Monday, May 14, 2007

Inflation in health care costs

Shown above is a bill that shows the cost of a visit at Beth Israel Hospital. We think it is from 1961, but it might be from 1951. It is a little hard to read, but you can note that the daily room rate was $28, and the operating room charge was $30. Today, both would be a little higher . . . .

13 comments:

Rocky Samuel said...

When glancing at this bill, I first interpreted the Operating Room Cost to be $3,000 instead of $30. It wasn't until I realized that it was from half a century prior that it dawned on me I was off by a couple decimal places. This is a good example how society, even medical students, inherently expect healthcare costs to be astronomical.

BC said...

I'm curious as to what today's list price per hour of OR time and the daily rate for a semi-private room is and what they work out to as a multiple of costs. Also, does Medicare reimburse enough to cover your costs? I suspect Medicaid probably does not.

Anonymous said...

Here's one for you:

90 tabs Captopril 50mg (today, via CVS website): $16.99

90 tabs Captopril 50 mg (my 4/23/07 insurance bill): $49.88

Who needs inflation?

Paul Levy said...

bc,

There is no such thing as a list price per hour anymore because there is not one price that applies to all payers. The rate you are paid depends on what has been negotiated with each insurer, or what the federal government sets, or what the state government set.

Overall our operating margin is about 3%. So the ratio of to costs = 1.03. Medicare (about 30% of our business) is a worse payer than the private insurance companies. Medicaid (about 6-8% of our business) is worse than all of them and pays well under costs.

Anonymous said...

I trust that the insurance carrier has settled on the claim by now right? Interestingly, when this service was rendered, there was no such thing as Medicare! :)

EB said...

There was no managed care back then, either. Looks like this patient paid cash.

Ah, the "good old days".

Anonymous said...

Paul - this is amazing. Ironically I just found an old bill of mine when I stayed at MEEI about 5 days incuding surgery in 1977 and the total cost was about $10.000

Richard

Anonymous said...

Yes, the day rate was "only" $28 but relative to the average income in those days that was quite a bit of money. Any idea what that $28 would be in 2007 dollars?

John Norris said...

Using Measuringworth.com, I get $28.00 in 1961 has the equivalent purchasing power of $188.66 in 2006.

Then again, they may have been using leaches back then...

John
(Go ahead and humor me on that one.)

Paul Levy said...

Thanks, John. Don't know about leeches, but apparently maggots are again being used, for real.

Anonymous said...

Yup, we're using maggots again (they are the best at debriding dead tissue) AND leeches (in our very own OR) because they are good for reducing venous congestion in such things as reattached fingers as well as secreting a substance which helps keep blood from clotting in the area.

Are you sure that 1961 $28 is only $188 today? Seems like you could buy a top-of-the-line car in those days for $1500, a nice big house for $20,000, etc. I can also remember gasoline for under 30 cents. . .

BC said...

I can remember staying in a semi-private room in a NYC hospital (Cabrini) in 1976 for $150 per day, and the going rate at our suburban NYC community hospital at the time was, I believe, $75. Mutiply each of those figures by about four to translate to today's dollars. Any way you slice it, the cost of healthcare (especially that provided in hospitals) exploded far in excess of the cumulative inflation rate. I believe costs really started to surge after Medicare and Medicaid were enacted in 1965, while the DRG system imposed in the early 1980's was an attempt to mitigate the cost plus mentality that pervaded the healthcare system generally and hospitals specifically.

Anonymous said...

I'm not sure why you would believe that, BC, since Mr Levy's 2nd post indicates that Medicare is actually a tougher customer than the private insurers. I think that whatever role MC may have played in the rise of health care costs is more virtuous than blameworthy: by socializing costs, it has made more services available to more people -- thus, of course, boosting demand.
I appreciate your dedication to the most important business in America, Mr Levy. But if you're ever disappointed in your margins, you might want to consider a pharmaceutical career. You may have heard that, during the decade from 1992 to 2001, Merck never posted a profit of less than 15 percent.