Inside Health Insurance: Part 4—Controlling Provider Costs—Hospitals and facilities

Unless you are really sick, or need a “procedure,” you likely won’t be utilizing a hospital or qualified facility in the normal course of your well care or treatment for routine seasonal illnesses. But if or when you do, you will quickly find that these costs are some of the highest expenses incurred in a major medical situation. If the inpatient treatment is prolonged, it is very easy to go deeply into a six figure bill.

Most hospitals, like doctors and health insurance companies, are in business to make a profit for the services they provide. Some equipment used in hospitals or outpatient facilities can cost millions of dollars, but is essential in order to provide the accurate diagnosis or treatment we have come to expect as routine. Think about medicine one hundred years ago compared to today. Our level of sophistication is so far superior to even fifty years ago, we have been able to increase life expectancy significantly in just the last few generations. We can easily treat illnesses now that doctors once were not even able to identify. As medicine continues to advance, it is exciting to think that one day we may have a cure for cancer, or be able to repair a cut or broken bone instantly.

What this means is that our minimum standards have risen with the increases in medical understanding and technology. Even in small town hospitals, they have basic equipment that was not even invented in the time of our grandparents. What this also means is that the cost to patients who use these facilities has to cover the investment required to offer that high standard of care, using those expensive pieces of equipment. With enough paying customers covering the cost to the hospital over time, this shared expense is reasonable. But when a large number of people do not or cannot pay the hospital for the treatments they receive, that expense has to be averaged into the bill of all paying customers, and thus the cost goes up even further.

Having patients with health insurance ensures the hospitals and facilities that there will be money available to pay their bills, and this alone can help keep costs down. The more “freebies” a hospital has to provide out of their own pocket, the more it affects costs to everyone.

In order to cut the hospital part of medical expenses, only one of two things can be done. Either reduce the minimum quality of care and use less sophisticated equipment, which will result is missed diagnosis, more fatalities, shorter life span, and a decline in the overall health of our population; or, allow hospitals to refuse to offer service to those who cannot pay. While the business decision may be easy, the moral implications of the latter are not so clear cut. Maybe if government focused more on letting insurance companies and health practitioners do what they do best as a business, and they simply supplement the gaps, rather than attempt to take over the entire process, this system is not as broken as it may appear.