Health Care Finance, in one brief parable:

Ulrich the Uninsured and Irene the Insured were crossing the street one day when they were both hit by a bus. They were both transported to the hospital, and both had broken legs and other minor injuries. The final bill for each of them was $50,000.00.

  Ulrich Irene
 Initial Price

50,000

50,000

“Discount” N/A

35,000

Subtotal

50,000

15,000

Deductible N/A

1,000

Subtotal

50,000

14,000

Paid by Insurance N/A

14,000

Payable by patient

50,000

1,000

 

As we can see, the impact on each person was radically different: Irene had to cough up $1,000.00, which she did by setting up a payment plan and taking the money from her HSA. But Ulrich was being billed for 50 times that amount, and had no idea of how to pay it. His account quickly went to collections, and he finally had to declare bankruptcy as a result. So he was S.O.L.

But surely the hospital also came out on the losing end for 50 grand (Ulrich’s unpaid bill)? Erm…no.

Well, then the hospital ate 35 G’s in Irene’s case, right? Erm…no.

See Irene’s cost after the “Discount”? That is the actual break-even amount for the hospital, negotiated with the insurance company. If you’re insured, you pay that actual cost (plus a bit of profit, perhaps) and the uninsured are billed for an inflated amount. But since the uninsured (except the Amish, who negotiate their own cash deals) can rarely pay such huge sums, what purpose is served by these unreal figures?

The inflated figure is the one hospitals use to write off “bad debt” from unpaid bills. This helps their balance sheets, which can reduce tax liability. Of course, if they pay less in taxes, someone else must make up the shortfall, and we all know by now who that “someone else” is, don’t we? (Hint –look in the mirror.) The actual losses come back to the same “someone else” via increased insurance premiums (to cover any losses the hospital can’t write off).

For every Ulrich, the insured American pays twice: once in our taxes, and another time in our insurance premiums. That’s what happens now, and very rarely anyone tell you that. All that we can see is that our health care costs go up, as do our taxes.

Under the ACA, these costs are no longer hidden, so it looks really bad – but  in reality, all the government is doing is pulling back the curtain, like when the Obama administration put the Iraq war on the books (after their predecessors had kept the costs off the books) to show us the true cost of healthcare. It may look like our costs are going up, but all that is really happening is that we are being told the truth for a change.

Insuring everyone puts all the numbers on the books where they can be seen and audited. Then we’ll know who is playing fair, and who is trying to diddle us (wonder who is who? Look at who supports, and who opposes, health care reform). No more inflated costs and smoke-and-mirrors accounting to cope with the costs of treating uninsured patients.

Epilogue: what happened to our two patients? Irene went back to work and is doing fine. Ulrich’s bankruptcy wrecked his credit, which made it impossible to afford car insurance, so he lost his job and is now on unemployment while he tries to rebuild his life and credit (another cost to the “someone else”).

Next time: why we KNOW the fix is in at the Supreme Court.

Mr. B & C