What You Need To Know About The Cost Of Health Care And Its Complicated History | KERA News

What You Need To Know About The Cost Of Health Care And Its Complicated History

Jun 28, 2017

A vote on the Senate's health care bill has been delayed until after the July 4 recess. If the bill is passed, it will roll back programs like Medicaid and Medicare, and the Congressional Budget Office predicts 22 million more people will be uninsured by 2026.

A concern many have is how all that will affect the cost of health care. A 2015 study from the journal "Health Affairs" listed five hospitals in Texas with some of the highest price markups in the country. Three of them are in North Texas. 

Britt Berrett is the program director for healthcare administration at the University of Texas at Dallas' Naveen Jindal School of Management. He was also the President of Texas Health Presbyterian Hospital Dallas from 2010-2014. Berrett says the fluctuating price tag of health care has a long history — and it's complicated.

Interview Highlights: Britt Berrett

On hospital markups:

“It’s the determinant of how much the procedure or the activity costs; how much more you have to build in to that pricing structure to fully recover costs. It’s not unique to health care. You see markups in the retail industry. But in health care, it’s very complicated. It has a lot of historical context that makes it very difficult to understand.”

On that historical context:

“Medicare and Medicaid probably are the big culprits in this. When [they were] rolled into law, the average life expectancy was 60, maybe 68. So there was really no anticipation that those funds would ever expire. Well, our life expectancy is now into the 80s, new technology is exploding, the complexity of health care is just enormous, and the cost for health care has escalated. It’s now $3 trillion; it’s 20 percent of the GDP.

"These dynamics come into play when you look at pricing. Medicare didn’t anticipate it. The politicians honestly failed to respond to the dynamics, and so for that reason, instead of modifying the program, they played a little game. They initially said, 'Hospitals and physicians, whatever you charge, we’ll pay you.' As that expense grew, they said, 'We’ll pay you 90 cents on the dollar. We’ll pay you 80 cents on the dollar. We’ll pay you 70 cents on the dollar.' What you have is a lot of health care providers looking at their cost structure, escalating rates so that their 'net-net,' what they bring home, keeps the doors open and maintains their viability."

On pricing and how markups are decided:

“Let’s use hip replacements, for example. We can give one package price — let’s say, $20,000. You have 27 orthopedic surgeons, and each one of them [was] trained differently. Each of them was at a different stage in their career. Each of them would dictate the costs and the expenses that would be incurred. You add to that — you got all sorts of different patients…Each has a different experience and therefore, will incur different pricing. So, a lot of this stuff is behind that curtain, and as consumers, we don’t see it.”

On the role of the consumer and transparency:

“I think consumers have a responsibility to push health care providers to be transparent on their pricing. I think we’ve got to demand that.

“I think the government could do a much better job of insisting that there’s transparency. If you are seen by your orthopedic surgeon, and he or she says, ‘Well, listen you need a hip replacement,’ you really have no way of determining the quality of care that you’re going to receive nor the price. And you’ll get the care, and you’ll be stuck with the bill.

“I think that’s not acceptable anymore. There’s too much accessibility to information. And I think the new generation expects complete transparency and if they don’t get it, they’ll move on.”