Unpaid Patient Healthcare Bills Mount: The Seen and the Unseen

“NASHVILLE — Hospitals and medical practices share a growing problem with those they treat: Patients aren’t paying their bills.

Working people are on the hook for an increasingly large portion of the cost of their care, as insurance policies pay for less. It’s a trend that is not reversing — and it’s causing financial distress for families and CEOs alike.”

“In health care, the billing process is called revenue cycle management. It’s a complex system of diagnostic codes, services, insurance benefit analysis, billing departments and software.

Hospitals and providers, historically, received 90% of the reimbursement from insurers, according to The Advisory Board. The patient portion was more of an afterthought.”

“For every patient dollar being billed, hospitals have historically failed to collect 65 cents.”

"The hospital operator is not alone, and the problem is not simple.

Billing practices are not designed to collect small, incremental payments from hundreds or thousands of patients. They are designed to bill a handful of large entities — insurance companies — not individuals who walk in the door.”

“Streamlining billing into a single itemized list is essential to helping turn patients into bill-paying customers.

One might not go back to a restaurant that gave you a bill for the appetizer then a bill for the bread then individual bills for the entrée and drink.

But that’s how health care is presently billed. An open heart surgery could bring individual bills from the cardiologist, the surgeon, the lab, the anesthesiologist, a consulting doctor who helped read charts and more.” - Why more than half of hospital bills don’t get paid, usatoday.com, 03/09/2016

　

The Seen and Unseen

The above excerpts, from the above mentioned report, do manage to explain the “seen”, but what about the “unseen”? How so?

The above statements are based on the assumption that insurance historically paid the vast majority of bills, which it did not. As recent as 1960 patients paid 90% of the bills and third party payers 10%. Stated alternatively, as recently as 1960 the percentages paid by third parties and the patients were exactly opposite of today i.e. today third party providers pay 90% and patients pay 10%, whereas 1960 third party providers paid 10% and patient 90%.

Somehow patients managed to pay 90% of bills as recent as 1960 and those bills were somehow manageable to be paid from a household budget. Conversely, somehow patients in 2016 can’t manage to pay 10% of bills and those bills are not manageable to be paid from a household budget.

With the 10% patient responsibility existing in 2016, the report mentions: “Hospitals and providers, historically, received 90% of the reimbursement from insurers, according to The Advisory Board. The patient portion was more of an afterthought”, “hospitals have historically failed to collect 65 cents” and “Billing practices are not designed to collect small, incremental payments from hundreds or thousands of patients. They are designed to bill a handful of large entities — insurance companies — not individuals who walk in the door.” Suppose one could look at the above statements many ways. One way is to state: The customer is not the customer, rather the customer is the third party payer.

Moreover, if the third party payer is indeed the indirect or direct consumer from the point of view of the healthcare provider as the report indeed suggests, then as such, it confirms the oft mention non-price signal discussion in healthcare. That is, the statement confirms the regularly discussed scenario that healthcare in conjunction with health insurance is akin to buying “grocery insurance” and paying a monthly premium. As the scenario goes, one arrives at the grocery store to shop where no prices are posted (price is not a signal). When checking out with the cashier one never knows the single item price nor total price as the bill goes to the “grocery insurance company”. One merely laments their monthly grocery insurance premium along with complaints and moans about their ever escalating monthly “grocery insurance” premium.

One can also make a grand argument that the unpaid patient bills are directly related to the process of non-price purchases. If price is not a signal at the point of exchange and only a signal after exchange, are the unpaid patient bills merely an adjustment to mutual exchange, after the fact, in that the patient doesn’t pay the bill to adjust for mutual exchange? Stated alternatively, had price been a signal many exchanges would have never occurred as the patient would have been unwilling to pay such price at the point of exchange (transaction rejected as a non-mutual exchange). As an extension to the argument: Are the unpaid patient bills merely part of the process, a process of non-price signal, a process self-produced by healthcare providers, and hence not a surprise but rather a known-known of such a process?

