Friday Family Photo--the cost of having a baby

An article in the WSJ health section really caught my attention--Anna writing about the cost of her newborn--$36,625. I dug around in my file for the medical costs of our oldest son's birth in 1961 (see photo), but could find every tax return except 1961, which means I've looked at it before and misfiled it. So I looked at 1964, for Patrick, and found the total medical costs for all of 1964 were $459, and it looks like $315 of that was for the clinic, so the doctor's bill was probably included in that. Our hospital insurance was $114, which paid $45 of that bill. However you slice and dice it, I was able to itemize the entire event in about 7 short lines for our taxes even though there were many complications, follow up visits, and I was high risk. I recall that I paid cash at the business office of the Carle with each prenatal visit, and I think the doctor's invoice was folded into the clinic because I had no separate item for him. Anna writes:

Cedars-Sinai Medical Center in Los Angeles provided excellent care and thoughtful treatment during my uncomplicated traditional delivery in December. Then the invoices started coming. The hospital sent one for me, and another for my baby. The doctors billed separately. The total charge for three days: $36,625.

People lucky enough to have good health insurance, including me, don't have to come up with such sums. Insurers typically pay a lower, negotiated price for hospital care, and patients pay a portion of that amount. Even people without insurance often get sharp discounts from list prices on their hospital bills.

She then attempts to decipher that $36,625. She’s on a preferred provider plan and her employers negotiated with the insurance company.

“For hospital and surgery services from these providers, I am on the hook for 15% of Aetna's negotiated price. [She later found out, probably researching this article, that Aetna’s price was about $17,300 (much higher than average) and her percentage was based on that.] I also have a $400 annual deductible. Fortunately, there is a $2,000 cap on how much I might have to spend out of pocket each year for my in-network care. I owed a total of $2,118.90, a sum I arrived at only after adding figures from five separate documents.” [Her son had his own deductible when born.]

She decided to check the itemized invoices, 34 items for her and 14 for the baby, not including doctors' fees. “Those charges I could decipher seemed stunningly high. A "Tray, Anes Epidural" cost $530.29. (After inquiring, I learned this was the tray of sterile equipment used to give me an epidural anesthetic injection.) An "Anes-cat 1-basic Outlying Area" was billed at $2,152.55. (I was told this was the cost of the hospital's resources related to the epidural.) These items were in addition to the separate anesthesiologist's charge of $1,530 for giving the epidural. Even though the pain-killing epidural shot felt priceless during my 20 hours of labor, I was amazed that its total cost could run so high.” Then there was $2,382.92 for her recovery, when there had been no Caesarean section. It turned out the charge was for the 90 minutes in the birthing room after delivery.

In the end, patient reader, there is no way to know what the real cost of this newborn was--and she was told it was a mistake that Cedars didn't give her the estimate she had asked for before the baby was born.

There's also no way to know what 1964 dollars are worth in 2008--there are perhaps 6 different ways to figure it (on-line). But using purchasing power figures (we're buying a baby here), $315 (my costs after insurance payout) in 1964 would buy $2,186 in 2008, or higher than what Anna said were her out of pocket costs of $2,119 at Cedars-Sinai in Los Angeles.

Insurance, both private and government, is what caused health care costs to sky rocket (keeping in mind she didn't pay anything near $36,625 or even the negotiated cost). Notice Anna's comment on how good her insurance is? Well, her "costs" are high because her insurance company is also paying for those people who don't have insurance--they don't put them on the street to have those babies when they show up in ER--they get the same excellent care Anna does, maybe better, because they don't have to negotiate with anyone!

In the 1960s, we purchased our own hospital insurance--our employers didn't. My own parents had no insurance at all--Dad bought "polio insurance" in 1949 because there was an epidemic (a real one, not like the Swine flu scare), but that's all. My parents paid cash for their babies, and I think Mom had a hospital stay of 10 days to 2 weeks. That had shortened to about 5 days in the early 60s, and now--do you even get to stay 48 hours?

When we have Obamacare, and it is definitely coming, it will be even more costly and more limited and more difficult to find out what it really costs. Just go back to the early 90s scare of Hillary and Magaziner and see what happened to health insurance costs when everyone feared a government take over. That nice epidural Anna was so grateful for (as was I)? I'm guessing that will have to be negotiated or rationed several months in advance, and only politicians' daughters will make the cut (no pun intended).