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I'm not a healthcare expert, but my understanding is that Medicare does address the cost transparency issue. Services simple cost what the government says they

I'm not a healthcare expert, but my understanding is that Medicare does address the cost transparency issue. Services simple cost what the government says they cost.

chimeracoder 9y ago
> I'm not a healthcare expert, but my understanding is that Medicare does address the cost transparency issue. Services simple cost what the government says they cost. Medicare is the root of price opacity in the medical system. Medicare determines prices by fiat, with no mandate to ensure that the rates are sustainable. As a result, Medicare's reimbursement rates are about 7% less than COGS in the aggregate. In other words, even if hospitals cost nothing to run and everyone worked for free, they would still lose 7% on each Medicare patient (on average) in purchasing the supplies necessary to treat them. How is that the providers still manage to stay in business? By marking up prices for private insurers (and therefore uninsured patients too, whom they are required by law to present the same price at the initial bill). Private insurers end up negotiating this down to some multiple of what Medicare reimburses, and this entire process is why there's no feasible way to have a transparent pricing system. It all depends on what the mixture of private-to-public insurance is for the patients that the provider sees, because they need to charge enough to make up for the loss that they're taking on Medicare patients. The fact that Medicare reimburses below-COGS isn't a secret; Medicare itself even has not one but two separate programs to subsidize providers who see a "disproportionate" number of Medicare patients. In other words, they're pretty open about the fact that private insurance is subsidizing the cost of care for Medicare patients, preventing any possibility of price transparency.
- nradov 9y ago
  It's not that simple. If the payers other than Medicare had more negotiating power relative to large provider organizations then they could also drive down prices. The providers have a lot of room to stay in business and trim fat by eliminating waste, reengineering processes, cutting staff compensation, and squeezing suppliers.
  - chimeracoder 9y ago
    > It's not that simple. If the payers other than Medicare had more negotiating power relative to large provider organizations then they could also drive down prices. The providers have a lot of room to stay in business and trim fat by eliminating waste, reengineering processes, cutting staff compensation, and squeezing suppliers. Medicare doesn't have "negotiating power". It's a monopsony; it doesn't negotiate, by definition. No other payer could do what Medicare does, because no other payer is enshrined in law the way Medicare is, as a mandatory payor [sic] for most major medical systems. A while back, a whole string of providers who were required to take Medicare went bankrupt because Medicare didn't pay enough, and (unlike other providers) they didn't see enough privately-insured patients to make up the difference. Congress "fixed" that by forcing Medicare to pay an additional stipend to providers whose Medicare patient share exceeds a certain threshold. But for the rest, they're still forced to overcharge private insurers (and uninsured patients) to make up the difference. Or, if they are legally able to, stop seeing Medicare patients altogether, which we're starting to see more of again.
creaghpatr 9y ago
Medicare prices as a universal chargemaster would cause the industry to collapse quickly. Private insurance patients subsidize Medicare's losses in addition to paying taxes for Medicare in the first place.

I'm not a healthcare expert, but my understanding is that Medicare does address the cost transparency issue. Services simple cost what the government says they cost.

chimeracoder 9y ago

> I'm not a healthcare expert, but my understanding is that Medicare does address the cost transparency issue. Services simple cost what the government says they cost. Medicare is the root of price opacity in the medical system. Medicare determines prices by fiat, with no mandate to ensure that the rates are sustainable. As a result, Medicare's reimbursement rates are about 7% less than COGS in the aggregate. In other words, even if hospitals cost nothing to run and everyone worked for free, they would still lose 7% on each Medicare patient (on average) in purchasing the supplies necessary to treat them. How is that the providers still manage to stay in business? By marking up prices for private insurers (and therefore uninsured patients too, whom they are required by law to present the same price at the initial bill). Private insurers end up negotiating this down to some multiple of what Medicare reimburses, and this entire process is why there's no feasible way to have a transparent pricing system. It all depends on what the mixture of private-to-public insurance is for the patients that the provider sees, because they need to charge enough to make up for the loss that they're taking on Medicare patients. The fact that Medicare reimburses below-COGS isn't a secret; Medicare itself even has not one but two separate programs to subsidize providers who see a "disproportionate" number of Medicare patients. In other words, they're pretty open about the fact that private insurance is subsidizing the cost of care for Medicare patients, preventing any possibility of price transparency.

nradov 9y ago
It's not that simple. If the payers other than Medicare had more negotiating power relative to large provider organizations then they could also drive down prices. The providers have a lot of room to stay in business and trim fat by eliminating waste, reengineering processes, cutting staff compensation, and squeezing suppliers.
- chimeracoder 9y ago
  > It's not that simple. If the payers other than Medicare had more negotiating power relative to large provider organizations then they could also drive down prices. The providers have a lot of room to stay in business and trim fat by eliminating waste, reengineering processes, cutting staff compensation, and squeezing suppliers. Medicare doesn't have "negotiating power". It's a monopsony; it doesn't negotiate, by definition. No other payer could do what Medicare does, because no other payer is enshrined in law the way Medicare is, as a mandatory payor [sic] for most major medical systems. A while back, a whole string of providers who were required to take Medicare went bankrupt because Medicare didn't pay enough, and (unlike other providers) they didn't see enough privately-insured patients to make up the difference. Congress "fixed" that by forcing Medicare to pay an additional stipend to providers whose Medicare patient share exceeds a certain threshold. But for the rest, they're still forced to overcharge private insurers (and uninsured patients) to make up the difference. Or, if they are legally able to, stop seeing Medicare patients altogether, which we're starting to see more of again.

creaghpatr 9y ago

Medicare prices as a universal chargemaster would cause the industry to collapse quickly. Private insurance patients subsidize Medicare's losses in addition to paying taxes for Medicare in the first place.