Why is Medicine So Expensive?

If you are one of the 255 million Americans WITH health insurance you probably have seen an EOB or Explanation of Benefits. What is shocking about and EOB is the difference between what a doctor charges and what insurance actually pays. For example, I recently had an allergic reaction to an antibiotic prescribed by my doc, actually he's a Physician Assistant. To treat my hives the EOB show the doc billed, my copay and the plan allowance:



the strange thing about the charges is that I was never given IV Therapy. The PA mis-coded a procedure. As a health care consumer, with insurance, I have little knowledge of the true cost of health care. Does an injection of steroids to treat an allergic reaction really cost $75.60? Why is the plan allowance only $6.36 and I only have to pay .64¢? What happens to the other $68.60? And, what about the mis-coded treatment. The receptionist asked why I care... She said I only have to pay $2.37 for it and my insurance picks up the rest so what's the big deal...

Doctors are paid by a scheme called Fee For Service The idea of a government-run health-insurance plan made doctors nervous, and Lyndon Johnson's administration was worried that doctors wouldn't take Medicare patients. So Joseph Califano, Johnson's adviser for domestic affairs, made what seemed like a small concession: Medicare would pay doctors whatever they thought was reasonable. This concession cause health care costs to spiral out of control. By 1967 the Johnson Administration knew Fee for Service would soon bankrupt the country with spirally health care costs But doctors, who had a lot of sway with Congress, found they liked the payment system. So the system stayed in place for decades, as medicine got more expensive.

By the mid-1970's health care costs were growing faster then anticipated. By capping what doctors would be paid it was thought costs could be contained. Unfortunately Docs found a loop hole by ordering more tests and more procedures. Many time Docs pit patients against insurance companies knowing that we intrinsically trust our doctors and not the faceless insurance giants. Instead of thinking of our doctors as finance managers on car dealer lots trying to talk us into buying extended warranties; we blindly follow their advice even if it involves treatments and test that have no value.

Another reason health care costs are so expensive might be due to the fact that most new doctors start their profession $150,000 or more in debt. The cost of medical school is so expensive that doctors will take 50 years to pay off student loans.

I think the system is so broken that it will take a total overhaul to fix it. Single payer will end the bureaucratic nightmare that is currently health care billing. Student Loan forgiveness programs for Docs will change the mindset and encourage more medical student to consider Primary Care instead of Specialties. The end of the Fee for Service model and adoption of a salary system will trim cost too. Finally. reigning in big Pharma and controlling costs of prescription drugs needs to happen. But it will never happen. It's too much. There would have to be a populist revolt.