A final point one might consider involves the following observations from the article: “Streamlining billing into a single itemized list is essential to helping turn patients into bill-paying customers“, “One might not go back to a restaurant that gave you a bill for the appetizer then a bill for the bread then individual bills for the entrée and drink“, and “But that’s how health care is presently billed. An open heart surgery could bring individual bills from the cardiologist, the surgeon, the lab, the anesthesiologist, a consulting doctor who helped read charts and more.”. Why all the bills?

What about the “why” concerning the several and many bills received by patients? The “why” is related to the non-competitive nature of much healthcare (CON [Certificate Of Need] legislation and other related legislation protecting the incumbent healthcare provider) and the consequential failure to reach scale in healthcare.

The several and many bills are not going to change as it is part of a conscious process. Nay, nay there is absolutely no reason to wring one’s hands over the flood of bills received by the patient as it is by design, not by error. Many and varied healthcare providers, in a self-produced and politically [legislation] protected non-scale environment, send many bills by design. Nope, no Wal-Mart or Southwest Airlines of healthcare in this supply, just a gazillion little shops sending non-price signal bills….and expecting to be paid.

Yep, one might think twice about the supply-side of healthcare.

King v Burwell: Differing Views of Health-care Spending Post HealthCare.gov

‘NEW YORK (Reuters) - As the U.S. Supreme Court prepares to rule on whether people in 34 states can continue to receive Obamacare health insurance subsidies, economists are projecting billions of dollars in lost healthcare spending for hospitals, drugstores and drugmakers if the justices say the payments are illegal.

The immediate consequences of such a ruling would fall on the 6.4 million people who receive the subsidies and live in states that did not establish their own insurance exchanges under President Barack Obama’s healthcare law, instead relying on the federal HealthCare.gov website.

The case, known as King v Burwell, would not affect subsidies in the District of Columbia or in the 13 states that run their own exchanges. The decision is expected sometime this month.

Health economists calculate the economic impact of a ruling against the subsidies in different ways, but one thing many agree on is that about two-thirds of people who receive subsidies through HealthCare.gov would drop their insurance altogether rather than foot the entire bill.’

‘"There will absolutely be these second-order effects," said Larry Levitt, a senior vice-president and healthcare researcher at the Kaiser Family Foundation. "A reasonable assumption is that (spending on) healthcare by people who lose their existing subsidies will drop by at least half."’

‘Conservative economist Douglas Holtz-Eakin and Brittany La Couture of the American Action Forum wrote recently that such a ruling could give a boost to small businesses by removing requirements on employers to provide health coverage.

Joseph Antos of the right-leaning think tank American Enterprise Institute says the estimates of healthcare spending effects are imprecise at best. He expects that a ruling invalidating the subsidies would be followed by a "fix" in which Congress or states somehow restore subsidies, at least temporarily.

In that case, he said, any drop in healthcare spending would be temporary and only "a very minor downward bump."

"They are going to extend the subsidies in some manner," Antos said. "I don't know how they are going to do it, but they are going to find some way."‘ - Economists predict shockwaves if Obamacare subsidies are nixed, Yahoo News, 06/17/2015

Link to the entire article appears below:

　

http://news.yahoo.com/economists-predict-shockwaves-obamacare-subsidies-nixed-142827841.html;_ylt=AwrBT9HvLYJVszAA2jVXNyoA;_ylu=X3oDMTEyZGZtdm1zBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjAwMjlfMQRzZWMDc2M-

ACA/Obamacare: Upon Further Review…. Prescription Co-Pays and The Total Price of ACA Plans

"MIAMI (AP) — Breast cancer survivor Ginny Mason was thrilled to get health coverage under the Affordable Care Act despite her pre-existing condition. But when she realized her arthritis medication fell under a particularly costly tier of her plan, she was forced to switch to another brand.

Under the plan, her Celebrex would have cost $648 a month until she met her $1,500 prescription deductible, followed by an $85 monthly co-pay.

