UPDATE: To underscore the opacity of the present system, its greed, and the way patients are overcharged, read this NYT article from May, “She was told that surgery would cost about $1,300. Then the bill came: $229,000.” Lisa Melody was charged the “chargemaster” price, even though she didn’t agree to that and her insurance company told her otherwise. When she wouldn’t pay that outrageous price for spinal fusion surgery, the hospital in Colorado sued her. A jury found for Melody, and her final bill was only $767. (h/t Enrico)
In 2020, when I had hernia surgery, I posted the bill that my insurance company received from the University of Chicago Hospitals. It was nearly $64,000! Europeans and Canadians were properly shocked at these prices, which indicated a big profit for the hospital. Now I didn’t pay nearly that much, as I have a good insurance plan, but the insurance company had to pay it (sometimes employers themselves foot part of the bill); but Americans without insurance would have be billed at that full price.
Shockingly, until last year, there was no way to find out these prices in advance so you could do comparison shopping. As I said in the earlier posts, almost no hospitals publicize the costs of their services or the medications they give you, so you don’t know what the bill is until after you’ve been treated. As I wrote at the time:
Now, can you know these prices in advance so you can comparison shop among hospitals? The answer is NO. While hospitals differ drastically in their costs, it would be nearly impossible to get a figure for the entire operation in advance. Some hospitals, like the Surgery Center of Oklahoma, will quote you a flat price (and for them, my redo surgery [the hernia operation had to be redone] would have been free), and that price, for hernia surgery similar to mine is, I’m told, about $4,500: only 7% of what the bill was above. Nor are these cheaper hospitals worse at what they do: there seems to be little correlation (or even a negative correlation) between the price of a procedure and the quality of the facility and the doctor. (My doctor at the U of C, by the way, was excellent and has a superb record, but more on doctor-shopping later.)
What about the costs above? Are those the sticker costs that then get discounted when billed to the insurance companies (i.e. are they they the so-called “Chargemaster list prices” for each item), or are they the already-discounted costs given to my insurance company? I have no idea. It’s as if you went to the grocery store and there were no prices on the food items, and then after a month you get a bill saying, “This is what you have to pay for groceries.
At the post above, Dr. Lickerman answered many readers’ queries (just search for “Lickerman”), which explained more about how dire health care prices were. Of course, other countries have single-payer insurance, but in many cases that results in a parallel series of private insurance because patients don’t want the long wait associated with many national single-payer systems. When I snapped a tendon in my finger in New Zealand, for instance, I could get treated for free, but it would be at least a five-hour wait in the hospital, or I could pay out of my pocket and get reimbursed in the U.S. I chose the latter, and fortunately my insurance company reimburses for medical treatment overseas.
The lack of transparency in pricing did two things: it prevented consumers from comparison shopping to find the cheapest price (especially important if you are paying out of your pocket or have a high deductible), and it generated huge profits for hospitals, which can adjust its “MSRP” prices as well as the discounts from those prices that are given to insurance companies.
This was supposed to be rectified when in 2020 Congress passed The Health Care PRICE Transparency Act, requiring hospitals to disclose the prices of 300 “shoppable” procedures as well as the billing costs for many drugs. It was supposed to take effect on January 1, 2021, and there were fines for violations.
As of today, almost no hospitals are complying, there is almost no transparency, and fines aren’t even being imposed. I heard about this on the NBC Evening News last night, and decided to see what’s going on. What’s going on is that hospitals, greedy for $$, are ignoring the law. And the Biden Administration isn’t doing anything about it. For laws can be enforced by the executive branch of the government.
Hospitals have four tiers of pricing, and all of these prices should be disclosed for each drug and service. I quote my doctor, Alex Lickerman, here about these tiers:
Charge master price = this is like sticker price on the car. No insurance company expects to pay this. Hospitals create this because they know different insurance companies will be willing to pay different percentages of their charge master price. When insurance companies advertise that they have the biggest “discounts,” what they mean is reductions down off a hospital’s charge master price (which hospitals historically haven’t disclosed). So BCBS might get a 50% discount. Medicaid might get a 95% discount off the charge master price. Medicare might get an 80-85% discount. (I’m making these discounts up).
This is what the uninsured patient pays, and if they don’t pay (they must be treated), they will be dunned and their credit ruined.
