Tubes in the ears

When Chris, our firstborn, was very young he had recurring ear infections. The treatment for this, once antibiotics are deemed insufficient, is to have tubes inserted in the eardrums to let fluid drain from the inner ear. We had it done, and insurance paid for it all. I seem to recall seeing a bill for one or two thousand dollars, which surprised me since the procedure took about five minutes in an outpatient clinic. This was in the late 1980s.

Last week we had them put tubes in Peter’s ears. This is apparently a fairly common thing for children with Down’s Syndrome. Their ear canals are very narrow, and fluid can build up easily. A hearing test showed that Peter’s inner ears were so filled with fluid that the eardrums were not vibrating properly; he could hear some (we knew that), but supposedly would be unable to make more subtle distinctions between spoken sounds. They tell us that the surgical procedure almost always fixes the problem once and for all. We haven’t seen a bill yet.

Today on Andrew Sullivan’s blog he ran another in his series telling of encounters with the medical system. this one about tubes in the ears [emphasis added]:

This summer my son needed to have tubes put in his ears. These tubes are very small and resemble miniature shoelace eyelets, a design that enables them to stay in place mechanically once inserted. The insertion takes about 10 minutes but requires that the child be anesthetized. For this relatively simple procedure, the surgical center billed us approximately $10,000.

Our insurer cut a reimbursement check to us in the amount of approximately $900. As per verbal instructions from the surgical center, we signed the check over to the surgical center who then adjusted our bill to equal the amount of the reimbursement. Aside from several small co-pays to the ear doctor and anesthesiologist, that adjustment settled our obligation to the surgical center.

While this is admittedly unremarkable, what would have happened if we did not have insurance, or if they did not decide to “adjust” our bill? We were legally on the hook for the full $10,000, a price that was clearly inflated by at least a factor of 10 in the hope that the insurer would pay more.

I am no fan of insurance companies in general, and I do think that reasonable regulation is a good idea, but it does bear mention that doctors and medical facilities are gaming the system too, and gaming it in a way that could easily bankrupt a normal family. How are the proposed health care reforms proposing to remedy what I consider to be bad-faith billing?

This is just one more example of why I have zero interest in the ongoing health care debate. The various parties to the debate are trying to solve the wrong problem. It will not help us in any way to shift the responsibility for paying for health care as long as health care costs continue to spiral upwards into the stratosphere. The problem here is not who will pay the $10,000, the problem is a system that thinks it is right and fair to charge $10,000 for such a procedure.

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7 thoughts on “Tubes in the ears

  1. Thank you for saying this. I’ve been wondering if my husband and I were the only one who noticed the incredible cost charged to uninsured patients.

    I had assumed that the insurance companies had put undue pressure on doctors to force the discounts, though. (“We won’t include you in our network if you charge more than X.”) I figured that the doctors’ expenses were not met by this amount, so uninsured patients’ costs rose to make up for that.

    But your assessment makes a lot of sense — the doctors aim high so they don’t risk asking for less than they could get!

    Either way, this kind of thing is not addressed in the health cared bill. And until they do address it, I could care less what they are putting in the bill.

  2. The demand for health care is largely inelastic. That’s unavoidable, outside of the sort of health care system only a hard-core anarchist/libertarian would want to see. If you give people a choice of receiving treatment they can’t afford, or dying (or, worse, watching a loved one die) they’ll choose the treatment and worry about paying for it (or not) later. And we have a cultural commitment to providing health care (at least emergency health care, and preventive care for children), to anyone who needs it.

    So we’ve got private insurance on the one hand, and inelastic demand on the other. The insurers and doctors are just being rational in the way prices are set. They’re maximizing profits. There are upper limits on how much money can be squeezed out, but the current system does a pretty good job of it.

    Artificially inflated prices, plus downward negotiation to “whatever money we can get” is a pretty effective way of maximizing revenue. It’s a “pay as much as you can afford” system of a kind that only works with inelastic demand. It even works to maximize what they can get out of people without insurance, as the ear tube examples illustrate.