Mason is one of the many Americans with serious illnesses — including cancer, multiple sclerosis and rheumatoid arthritis — who are indeed finding relatively low monthly premiums under President Barack Obama's law. But some have been shocked at how much their prescriptions are costing as insurers are sorting drug prices into a complex tier system and in some cases charging co-insurance rates as high as 50 percent. That can leave patients on the hook for thousands.

"I was grateful for the Affordable Care Act because it didn't turn me down but ... it's like where's the affordable on this one," said Mason, a 61-year-old from West Lafayette, Indiana who currently pays an $800 monthly premium". - Obamacare plans bring hefty fees for certain drugs, Yahoo news, 03/22/2014

Link to the entire article appears below:

http://news.yahoo.com/obamacare-plans-bring-hefty-fees-certain-drugs-154823920.html


　

　


　

ObamaCare: a less demanding parasite?

"However that may be, since we must turn to what the socialists call a parasite, which of the two—the merchant or the public official—is the less demanding parasite?" - Frédéric Bastiat, French economist, 1848. (1)

" Our country, it is increasingly clear, has arrived at a pivotal moment – perhaps the pivotal moment – in its history. Together, we face a choice between two futures. One is a collectivist future where the federal government claims ever increasing shares of our income and grants itself the authority to make decisions affecting virtually every aspect of our daily lives. The other future is built upon the idea that individual freedom trumps government authority, and that in those rare cases when solving a problem requires government, the government that governs best is the one that is smallest and closest to the people." - Edwin J. Feulner, Ph.D., President, The Heritage Foundation, 2011 (2)

Frédéric Bastiat wrote a famous essay entitled What Is Seen and What Is Not Seen. (3) Bastiat exposed many economic fallacies within this single essay. Feulner echos the argument Bastiat made regarding his quote above. That is, that the collectivist argument is that only institutions of state can deliver the collectivist vision.

What was Bastiat's argument regarding collectivists wanting to deliver their vision through state and the institutions of state? Part of Bastiat's argument appears below:

Middlemen -Frédéric Bastiat

Society is the aggregate of all the services that men perform for one another by compulsion or voluntarily, that is to say, public services and private services.

The first, imposed and regulated by the law, which is not always easy to change when necessary, can long outlive their usefulness and still retain the name of public services, even when they are no longer anything but public nuisances. The second are in the domain of the voluntary, i.e., of individual responsibility. Each gives and receives what he wishes, or what he can, after bargaining. These services are always presumed to have a real utility, exactly measured by their comparative value.

That is why the former are so often static, while the latter obey the law of progress.

While the exaggerated development of public services, with the waste of energies that it entails, tends to create a disastrous parasitism in society, it is rather strange that many modern schools of economic thought, attributing this characteristic to voluntary, private services, seek to transform the functions performed by the various occupations.

These schools of thought are vehement in their attack on those they call middlemen. They would willingly eliminate the capitalist, the banker, the speculator, the entrepreneur, the businessman, and the merchant, accusing them of interposing themselves between producer and consumer in order to fleece them both, without giving them anything of value. Or rather, the reformers would like to transfer to the state the work of the middlemen, for this work cannot be eliminated.

The sophism of the socialists on this point consists in showing the public what it pays to the middlemen for their services and in concealing what would have to be paid to the state. Once again we have the conflict between what strikes the eye and what is evidenced only to the mind, between what is seen and what is not seen.

It was especially in 1847 and on the occasion of the famine that the socialist schools succeeded in popularizing their disastrous theory. They knew well that the most absurd propaganda always has some chance with men who are suffering; malesuada fames.

Then, with the aid of those high-sounding words: Exploitation of man by man, speculation in hunger, monopoly, they set themselves to blackening the name of business and throwing a veil over its benefits.

"Why," they said, "leave to merchants the task of getting foodstuffs from the United States and the Crimea? Why cannot the state, the departments, and the municipalities organize a provisioning service and set up warehouses for stockpiling? They would sell at net cost, and the people, the poor people, would be relieved of the tribute that they pay to free, i.e., selfish, individualistic, anarchical trade."

