Why Most People Do Not Have to Pay Their Medical BillsSubmitted by TommyPaine on Fri, 11/01/2013 - 20:09
If you want to understand why medical care expenses are so expensive today and want to be able to explain it to others, read this post.
If you know someone faced with huge medical bills they cannot afford, read this post.
I am in favor of paying bills. I am in favor of paying medical bills - REASONABLE medical bills. Most medical bills today are NOT reasonable. The prices charged are far too high (as compared with a free market system), and they are (most of them) what are known as "adhesion contracts." I'll explain what that is, but first some history.
The reason medical care costs today are so expensive is because the government has become more and more involved in the industry, and this has raised the cost for everyone.
Before WWII and for all of American history before that, people could pay their own medical bills with no problem. There was no "crisis." There will always be poor people in society, especially when "poor" is defined as the bottom X% of the population. By that definition, there will always be poor people, and they can and should turn to charity for help.
Back then, there was no such thing as health insurance. People could pay their doctor bills. Health insurance came about as a way for people NOT to pay their doctor bills but to recover LOST WAGES during times they were sick. Lost time from work was a bigger financial problem than the bills themselves. Originally, "health insurance" was more like what today would be called disability insurance.
During WWII, the federal government instituted price and wage controls. This meant that employers could not increase salaries. So, employers started offering "fringe benefits" as a way to attract the best people. This is when employers started paying for health insurance for employees.
In the 1950's, the tax code was changed so that employers could deduct health care insurance paid on behalf of employees. Tax deductions are good, but it should have been at the individual level. Since so many employers were now paying these costs (because of the previous government meddling), this was very popular.
In 1965, Medicare was passed, making the federal government a huge "payor" of health care costs. In 1973, Congress passed the HMO Act, requiring larger employers to provide HMO's for employees.
Since then, there have been numerous other ways the federal government has pushed its way in (unconstitutionally) to the health care industry.
Today, even before Odumbacare, the federal government is by far the largest payor of health care expenses, and HMO's are next largest. Together, they dominate the terms of what they will pay for health care expenses.
Since the individual usually does not pay for their medical expenses, doctors make more money doing multiple tests. They get paid more for that, too. But the government and HMO's often refuse to pay the full price. So, doctors get paid less than they expected on the procedures they do, and so they look to everybody else to make up the slack.
The slack is paid for by individuals with their own health insurance and those who pay cash. Since doctors are so used to doing every test and procedure they can think of (because they benefit from that by charging more to the government and HMO's), they do this with individuals, too. It is estimated that people paying cash pay 3 times the amount that the federal government does for the same things.
This is why health care costs are so high.
But, if you get a doctor or hospital bill, you usually do NOT have to pay it.
That's because almost all such bills are adhesion contracts. An adhesion contract is a "take it or leave it" contract. One side dictates the terms, and the other side must take it or leave it. But the terms are not known up front. So, the person taking it has no idea what they are taking.
In fact, most such bills are not contracts at all. A contract requires a "meeting of the minds." If a doctor does not tell a patient (a) what will be done or (b) how much it will cost, then there is no meeting of the minds. Further, even if it is a contract, it is an adhesion contract.
Adhesion contracts are VOIDABLE by the party who did not create the contract. So, a person with a huge medical bill can REFUSE to pay it by declaring it VOID.
Having said that, I do not recommend actually voiding it. Better is to notify the doctor or hospital that you MIGHT declare it void and instead work out a reasonable fee that you will pay in a reasonable amount of time.
Today, there are more and more clinics actually publishing their rates. A person could use those prices as a good faith method of determining a fair price to pay (and doing business with such doctors are NOT adhesion contracts because the amounts are known up front, unlike 99% of the industry). One doctor running such a clinic stated that he originally thought his costs would be 1/2 of what other doctors were charging. He really had no idea because he never had control over costs. What he found was that his costs are actually 1/6 to 1/8 of the costs of doctors who get paid by traditional means. So, the health care industry is costing 6-8 times what would be the case in a free market.
So, the government has created this mess with more and more intrusion into the health care industry over several decades. The solution, of course, is to REPEAL such laws (including the prohibition of selling insurance across state lines). Let the FREE MARKET return to the health care industry and the problems will be solved.
In the meantime, any large medical bills can be NEGOTIATED down to a reasonable amount and, if necessary, declared VOID.