The cost of living has skyrocketed since the Covid-19 Pandemic. Some goods and services have risen in cost more than others. Cage-free eggs are about $0.50 apiece, while beef prices are near record highs. New cars are so expensive it’s hard to imagine how people can afford them. Then there is health care. Medical prices have been rising at about three times the rate of consumer inflation for as long as anyone can remember. According to the New York Times:
Health care remains stubbornly unaffordable for millions of people, according to a new survey released Wednesday that underscores the struggle many people have in paying for a doctor’s visit or a prescription drug — even before any talk of cutting government coverage.
In the survey, 11 percent of people said they could not afford medication and care within the past three months, the highest level in the four years the survey has been conducted. More than a third of those surveyed, representing some 91 million adults, said if they were to need medical care, they would not be able to pay for it.
The New York Times article is subtly trying to cast doubt on proposed cuts to federal health care programs. As an aside, I believe it was economist Thomas Sowell who once said if something is unaffordable individually, it cannot be more affordable collectively. Medical care is a prime example of this.
One proposal to reduce Medicaid spending is to encourage states to pass work requirements for adults on Medicaid. A recent study by Urban Institute estimates that work requirements would reduce Medicaid enrollment by 5 million. This from Fierst Healthcare:
The report, from researchers at the left-leaning think tank the Urban Institute, estimates that coverage losses could range from 4.6 million to 5.2 million if work requirements were put in place. Not limiting these requirements explicitly to the expansion population could significantly increase the number of people losing coverage, as it would impact more than 30 million adults aged 19 to 55.
Critics argue that most adult Medicaid enrollees’ have jobs and would already meet work requirements. However, they argue the red tape of having to periodically provide proof of work would cause significant numbers – millions – to drop coverage. That argument itself is rather significant. Dropping coverage of a federal health program because of the inconvenience of proving work suggests enrollees’ willingness to pay is very low and they do not value Medicaid very much.
Although health care affordability is a significant problem, it’s just the tip of the iceberg. A lack of price transparency is a problem that exacerbates affordability. More Americans would be less worried about seeing a doctor if they could easily look up prices online. Price transparency would boost access to care. An earlier post talked about dermatologists who were coding simple procedures as surgeries costing hundreds of dollars. It would be nice to know ahead of time whether removing a skin tag or a freckle was a $40 or a $400 charge. The lack of transparency is a chicken / egg conundrum: patients don’t shop because prices are impossible to find. Prices are hard to find because patients don’t demand them. Indeed, many patients don’t even realize prices vary and they could save money.
Patients’ reluctance to compare prices and pay cash also inhibits cash-based practices. Years ago, I met a doctor who took only cash and would not even schedule appointments. His office policy was first come, first served. My wait was only about 15 minutes, and he charged me $35 (in 1993). The few clinics that operate on a cash-based model generally cater to the wealthy (charging high prices for boutique services) or low-income immigrant communities. A survey from a few years ago found that about 65% to 75% of primary care practice revenue is required to cover the overhead. Much of the overhead is for office space and salaries for billing clerks. Having to bill multiple insurance companies requires a larger staff than charging cash for a doctor’s time. A cash practice could, at least in theory, offer better prices due to lower overhead.
Medical care is unaffordable for many people. There are many reasons for this. A primary reason is that America tried to socialize medicine through a third-party collective payment system mor than 75 years ago. When patients stopped being consumers, providers stopped being competitors.
- Read more at NYT: More Americans Cannot Afford Medical Care: Gallup Poll
- Fierce Healthcare: Medicaid work requirements could drive 5M off of coverage: study