Patient Needs Larger Role in Health Care

Charles Hugh Smith has a great blog, "Of Two Minds." His recent post addresses one of the factors in the cost of health care: The buyer, or patient, has no direct role in price negotiation.

Smith, in the blog, shows a menu for maternity rates for the Santa Monica Hospital from 1952. Use of the delivery room, including all standard lab work, supplies and medicines, plus care of the newborn, costs $30. Semi-private room charges were $16 a day and newborn care was $6 a day. Total hospital costs, with two-day stay, for having a baby in 1952 at a premier West Coast hospital were $74. A four-day stay for birthing was common in 1952, which would cost $118.

I haven't been a proud new papa for many years so I don't have any personal experience with new baby charges today. I called my son who had an addition to the family earlier this year. The hospital charges for bringing his new daughter into the world were somewhere in the vicinity of $20,000 to $25,000. The amount paid by insurance to the hospital was probably a fraction of the billed charges, maybe less than half. This created a bookkeeping loss for the hospital, but since it didn't go bankrupt it was probably simply a loss on the books, not in cash flow.

The fact that my son didn't know the total more precisely adds to argument Smith makes: A big problem in controlling health care costs is that, in most cases, the patient, or consumer, is insulated from the cost by an insurance intermediary. I have visited the Web sites of several large hospitals and searched for information such as room rates, room charges, costs, fees, and the like, but have found nothing. This emphasizes just how far the patient is removed from the pricing of the product.