    So … playing devil’s advocate … the proposed reform does try to address this problem. If everyone is insured (with subsidies for those who can’t afford it on their own) the problem of the uninsured being treated so unfairly is gone, because there are no uninsured. I expect that private health care providers would still bill at the private-insurance rates, then write off the excess for those in the “public option” pool. But if you’re in the public pool at least you wouldn’t be subject to inflated prices that only come down based on your own individual negotiations, up against a spreadsheet that predicts what they can get out of you directly vs. what percentage they’d have to settle for if goes to debt collectors and possible bankruptcy proceedings.

    Far from ideal in lots of ways. But if demand is going to be inelastic, and the whole thing is not going to be run by the government, how do you get profit-maximizing entities to stop maximizing profits in favor of fair pricing, altruistic preventive care, and so on?

  3. But if demand is going to be inelastic, and the whole thing is not going to be run by the government, how do you get profit-maximizing entities to stop maximizing profits in favor of fair pricing, altruistic preventive care, and so on?

    This is not a proposal, because I do not know how to get from where we are to where we ought to be, much less how to do so without causing major upheaval, pain, and damage. But two of the many culprits I blame for the current mess are insurance and licensing. As long as those two are factors, there is too much money to be extracted at the game for us to expect people not to try to extract it.

    But if it were somehow the case that people could get the health care they could afford—and only that—from whoever they elected to get it from, I think that would put a natural cap on the cost of care, and in turn on the level of care that would be available.

  4. But if it were somehow the case that people could get the health care they could afford—and only that—from whoever they elected to get it from, I think that would put a natural cap on the cost of care, and in turn on the level of care that would be available.

    That would make the demand more elastic. But I’m not sure how much more.

    People would still choose to pay for health care they can’t afford. When the alternative is watching your kid suffer and possibly die, the doctor gets the cash today that was supposed to go to the landlord tomorrow. So demand still tends to be somewhat inelastic just by human nature.

    (Look at how funeral spending tends to be inelastic. People are free to choose cheaper alternatives, but when a loved one is involved it’s hard to be rational and calculating about budgets and expenses. That’s after someone has died. It’s all the more true when it’s about spending money to save the live or alleviate the suffering of someone you love.)

    And unless private insurance were outlawed (hard to see any justification for that) demand among those who can afford the insurance remains largely inelastic. But at cheaper rates, since costs from the uninsured wouldn’t have to be redistributed as much.

    The price for some small incremental increase in elasticity of demand among the non-rich would be that people who aren’t sufficiently well-off to buy into private insurance end up with higher death rates, especially among the youngest and oldest. It’s a hard sell.

  5. Sullivan just published this follow-up email:

    Our daughter also needed the ear tubes your reader described. Living in Australia, we have the option of waiting in line for our single-payer system to provide this necessary surgery for free, and most of the time this is what we do. This time we decided we needed to move more quickly (our one-year-old wasn’t learning to speak because her hearing was affected) so we took the private option.

    We booked in for the surgery the following week with our chosen surgeon. Not having health insurance, we paid the surgeon’s and anesthetist’s bills (about $1600 altogether) and the government reimbursed us about $600. So yes, I’d say your reader’s estimation of an inflation factor of 10 is about right.

  6. Hello Mr. Rick,
    I just wanted to say I am reading your blog now, and I think it is very interesting! But the best is the music! Dad has always been a folk singer, and taught us girls also, so it is lovely to see others doing it!
    (I’m a penpal of your daughter…)
    Forgive me for an off-topic comment. You have a great blog!

    Kate

  7. Hobbit Maiden,

    Thanks for your kind words. I think the music is my favorite, too; it doesn’t really fit in with the rest of the blog, but I like it and want others to hear it.

    I’m glad that you and Maggie have started up a penpal relationship. And I’m especially glad that it is taking place on actual paper, and being mailed in real envelopes!

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