Is there a real cost of health care? A horrible example -- and some questions about a suggested alternative

President Bush recently vetoed a proposed expansion of the State Children's Health Insurance Program (SCHIP) (the link will take you to the government site explaining the program) and the usual suspects are predictably aroused.

Here, for example, is an ABC News story about the feared consequences of the veto. Although the proposed SCHIP expansion had bipartisan support, not all Republicans favored it. Here is a link to an op-ed piece in the Kansas City Star by U.S. Representative Sam Graves (R. Mo.) defending the veto.

I'm not taking sides here on a political question, but I'd like to add a couple of observations and ask questions of anyone who comes across this.

I write as a lawyer who has some experience of the ridiculous nature of our health care pricing system. Let me give you a real-life example from a case that is settled and done.

You'll understand that I can't use actual names and must fuzz the details.

But I represented a middle-aged woman and her mother who were involved in a traffic accident downstate about two years ago.

Accident is far too polite a term for what happened to them. It was still daylight, but the driver coming in the opposite direction down the Interstate was roaring drunk. He hit something or swerved to avoid something in his own lane of traffic -- even the police were vague on the details -- and, because he was traveling at such a high speed, literally became airborne. His car flew into oncoming traffic, directly into the path of the middle-aged woman and her mother.

The mother was driving. And she could see, in that awful split second, what was about to happen. A maternal instinct kicked in and she turned the wheel of her car so that the airborne car would hit her side of the vehicle and possibly spare her daughter. The middle-aged woman saw her mother do this.

And the daughter was spared. But her mother's decision to turn the wheel was the last decision she would ever make.

Surprisingly, the drunk driver had some liability insurance. Not a lot, mind you, but some. And my client had underinsured motorist coverage. And since neither of their policies were issued in Illinois the policies were stackable (that's not true for Illinois auto policies).

Now the health insurance angle: The middle-aged woman and her mother were working poor. The middle-aged woman's husband had a job with a major retailer, one which has a justly deserved reputation for preventing its employees from ever qualifying for health benefits. My client had no health insurance.

My client was taken from the scene to a nearby hospital. She was kept overnight for observation and released the next day. There were a number of diagnostic tests performed -- all coming back negative. And because my client had no insurance, her bill was over $17,000. A health insurer would have been billed a far, far smaller amount.

And the hospital found a way to bill the mother, who was killed at the scene, another $10,000.

These bills helped me get the maximum available auto insurance benefits, yes, but then I had to deal with the liens.

The hospital had gotten med-pay benefits from my client's auto policy -- $5,000 for each accident victim. The balance of the mother's claim was submitted to Medicaid -- not Medicare, don't ask me why -- which paid only a few hundred dollars of the thousands of dollars still claimed. And the hospital took it, willingly, and closed its file on the mother. But that hospital wanted full value from the surviving daughter. And the hospital had its own lawyers seeking payment on the lien.

Well, sure, you say, but shouldn't the hospital be entitled to collect its fee?

But what should its fee be, please? What is the actual cost? What it charges Blue Cross? What it charges some other health insurer? What it would accept from Medicare or Medicaid? These are all different -- far lower -- prices.

I listen to the politicians bloviate about letting the market work, or making the market fair and I see insurance distorting any semblance of any market I can understand.

In the example I'm using today, this money -- which the hospital would never have gotten from Blue Cross -- was taken from a woman who needed this money to bury her mother. And, frankly, losing the mother's social security check -- whatever it was -- was a blow to the family's finances. These people were not retiring to the South of France on this settlement.

So I ask: Is it too late for the market?

I have to tell you that I don't have high expectations for a government run health system. Seems to me the recent scandal involving the treatment of returning war veterans at Walter Reed Hospital provides a strong starting point for any argument against "socialized medicine." We have been providing health care for soldiers, sailors and marines since we became a country... and we don't have even that down pat. Will adding hundreds of millions more people to the ranks of those who are entitled to government health care make things better?

This is why I was intrigued to read recently about SimpleCare -- doctors who have opted out of the insurance system, and coding bills, and large staffs devoted solely to tracking insurance payments and claims. From the SimpleCare website:

Better care for less money – it’s just that simple!

How does it work? We call it PIFATOS – Pay In Full At Time Of Service – and it is truly a "Cash-Based Revolution." A patient sees a doctor for a non-catastrophic reason – yearly check-up, a nagging flu, a twisted wrist, an aching stomach, etc. The doctor bills the patient after the visit. The patient pays in full before leaving. Because doctor charges are anywhere from 25 – 50% inflated due to administrative costs caused by the health insurance industry, you’ll be paying drastically reduced rates for your medical expenses. In conjunction with a regular catastrophic health insurance policy to cover extremely costly procedures, PIFATOS can save the average healthy adult and/or family up to $5000/year!*

The asterisk takes you to an example: It claims a catastrophic health policy can be had for $3,000 a year while a regular health policy must cost at least $9,000 a year. (In the last year I paid health insurance premiums -- a few years ago now before my wife got benefits from teaching full-time -- I was paying $18,000 for the family, and that was with several large deductibles that had to be satisfied before the customary 85/15 split would kick in.) If you spend $1,000 going to the doctor in that year, you've saved $5,000.

I am intrigued that there would be -- could be -- a market-based price. A real price -- and not one that depends on who's asking.

So, gentle readers, tell me: Is such a Nirvana attainable? Have you heard of this? Does it really work? Could it?