Financial Sense – 9/5/2013

Data from Medicaid show the cost of this IV bag of saltwater currently at $1.07. When an outbreak of food poisoning struck eaters of tainted rice at a Buddhist festival in New York state, a lot of bags got used by the hospitalized victims. The article’s author set out to discover how much was paid for them. The answer? Although there was wide variation — when the final price could even be determined — the price typically ran to hundreds of dollars. One hospital that would go on the record defended the prices as “consistent with industry standards,” and noted that the price reflected other hospital expenses as well — although the patient was also billed hundreds of dollars for the administration of the IV, and for general emergency-room services.

The bottom line is that the maze of contracts and preferred relationships and hidden negotiations, coupled with third-party payment, has allowed consumers to become frogs being boiled alive in a slowly heating pot of water — with their health-insurance premiums funding an ever-expanding network of intermediaries comprising an industry with extremely robust growth. The only problem is that that growth ultimately comes at the expense of other productive sectors of the economy.