Is Cost-Plus Health Care Finance Doomed?

Managed care isn’t working and everyone knows it. PPO discounts are touted to be significant and substantial, yet health care costs keep going up every year.

Enter Cost-Plus health care financing.

Cost-Plus health care financing makes sense to a growing number to Texas employers. Since hospitals publish their cost-to-charge ratios with the federal government, some employers are using that as a benchmark to reimburse hospitals their cost, plus a profit margin that is fair and reasonable.

As Cost-Plus grows and more employers jump on the cost-plus band wagon, what will hospitals do to fight this transparent intrusion into their financial ledgers to protect profits?

In the scheme of things, one might conclude that a market driven cost-plus approach to financing health care, if ultimately pervasive within the health care delivery system, could ultimately serve the function of insuring that hospitals have enough income to recover their costs. But the rub lays in the ability of the hospitals to increase their incomes and the only way to do that would be  to increase their costs, a perverse notion in a free enterprise capitalist system.

So, one could conclude that as the cost-plus health care financing phenomenon takes hold, costs will increase at probably the same level as we have experienced under managed care for the past 20+ years. After all, everyone deserves to make a profit.

Editor’s Note: Molly “Tsun Su” Mulebriar writes: “For every point of view, the is an opposite point of view worth discussing. It is in everyone’s best interests to consider all possibilities to be better prepared in the future. Knowing your enemy is the first step towards ultimate victory.”