Wednesday, May 07, 2008

Need further proof that idiots go into politics?

Gather 'round, Gentle Readers, and Auntie Tam will give you a free lesson in economics.

There is a thing called "Division of Labor" that makes an economy more productive. As an example, your corner automobile mechanic needs to put a rebuilt gizmo in your car to replace the broken one. Now, theoretically he could keep trained gizmo rebuilders in his employ, as well as all the parts necessary for rebuilding gizmos, and do it on the premises. However, it is much more economically feasible to have one or two gizmo rebuilders in town that specialize in nothing but gizmo rebuilding, and have all the local mechanics use their services.

He removes the gizmo from your car, sends it to the rebuilders, and installs a rebuilt one in its place. He charges a percentage over what the gizmo rebuilder to compensate him for his time in diagnosing the bad gizmo, replacing it, and a bit of that "profit" thing which is why he started the business in the first place. Thanks to the economies of scale, you still get your gizmo rebuilt more cheaply than if the mechanic had to do it himself.

In modern medicine, a large part of its success is based on the accuracy of diagnoses. These diagnoses are made possible by a bewildering array of tests and labwork. These tests and labwork require test kits and reagents and centrifuges and gas chromatographs and all manner of other stuff that would be impractical to keep in every doctor's office, along with the technicians to operate it all. It's more practical, and cheaper in the long run, to send your test samples off to the gizmo rebuilders.

Simple, right? Apparently not. For example, this piece of Basic Economics seems to have flown completely over the head of some legislators in Missouri.

You don't have to be a vote-pandering, dumb-as-a-stump, collectivist simpleton to get into politics. But it helps.

6 comments:

Anonymous said...

I've just developed a blood clot in my calf, and I'm learning about the costs of blood tests. I need to have two PT/INR tests per week for another month or so, and I have insurance, but I wanted to be responsible in how I spent their (our?) money. The clinic I go to has a bulk rate on this test at about $5 from their lab, and they draw the blood themselves. The same lab charges $17 retail plus $15 drawing fee if you show up at their lab.

I sure as heck don't want the government to get involved any more than they already are, but it will be a shame if my co-pay on lab work is higher than it costs the clinic.

Clearly, health care is being driven through the roof by health insurance, Medicare, Medicaid, the AMA keeping the supply of doctors low, continous fear mongering paid for by physicians groups, crazy lobbying done by drug companies and lets not forget plenty of lawyers suing the pants off of everybody. And of course the government is right in the middle of the whole mess. And we would really like their involvement in this matter and every matter to get smaller.

W

Brian J. said...

I think the same principle applied to legislation might be beneficial: lawmakers can only introduce and vote on legislation they themselves have written. No aides, no consultants from lobbyists, no help from family members.

It would probably result in a lot less legislation, and laws that are a lot simpler.

Mikee said...

While I hope anonymous has quick healing of his leg, I think he misses the whole point of the post and the linked article.

Of course your clinic is going to charge you more than it costs them to get your lab results. This allows the clinic to remain open.

And if you are complaining that your insurance copayment is higher than the billed charges from the clinic, just pay the charges yourself and leave the insurance company out of it. This saves you money....

brolin_1911a1 said...

Living in Missouri and having had the misfortune to experience the kind of billing becoming all too common here, I agree with the proposed legislation. The real issue isn't simply one of a reasonable markup on a contracted service. The issue is one of double billing.

The last time I had a serious medical problem requiring lab work, my doctor's bill included a fee for bloodwork. Then, two weeks or so later, I got a second bill from the lab and another from the lab's resident specialist. Plus a bill from my doctor for examining X-rays, followed by a bill from a radiologist for interpreting those X-rays. To add insult to injury, every one of those "contracting" labs was owned by the same clinic where I visited the doctor.

A more accurate analogy would be if your mechanic's shop was owned by the same company as the widget maker and both billed you independently for the same widget plus markup.

Anonymous said...

No, Mikee, I think that Igot the article. The rant that any business person should be allowed to purchase supplies at wholesale and resell them at retail. And I completely agree with that.

The government ends up footing the bill for lots of peoples health care, of course they are using tax-payers' money to pay these bills. I don't blame them for wanting to keep the costs down. It is just simple-minded to think the government can help.

Anonymous said...

As far as just paying cash, there are two problems:

1) I won't even know what the co-pay is for maybe a month. In the meantime, the cash price is still more than my co-pay, because no one is offering a reduced cash price. No competition. Autozone doesn't sell this widget.

2) My employer is paying over $900/month for my insurance. I was just pricing the lab work out because I wanted to get the best price for whoever ended up paying the bill. People who pay their bills also pay the bills of people who don't, but those folks would have got a better price if they did. That deal isn't offered at the car repair shop, either.