The Santa Claus Syndrome: Where Things Come From

Medical Billing Mysteries

As an accountant, I wonder how this situation can be logical or even possible.  An actual example of a current medical bill arrived in my mail this week.  I had a check up a few weeks ago which involved some routine blood tests.  You can tell a lot of things from analyzing blood.  The lab billed me $324.08 for this.  But wait.  There was a deduction of a $238.83 “insurance discount.”  Then the insurance company paid $18.66 and I got a bill for the balance of $66.59. 

I don’t really mind paying $66.59 for these tests since they check for a number of potential problems.  Even if I had to pay the small amount the insurance paid, it would still be a good value.   If I didn’t have insurance and was stuck paying the full $324.08, it would have not been so good.  In many cases I’m sure that the people who get hit with the full bill are the least able to pay.

It is important to focus on the fact that the real benefit is not the nominal $18.66 that the insurance company paid.  In fact, that would hardly be worth filing for if you had to do the paper work yourself.

The real benefit from insurance is the huge discount that they negotiated.  The $238.83 is more than 73% off the price.  I would be willing to pay somebody to negotiate a 73% discount on most everything I buy, even if they paid nothing.

So as an accountant you wonder what this stuff really costs.  If it really cost the full price, they couldn’t give such a discount.  I have read that hospitals claim they only collect a small percentage of the bills they send to the uninsured.  But the percent collected would be a lot higher if they billed at the discounted rate.

They have to pad bills to cover services to those who don’t pay, including the service the government requires them to perform free like emergency room care. But can it be nearly three quarters of the bill?  There need to be more CPA’s looking at this to figure out just how the money works in the medical industry.

 

Real Medical Cost Cuts

One of the centerpieces of the Obama health scheme is what he calls cost cutting.  They even plan to cut some of what they now pay into Medicare Advantage.  But they seem set on just arbitrarily paying less for the same services, not finding more efficient ways to, for example, extract an appendix.

We already hear about many doctors who already won’t accept Medicare patients because of the low payments.  This number will have to grow.  You won’t get any benefits by setting prices so low that providers can’t operate.

We already have a lot of cost shifting instead of cost saving now in a world where Medicare and insurers are negotiating prices with providers.  If Medicare makes lowball payments, some of the cost of these procedures will be transferred to insurers or individual payers.  Just saying you will pay less does not make a provider more efficient.  It means they have to get their money by overcharging somebody else.

We need is to have CPA’s go over charges and accounting practices to see what the costs actually are.  I expect they will find a lot of overhead in every charge.  This is because there is a lot of infrastructure and administration in hospitals.  And all of the cost shifting will have to be accounted for and that will be ugly. 

There are also some reports that in the case of Medicare, in some locations patients are given far more treatments and procedures than in others while the overall results aren’t much different.  This needs to be looked at in great detail. 

Another thing that should happen is an analysis of every procedure to see if it could be done more efficiently.  Is there an alternative treatment? 

If the only cost containment technique you use is that you just decide to pay less, you will most certainly receive less, one way or another.  We need to work on actually providing services more efficiently.  This involves analysis by both those with a technical knowledge of how services are provided and those who understand all the intricacies of how costs are accounted for.  This isn’t the same as a plan concocted by horse trading lawyers and politicians who have only a barely superficial knowledge of either. 

Georgia Birthday Card

    This week mine came in the mail.  The envelop bore a message demanding that you open it immediately because it’s government business.   For several years Georgia has used the owner’s birthdate for the car tag renewal deadline.  They send you a notice a few weeks ahead of your birthday to provide time to get an emissions inspection and any necessary repairs.

    Did I mention that there is a tax in there too?  It’s based on their estimate of the value of the car.  They used to use a straight line depreciation model but now use a value estimate.  This means that if you drive a five year old Toyota or Honda, you will be paying more tax than if you had a car which lost value at a higher rate. 

But writing my checks this morning, I was thinking about how many different payments and deadlines there are imposed on us by various governments.  And they are just to get money for their operations.  But they are generally going from the same pockets to the same places.  In fact, I have to write checks to the exact same tax commissioner at different times of the year for property tax on my house and a several hundred dollar annual fee for “solid waste” services.

This is a system designed for the benefit of government (them) instead of the taxpayers or customers (us).  We would be far better off if we could force them to use a smaller number of taxes that were easy to calculate so we could keep up with what we pay.  But for them it is better to nip us for a little here and a little there so it is harder to fight off.  And it is easier for them to get more money.  Of course with different tax systems there is more overhead in duplicate collections processes but that is a problem for us not them since we have to pay for that too.

I was thinking about this today reading an item about a new tax on stock trades proposed by labor unions.  The beauty is that it will be a small amount applied to a huge number of transactions and would draw in a lot of money.  And the thing that they and governments would like is that it would be hard to see.  But it would still be coming out of our pockets.

Every time any new tax is proposed, we need to remember that if we are among those who pay taxes, it will be us paying it.  The idea of getting services from the government for free is a fallacy.  All of this money comes from somewhere and it is inevitably the pockets of the productive part of society who is already paying.