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The high cost of “free.”

Click here [1] to listen to the broadcast of You Tell Me on KTBB AM & FM, Friday, September 04, 2009.

As a good friend of mine, a volunteer football coach and altogether good guy said Wednesday afternoon, “Paul, when you married Lee you out-punted your coverage.”

For those of you who aren’t football fans, suffice to say, that was the highest compliment he could pay my wife.

And he’s right. I married a wonderful woman. For all of my guy friends who complain about how much their wives spend, my problem with my wife is that she squeezes a dollar until George Washington begs for mercy. My wife spends prudently.

Not long ago, she was at an event at which Baylor University Medical Center had set up a mobile mammography unit. The lady at the table said, “Why don’t you get a mammogram today?” My wife thought, “I’ve never had one, I’m old enough to where I should have, I’m here, so why not?”

She reached in her purse and got out a credit card and the lady at the table said, “Oh, don’t worry about that, we’ll bill your insurance company.”

Good news to my dollar-watching wife. From her point of view, a mammogram that day was “free.”

And she got it done and everything is fine.

But then the bill came. It seems that Baylor is an “out-of-network” provider on my health plan and thus declined to pay for any of my wife’s mammogram that day. Baylor wanted $308.

My wife went nuts.

“They should have told me what it cost!,” she fumed. “If I had known it was $300 I probably wouldn’t have done it.”

Now every doctor listening will tell my wife that $300 is a small price to pay for an early diagnosis of breast cancer and they are quite correct. But that’s not the point.

I submit that if everyone that walked up to the table that day had known that the procedure was going to cost $300 out of their pockets, many would have elected to pass. And I believe that if a high percentage of patients were price resistant at $300, the price wouldn’t be $300.

I know that mammography is miraculous technology that cost a lot of money to create. But I also believe that if selling mammograms required getting women to come up with money right out of their purses to pay for one, instead of costing $300, someone would find a way to make money with a mammogram machine at $65 a copy.

I believe that it’s the too frequent illusion that health care is free, driven in large measure by the belief that health insurance is a right born of being employed (itself a distortion created by government policy during World War II), that is a very significant factor in driving up the cost.

Not coming out of your pocket is not the same as free but at the point of transaction it looks and feels like it’s free.

And thus we lose the chastening effect of price sensitivity. And if the customer lacks price sensitivity, you can bet the price is going nowhere but up.

But, Paul, the insurance company will be price-sensitive. They’ll have to pay the claim.

That’s true. But their price-sensitivity is mitigated by a myriad of regulatory and legislative mandates regarding what they must cover whether they want to or not.

And thus premiums that employers pay for employee benefit health insurance gallop ahead at several times the rate of inflation, prices for health care keep going up and our leaders in Washington declare a “crisis” that only a massive intervention of government can solve.

The fact that my wife reached for her credit card suggests that there is a price at which she is willing to accept personal financial responsibility for monitoring her health.

Americans by and large maintain their cars and their homes with money they pay out of their own pockets and there exists no “crisis” requiring a massive government takeover of the car and home repair industries.

And if something truly terrible happens to home or car, most Americans are adequately insured to deal with that calamity.

Call me simplistic, but for the life of me, I cannot understand why this can’t be the case in health care.