The tribute that the people pay to business, is what is seen. The tribute that the people would have to pay to the state or to its agents in the socialist system, is what is not seen.

What is this so-called tribute that people pay to business? It is this: that two men render each other a service in full freedom under the pressure of competition and at a price agreed on after bargaining.

When the stomach that is hungry is in Paris and the wheat that can satisfy it is in Odessa, the suffering will not cease until the wheat reaches the stomach. There are three ways to accomplish this: the hungry men can go themselves to find the wheat; they can put their trust in those who engage in this kind of business; or they can levy an assessment on themselves and charge public officials with the task.

Of these three methods, which is the most advantageous?

In all times, in all countries, the freer, the more enlightened, the more experienced men have been, the oftener have they voluntarily chosen the second. I confess that this is enough in my eyes to give the advantage to it. My mind refuses to admit that mankind at large deceives itself on a point that touches it so closely.

However, let us examine the question.

For thirty-six million citizens to depart for Odessa to get the wheat that they need is obviously impracticable. The first means is of no avail. The consumers cannot act by themselves; they are compelled to turn to middlemen, whether public officials or merchants.

However, let us observe that the first means would be the most natural. Fundamentally, it is the responsibility of whoever is hungry to get his own wheat. It is a task that concerns him; it is a service that he owes to himself. If someone else, whoever he may be, performs this service for him and takes the task on himself, this other person has a right to compensation. What I am saying here is that the services of middlemen involve a right to remuneration.

However that may be, since we must turn to what the socialists call a parasite, which of the two—the merchant or the public official—is the less demanding parasite?

Business (I assume it to be free, or else what point would there be in my argument?) is forced, by its own self-interest, to study the seasons, to ascertain day by day the condition of the crops, to receive reports from all parts of the world, to foresee needs, to take precautions. It has ships all ready, associates everywhere, and its immediate self-interest is to buy at the lowest possible price, to economize on all details of operation, and to attain the greatest results with the least effort. Not only French merchants, but merchants the whole world over are busy with provisioning France for the day of need; and if self-interest compels them to fulfill their task at the least expense, competition among them no less compels them to let the consumers profit from all the economies realized. Once the wheat has arrived, the businessman has an interest in selling it as soon as possible to cover his risks, realize his profits, and begin all over again, if there is an opportunity. Guided by the comparison of prices, private enterprise distributes food all over the world, always beginning at the point of greatest scarcity, that is, where the need is felt the most. It is thus impossible to imagine an organization better calculated to serve the interests of the hungry, and the beauty of this organization, not perceived by the socialists, comes precisely from the fact that it is free, i.e., voluntary. True, the consumer must pay the businessman for his expenses of cartage, of trans-shipment, of storage, of commissions, etc.; but under what system does the one who consumes the wheat avoid paying the expenses of shipping it to him? There is, besides, the necessity of paying also for service rendered; but, so far as the share of the middleman is concerned, it is reduced to a minimum by competition; and as to its justice, it would be strange for the artisans of Paris not to work for the merchants of Marseilles, when the merchants of Marseilles work for the artisans of Paris.

If, according to the socialist plan, the state takes the place of private businessmen in these transactions, what will happen? Pray, show me where there will be any economy for the public. Will it be in the retail price? But imagine the representatives of forty thousand municipalities arriving at Odessa on a given day, the day when the wheat is needed; imagine the effect on the price. Will the economy be effected in the shipping expenses? But will fewer ships, fewer sailors, fewer trans-shipments, fewer warehouses be needed, or are we to be relieved of the necessity for paying for all these things? Will the saving be effected in the profits of the businessmen? But did your representatives and public officials go to Odessa for nothing? Are they going to make the journey out of brotherly love? Will they not have to live? Will not their time have to be paid for? And do you think that this will not exceed a thousand times the two or three per cent that the merchant earns, a rate that he is prepared to guarantee?

And then, think of the difficulty of levying so many taxes to distribute so much food. Think of the injustices and abuses inseparable from such an enterprise. Think of the burden of responsibility that the government would have to bear.

