How much should we pay for health care?

A stethoscope wrapped around a roll of $20 bills represents the costs of health care.


Tess Vigeland: We mentioned earlier that Philadelphia is home to the nation's first hospital, Pennsylvania Hospital, founded in 1751 by Ben Franklin. On the top floor of the grand Colonial building is a surgical amphitheater. It's where med students and locals paid to watch doctors perform surgeries. Without anesthesia.

We decided it was a good place to meet Mark Pauly. He's a health economist with the Wharton School at the University of Pennsylvania. I wanted to ask him a question I've long had about health care, which is: If we all complain that we pay too much for it, then how much should we pay?

Welcome to the show.

Mark Pauly: Thank you.

Vigeland: I want to start with a personal anecdote if I may: I was diagnosed with melanoma seven years ago and had to have surgery for that. I'm one of those strange people who kept my explanation of benefits. And I added up the total, and the cost for my cancer was just shy of $30,000. I paid $25 in co-pays. Is that appropriate? Should I have paid more?

Pauly: To judge from what Americans prefer, the answer's no. We don't want to have to worry about paying and we don't want no stone left unturned in our treatment. And then we are outraged when we discover how expensive health insurance premiums are. And here's a case where imagining that there's some way you can have it all and not pay for it is just not going to happen anymore than it happens anywhere else.

Vigeland: Who pays the rest of the cost of my cancer treatment, and what goes into determining who pays?

Pauly: Well, if you were privately insured, you probably paid for the cost of your treatment and then some. Because hospitals provide care to a lot of people who don't pay the cost, so the rest of us pay that have private insurance a bit more to offset that. The other thing that economists are programmed to mention is that, in a way, the tax payers are paying for our health insurance. When we get compensation in the form of health insurance, we don't have to pay any income tax, any payroll tax. So, we're subsidizing each other's health insurance.

Vigeland: We don't seem to really question when we're told we're going to pay a lot of money to drive a car or to own a house. But there is a large human cry about what we pay for health care. Now, given, we are paying more for health care than we are for those other things. But when you're talking life and death, how much should that burden fall on the patient?

Pauly: Well, of course, sooner or later, we all end up paying for our insurance. The idea that our employer pays it is a bit of a fiction, because that comes out of what otherwise would've been our wages; probably doesn't come out of the employer's profit. The main place, I think, where people do make a choice is not in the surgery room, like we are here, but when they're sitting in their living room, looking over benefits options for the upcoming year.

Vigeland: I want to talk a little bit about the variability in what you pay versus what I pay versus what other people would pay. Most people know the factors that go into determining the cost of car insurance. It's how many tickets you have, it's your age, it's how many accidents you've had. Health care doesn't work remotely that way. Why?

Pauly: I think it's because health care has high fixed costs, which means there's always room to negotiate a discount. Some insurers are better, for various reasons, at negotiating discounts compared to others. But no matter what kind of deal you get, it's going to be expensive.

Vigeland: So what will the impact be of health care reform on the consumer pocketbook?

Pauly: Obviously, if you're a low-income, uninsured person, it's a good impact. You are going to have what is not only a major threat to your life, but also a major threat to your financial well-being protected. And for the rest of us, I think we're back to, unfortunately, my grim story, nobody wants to sit next to health economists at a dinner party, because all we have to say is, "Well, if you want to save money, we can save you money. You'll just have to tell me what you want to give up."

Vigeland: Alright, yes. I think I will pass on that dinner party with you.

Pauly: O.K., thank you.

Pauly and Vigeland laugh

Vigeland: Mark Pauly is a health economist at the Wharton School of the University of Pennsylvania. And we've been talking in the surgical amphitheatre of Pennsylvania Hospital. Thanks so much for your insights.

Pauly: Thank you.

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Tess, you not only need to sit next to a medical economist at a dinner party, you need to discuss this with doctors, the drug dealers, oh, I mean pharmaceutical company reps that visit the doctors, insurers, stockholders in for-profit medical practices and hospitals, and everybody else in the "for profit medical business, like I do. You get some really strange responses.
My wife and I are self-employed and ages 64 and 65 and very healthy. Our monthly health insurance bill is $1816 - $21,792 per year. We are self-employed and earn good money but still pay more for insurance than we pay federal income taxes!
Both of us broke our arms in the last few years. In spite of the cost of insurance we pay, both cost us over $5000 in addition to what insurance paid. The 45 minute visit to the local for-profit run hospital in our small town for 2 -rays ended up costing me almost $2000 out of pocket.
Since healthcare services transitioned to the "for-profit medical business" over the last two decades, costs have risen at more than twice the rate of inflation until we now pay twice what the rest of the world pays for medical care. And in the last 50 year, life expectancy in the US has dropped from 5th in the world to about 50th!
The takeover of medicine by capitalism has resulted the creation of some vast fortunes - and some convictions for insider trading - a massive rise in the power of big pharma who pay doctors to use their names on ghost-written articles about the power of drugs then advertise to get drugs used for non-approved uses for which they pay billions in fines, doctors who prescribe unnecessary procedures (one told us that unless our 97 year old grandmother had brain surgery in the next 24 hours she would die!), tests for cancers that are so unreliable like PSA and breast cancer screening that they lead to lots of unnecessary treatment as well as pain and suffering for patients. I could go on and on.
The "for-profit medical business" is broken - and it has little to do with healthcare. I've been analyzing it for years from a scientist's and businessperson's point of view and I can only conclude it's corrupted by greed - just like the internet biz of the last decade and housing and banks in this one - and will soon collapse of it's own greed. Consider that today medical costs represent 1/6th of the GNP and at current rates will be 1/3rd in less than 10 years. That's totally unsustainable. I predict it will collapse of it's own greed in only a few more years - we're already seeing signs of that in CA.

"I added up the total ... just shy of $30,000. I paid $25 in copays. Is that appropriate? Should I have paid more?"
You did pay more - all your health insurance premiums, what you paid and what your employer paid as well. And as a co-owner of a small business, I disagree w/Mr Pauly. Yes part of the premiums the empoyer pays would otherwise be wages, but part most definately does come from the business' profits.

"...then we are outraged when we discover how expensive health insurance premiums are..."

Exactly !! Imagine how much Car Insurance would cost if we used it to pay for large chunks of our Gas,Repair, and Car wash expenses.

And imagine how much Gas, Repair, and Car Washes would be if the recipient didn't care how much it cost.

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