The minimum negotiated price = this is the greatest discount, and therefore the lowest price, a hospital gives a third-party insurance payer.
The maximum negotiated price = this is the lowest discount, and therefore highest price, a hospital gives a third-party insurance payer.Cash price = the price a patient would pay without insurance. Ironically—and horribly—this is often the full charge master price; that is, the price for the service WITHOUT a discount, which is then charged to people to have the least ability to pay it, i.e., the uninsured.
1). There’s a tremendous variation in prices among hospitals that do list them. The New York Times article from last summer is the best source of information:
The data show that the charge for a joint replacement can range from a low of $5,300 at a hospital in Ada, Okla., to a high of $223,000 at a facility in Monterey Park, Calif. Or within the same area, charges range from $21,000 to $46,000 to treat heart failure in hospitals in Denver, Colo.
Here are some disparate prices from that NYT article, and you can see more examples from the paper. Note that the vertical lines show four times what Medicare pays the hospital (for a colonoscopy) and TEN times what the government pays (for an MRI scan). Almost no insurance company pays anything near as low as what the government pays:
It holds for drugs too, which are often particularly inflated in price. This is for a rabies drug (text from the NYT):
Prices were still secret when Brian Daugherty went to an emergency room near Orlando, Fla., for a rabies shot after a cat bite last summer.
“I tried to get some pricing information, but they made it seem like such a rare thing they couldn’t figure out for me,” he said.
He went to AdventHealth Orlando because it was close to his house. That was an expensive decision: It has the highest price for rabies shots among 24 hospitals that included the service in their newly released data sets.
The price there for an adult dose of the drug that prevents rabies varies from $16,953 to $37,214 — not including the emergency-room fee that typically goes with it.
Mr. Daugherty’s total bill was $18,357. After his insurer’s contribution, he owed $6,351.
2.) Few hospitals are complying with the law.
“One year after this law making hospitals show prices came into effect, unfortunately, we found that only 14.3% of our country’s. . . hospitals are complying with this law,” PRA founder and CEO Cynthia Fisher said.
The NBC News last night reported only 15% compliance.
The law required hospitals to post prices for all services, including gross charges and discounted cash prices.
In addition, the rule requires the information to be available in two formats, a machine-readable file that contains pricing data for third parties to compare between hospitals and a shoppable service list that displays specific services offered at the facility.
And the fines:
Under the final rule, for hospitals with thirty or fewer beds, the minimum civil monetary penalty will increase to $300 per day. For hospitals with more than thirty beds, the minimum civil monetary penalty will be $10 per bed per day, capped at $5,500 per day. This means the minimum amount for noncompliance with the rule would be $109,500 annually while the maximum amount is $2,007,500 annually. CMS is also requiring that the machine-readable files with pricing information be accessible to automated searches and direct downloads.
In response to a reader’s question after my post about why the bills were so much higher when insurance was involved, Dr. Lickerman said this:
Great question! The answer is, many providers will charge a lower cash pay price because payment is immediate. The bill is higher when insurance is involved because providers create a “chargemaster” which has prices that are like an MSRP when you’re buying a car. It represents a ceiling price–an initial price–in a negotiation that almost no one pays. Providers inflate their chargemaster prices because they know they’ll be forced to negotiate different discounts with insurers. So while private insurers get maybe a 50% discount off chargemaster rates, Medicaid takes maybe a 90% discount (which is why most medical systems consider Medicaid to be “bad” insurance: it reimburses them for a given service at the lowest rate). This is why, paradoxically, if you’re uninsured, you may pay more than even large insurance companies. For reasons that defy logic, medical systems will sometimes quote the uninsured their chargemaster rates–the highest price–rather than a true cash pay rate.
If you’re getting care from a small provider (vs. a large hospital system), you’re much more likely to find a reasonable cash pay rate that ends up being cheaper than going through your insurance (depends on your yearly out-of-pocket max and how far into it you’ve already spent).
Large hospital systems likely raise their chargemaster rates to meet revenue targets. Contrary to what you’d expect, insurers are happy to pay these rates because it enables them to increase premiums, which they want to increase because Obamacare imposed a medical loss ratio of 20% on most insurance plans. That means insurers must spend 80% of their revenues (premiums) on healthcare claims. If you’re limited to only 20% of the pie to make profits, what do you do? Find a way to make the pie bigger so that the absolute dollar amounts you bring in goes up. This is what the insurers have done, and it’s why premiums have gone through the roof since Obamacare was enacted. The unit cost of most medical care has increased mostly with inflation. Healthcare prices set by providers have increased by far more.