The socialists who have invented these follies, and who in days of distress plant them in the minds of the masses, generously confer on themselves the title of "forward-looking" men, and there is a real danger that usage, that tyrant of language, will ratify both the word and the judgment it implies. "Forward-looking" assumes that these gentlemen can see ahead much further than ordinary people; that their only fault is to be too much in advance of their century; and that, if the time has not yet arrived when certain private services, allegedly parasitical, can be eliminated, the fault is with the public, which is far behind socialism. To my mind and knowledge, it is the contrary that is true, and I do not know to what barbaric century we should have to return to find on this point a level of understanding comparable to that of the socialists.

The modern socialist factions ceaselessly oppose free association in present-day society. They do not realize that a free society is a true association much superior to any of those that they concoct out of their fertile imaginations.

Let us elucidate this point with an example:

For a man, when he gets up in the morning, to be able to put on a suit of clothes, a piece of land has had to be enclosed, fertilized, drained, cultivated, planted with a certain kind of vegetation; flocks of sheep have had to feed on it; they have had to give their wool; this wool has had to be spun, woven, dyed, and converted into cloth; this cloth has had to be cut, sewn, and fashioned into a garment. And this series of operations implies a host of others; for it presupposes the use of farming implements, of sheepfolds, of factories, of coal, of machines, of carriages, etc.

If society were not a very real association, anyone who wanted a suit of clothes would be reduced to working in isolation, that is, to performing himself the innumerable operations in this series, from the first blow of the pickaxe that initiates it right down to the last thrust of the needle that terminates it.

But thanks to that readiness to associate which is the distinctive characteristic of our species, these operations have been distributed among a multitude of workers, and they keep subdividing themselves more and more for the common good to the point where, as consumption increases, a single specialized operation can support a new industry. Then comes the distribution of the proceeds, according to the portion of value each one has contributed to the total work. If this is not association, I should like to know what is.

Note that, since not one of the workers has produced the smallest particle of raw material from nothing, they are confined to rendering each other mutual services, to aiding each other for a common end; and that all can be considered, each group in relation to the others, as middlemen. If, for example, in the course of the operation, transportation becomes important enough to employ one person; spinning, a second; weaving, a third; why should the first one be considered more of a parasite than the others? Is there no need for transportation? Does not someone devote time and trouble to the task? Does he not spare his associates this time and trouble? Are they doing more than he, or just something different? Are they not all equally subject, in regard to their pay, that is, their share of the proceeds, to the law that restricts it to the price agreed upon after bargaining? Do not this division of labor and these arrangements, decided upon in full liberty, serve the common good? Do we, then, need a socialist, under the pretext of planning, to come and despotically destroy our voluntary arrangements, put an end to the division of labor, substitute isolated efforts for co-operative efforts, and reverse the progress of civilization?

Is association as I describe it here any the less association because everyone enters and leaves it voluntarily, chooses his place in it, judges and bargains for himself, under his own responsibility, and brings to it the force and the assurance of his own self-interest? For association to deserve the name, does a so-called reformer have to come and impose his formula and his will on us and concentrate within himself, so to speak, all of mankind?

The more one examines these "forward-looking" schools of thought, the more one is convinced that at bottom they rest on nothing but ignorance proclaiming itself infallible and demanding despotic power in the name of this infallibility.

I hope that the reader will excuse this digression. It is perhaps not entirely useless at the moment when, coming straight from the books of the Saint-Simonians, of the advocates of phalansteries, and of the admirers of Icaria, tirades against the middlemen fill the press and the Assembly and seriously menace the freedom of labor and exchange.

Notes:

(1) The Seen and the Unseen, Frédéric Bastiat, http://www.econlib.org/library/Bastiat/basEss1.html

(2)The House Repealed Obamacare. What Next?
http://www.americanconservativedaily.com/2011/01/the-house-repealed-obamacare-what-next/

(3)(4)The Seen and the Unseen, Frédéric Bastiat.