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Blast from the past: Health Care Costs

Not long ago a friend at the Arizona Hospital and Healthcare Association sent me a piece of medical history she ran across in an old file. It was a one page billing from a Wisconsin hospital for delivering a baby girl, circa 1941. The mother stayed for a total of 10 days and paid a whopping total of $61.20. That included a $20 discount because she paid cash.

A few highlights: Room and board -- $33.50; infant care -- $10; drugs -- $1; laboratory -- $1. The bill had a large "Paid" circle stamped in the middle, with a hand written note from Sister Murphy saying "Thank you!"

It's been a long, strange trip since then. Women now spend two days on average, not ten, in the hospital for a vaginal delivery, and in Arizona at least, hospitals charge about $5,000 for services. A state like Iowa, on the other hand, bills closer to $3,000. That's because nobody pays total charges, reimbursement rates vary by plan and location, and hospitals are forced to jack up the bill for paying customers to make up the losses for providing care to those who can't pay.

But patients seldom have to deal with total charges. In 1941 they were responsible for most of their medical expenses themselves. Today, the patient pays less than 20 percent out of pocket. Of course, when you have to pay more for a month's supply of your arthritis prescription than someone had to pay for 10 days in the hospital back in 1941, even 20 percent out of pocket costs are more than many people can afford.

Therein lies the dilemma. Healthcare costs have risen so rapidly - and are projected to rise even more rapidly over the next decade - that there is no stop left on the cost shifting wheel to absorb the hit without inflicting major economic pain. Consumers have been shielded from rising costs in the past - someone else always picked up the tab - but that's clearly unsustainable in today's environment of a Mexican standoff between providers and payers, a rapacious appetite for the latest and greatest drugs and procedures driven by advertising, a large uninsured population that can't afford to pay for basic healthcare, and static or declining public revenue streams.

Healthcare costs have come full circle. They're being passed back to the consumer because there's no place else to go.

Painful as it's bound to be in the short term, the long term outlook might be considerably better with the consumer back in the driver's seat. Imagine your own situation ten years from now. You have a set amount of healthcare dollars to work with from your employer's defined contribution program. Instead of seeing your family doctor for a sore throat, you might choose to see a nurse who can prescribe meds and save yourself some money in the process. If you prefer, the entire encounter could take place on the Internet. Instead of seeing a psychiatrist for episodic depression, you might choose to see a psychologist who is allowed to prescribe medication as a result of changes in training and regulation driven by consumer demand. Or perhaps you sign up for a diabetes management program offered by a boutique provider group that offers attractive pricing and integrated care. The options, really, are endless.

Providers will respond and adjust to consumer preferences. Different roles, relationships and organizations will spring up overnight. It's already starting to happen.

Total health costs will continue to increase, but the price points and options will expand to meet the needs and financial situation of particular consumers, and not the needs of an inflexible system dominated by middlemen and professional cartels.

That's the good news. The bad news is that increasing costs will drive the wedge deeper between the haves and have nots. Millions will be priced out of the market. That, too, is already starting to happen.

Health insurance and employer-benefits were just getting underway in 1941; few people expected others - and especially the government - to pick up the majority of their healthcare bill. Today, most Americans view basic healthcare as a right, not a privilege, as the ideologically pure free marketers would like us believe. With the Boomers getting ready to retire and millions of citizens and immigrants locked in low paying service jobs without health benefits, it's politically naïve to forecast an American healthcare system in the future without significant government support and the federal and state levels.

Regardless of how the healthcare bill is sliced up, costs are going up. Sixty years ago, $61 bought you ten days in the hospital with full services. Today, it buys you a handful of anti-depressant pills, which you'll probably need if you think about health costs too deeply.