.
“The system is rational in the sense it is designed to give a lot of market power” to doctors, hospitals and other providers, says Reinhardt. “The system was built by suppliers. It does achieve the objectives for which it has been built--to grab every ounce of revenue you can squeeze out of society.”
Whether that’s fair or just, or whether it results in better health outcomes, is another matter. But families like mine will have to make decisions. Should I not have immunized my daughter? Will I pay for another new vaccine, the price of which is padded with extra costs some doctor needs to recoup?
Those without insurance, of course, have it far worse. When consumers of health care--insured or uninsured--have no place to shift their costs, personal and public health can’t help but suffer.
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Trudy Lieberman is the author of “Consumer Reports Complete Guide to Health Services for Seniors” (Three Rivers Press, 2000). She can be reached at tlieber@ksg.harvard.edu. Health Matters appears on the third Monday of the month.
