In 1961 when I started working in employee benefits as a health benefit claim processor, an office visit was $5.00. Based on the change in CPI since then, an office visit should cost about $36.59.
Today a basic follow-up office visit will be $60.00 to $70.00, an initial office visit will be more and a specialists office visit $150.00 and sometimes way more.
So what happened? Why are we paying so much more than inflation would seem to indicate? The cause of health care inflation is often attributed to new technology, an aging population and the cost of prescription drugs, so what’s the deal with an office visit?
Remember, there are two basic factors in determining overall health care costs. The cost per service and the number of services rendered. Costs (and premiums) increase if either factor increases and when both increase there is a multiplying impact. We know an office visit costs about twice what the CPI indicates it should. We know more and more costly services are being provided – “let’s get an MRI to be sure” – considering both, we have solved the mystery of health care costs…and we didn’t even mention an insurance company.
However, we still don’t know why an office visit charge is double what it should be. Wouldn’t it be ironic if the high cost of an office visit is attributable to the cost of health insurance for the office staff?
Clearly, the cost of health care is more complicated than this simple scenario, but keep in mind utilization is a major factor and you and your doctor can have a significant impact. More health care is not necessarily better health care.
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QUINNSCOMMENTARY 
A physician can’t “charge commercial patients more” unless the patient is paying only in cash. Contracts with insurance companies prohibit this. The overall discussion here is awefully vague. Is the office visit to a family physician, a surgeon, a consultation, a followup?
Many physicians are introducing concierge medicine and limiting who they see altogether, thereby avoiding the unknown of where healthcare reform is going.
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Dick,
A very interesting question. Let me offer some possibilities. Cost shifting from federal and state programs has created one potential answer to your question. Through legal fiat, Medicare and Medicaid set the rates for office visit reimbursements. The private physician either accepts those rates or doesn’t see Medicare or Medicaid patients. Many doctors I speak with suggest that Medicare reimbursements roughly cover their costs and Medicaid does not even cover the cost of the service. Therefore they are compelled to make up the difference by charging commercial patients significantly more.
Further, what many people do not understand about Medicare reimbursement and the annual fight between the AMA and Congress is that under SGR (sustainable GROWTH rate) calculations each year the federal government pays out more in physician reimbursements, even when there is no update to the fee schedule.
Why? Because SGR is made up of two factors – rate and volume. When the volume exceeds the allowable growth rate for reimbursements the unit cost is required to be adjusted downward – although that has only actually happened once in the history of SGR 1997.
Therefore, more and more is being paid out — physicians on the whole are making up in volume for what they can’t get in rate from federal and state payers.
This continues to put more and more pressure on commercial payers since, since as they say, there are only 24 hours in a day.
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Good points all. Generally speaking people do not understand how various aspects of the system are connected and politicians either don’t know it either or ignore the fact.
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