Even employers find it hard to determine what they will pay for an insurance plan, as they must hire lawyers and consultants to get around the great wall of secrecy. And sometimes even then it doesn’t work, so they’re buying a plan for their employees whose benefits they don’t know and, since employers must sometimes pay some benefits, they don’t even know how much they would be liable for.
This is greed, pure and simple, and it hurts everyone. Many Americans are impoverished by the cost of healthcare and their inability to do comparison shopping.
There are multiple solutions: Single-payer health, Obamacare for everyone, with government help in paying for private insurance, enforcement of transparency, negotiation of drug prices and so on.
Everyone usually prefers the system they have now, unless they have no insurance. I’m wary of the single-payer system just because it hasn’t worked out well in many places. Here’s what Dr. Lickerman said about it on my earlier post, and at the risk of reader ire in Canada and the UK I’ll present it anyway:
Great question. The idea of having a single payer for all healthcare (the government) definitely has its supporters here in the U.S. But it would likely lead to what we see in Canada (the system outside the U.S. I know best), which is untenable wait times for anything other than emergent care, which is all handled by already-burdened ERs. You won’t go broke getting healthcare in Canada like you can in the U.S., but you won’t have appropriate access to healthcare either. The single payer system there has resulted in a dearth of primary care physicians that’s even worse than in the U.S.
But whatever the solution, it’s not what the U.S. has now, and countries like Canada and the UK do have nearly free single-payer care, which does deal quickly with emergencies. Here’s what the NYT got when it solicited “explanations” from hospitals in its article last August. Look at these Scrooges!
At the Biggest U.S. Hospitals, Few Prices Are Available
Six months after the new rules took effect, the Times reached out to the highest-revenue hospitals that had posted little or no data about their negotiated rates or cash prices. Here’s what they had to say:“We will not be providing a statement or comment.”
N.Y.U. Langone has not published its negotiated rates or cash prices.“Services that do not have a fixed payer-specific rate are shown as variable.”
Stanford Health Care has not published its cash prices. Of more than 300,000 possible combinations of insurance and medical treatment in its data file, it includes prices for 479.“We do not post standard cash rates, which typically will not reflect the price of care for uninsured patients.”
Cedars-Sinai Medical Center, in Los Angeles, has not published its cash prices. The hospital initially posted a 2.5 GB data file composed almost entirely of more than one million lines that contained no data. After The Times inquired about the large file size, the hospital reduced it to a 1.4 MB file.“We have listed the fixed rates where possible and, where that is not possible, have listed them as ‘variable.’”
U.C.S.F. Medical Center has not published its cash prices. Of more than eight million possible combinations of insurance and medical treatment in its data file, U.C.S.F. includes negotiated rates for 346. (U.C. Davis, which is part of the same system and has also not published its cash prices, sent an identical statement.)Penn Medicine is committed to transparency about potential costs.”
The Hospital of the University of Pennsylvania added cash prices to its price transparency file after The Times inquired about why that data was missing.“The resources we provide ensure that our patients know what kind of assistance is available to them and, ultimately, what a procedure will cost them — not us.”
Montefiore Medical Center, in the Bronx, has not published its negotiated rates or cash prices.“V.U.M.C. offers a toll-free number which consumers can call if they have questions about what they may be charged for services.”Vanderbilt University Medical Center, in Nashville, has not published its negotiated rates or cash prices.
“Orlando Health has worked hard over the past several years to deliver helpful pricing information to its patients.”
Orlando Health has not published its negotiated rates or cash prices.
“We are continuing to work on the machine-readable file that includes payer-negotiated rates. … It involves analyzing a daunting number of data points.”
Long Island Jewish Medical Center has not published its negotiated rates or cash prices.
The largest hospitals were chosen based on gross revenue reported to the Centers for Medicare and Medicaid Services in 2018, the most recent year with full data available.
If you’re an American, you should be plenty mad about this, be you Democrat or Republican. Everyone needs healthcare, and the fat cats are bilking the government and medical patients, all the while knowingly and insouciantly violating the law.