How does “Other People’s Money” affect the cost of care?

We all spend our own money more carefully than Other People’s Money (OPM).

To paraphrase Russ Roberts:
If you go out for dinner, you might spend $6, and you might forgo the desert and fries, which would cost another $4. If you go with 3 of your friends, and you split the check 3 ways, then desert and fries is only going to cost you $1. Being with close friends, you may resist the temptation. But will they? If they do, will you?

Now, spread the costs over 100 people. The fries and drink only cost you 4 cents. So why restrain? Actually, why not upgrade to the filet, and a bottle of wine while you’re at it for $40, since it will only cost you 40 cents? The problem is, that most of the other 99 have figured out the same thing, so the $6 sub you would have eaten on your own, has now become Filet Mignon and Zinfandel, with $34 of upgrades.

This illustrates the problem of spending other people’s money, and how it inflates costs.

The same holds true in medical care. If you are spending your OWN money, you will shop around for value, and buy only what you need. If you are part of an insurance pool, and you can get that $2,400 MRI for $100, why not get one? If however you had to pay out of your own pocket, you might buy the $65 x-ray instead. Soon, many others would buy x-rays instead of MRI’s, and in time, the price for an MRI would drop from $2,400 to $1,200 or less.

THIS is the power of Your Own Money (YOM).

Third-party payers (like Medicare) are spending your money for you. They are less likely to be sensitive to your unique situation and less likely to exercise restraint. They are concerned with their own costs, such as the time they have to spend on your case. OPM makes them sluggish and unresponsive. They may be willing to pay $3600 for a $1200 MRI, and if other consumers only have $100 copay, nobody is concerned with cost. Inevitably, you will pay this increased cost in increased premium, higher taxes or lower quality care.

MediBid, is a proprietary system, which allows you to make better use of Your Own Money. You simply enter your desired procedure, and how far you are willing to travel, and doctors from all over the world bid on your care.

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One response

Just to prove the point about spending OPM, an amazing thing happened this weekend in my radiology department where I work as a radiologist. For years, I have been saying that the doctors hardly bother with physical examination anymore and they just order tests. They let the work of the radiologists’ do the work for them. Rather than intelligently and selectively ordering tests, they just order them in a shotgun manner. This is facilitated because with a third-party payment system, they are spending other people’s money.
On the weekend, a lady came in with blue hands. Medically, this could mean blockage of the arteries to both hands. This would be rare indeed especially in a young person. The ER doc ordered a arterial Doppler ultrasound to assess for arterial blockage. When the tech was setting up to do the test, she looked at the patient and realized she had brand new blue jeans on. She noticed that the “blueness” looked like dye. She got a cloth and started wiping blue dye off of the patient’s hands!! It was simply blue dye from the new blue jeans from being wet! The doc and patient were prepared to spend hundreds of dollars of other peoples’ money when a careful examination and history would have been sufficient.
Congress does not realize that health care costs can be controlled by putting patients in charge of managing their own money. Instead they propose a blizzard of regulations to control out of control spending caused by a health care system based on spending other people’s money (OPM).

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