13 ms·

The anatomy of a ripoff

232 points by rglovejoy 15y ago

deleted 15y ago
[deleted]
CWuestefeld 15y ago
My wife is the manager of budget and reimbursement at a hospital, and from many conversations with her, I can imagine that this article is accurate. However, if I were writing this, I would have given greater emphasis to the effect that Medicare has on these problems. The article does mention that Medicare typically pays fees that are below actual cost for the procedures, and that hospitals must therefore increase charges to other customers (the article says they must do this to make profit, but actually they must do this just to break even and stay in business). But the problem goes even farther than that. Because Medicare is essentially a monopsony and gets to call the shots as far as charges are concerned, it actually matters far less what the actual costs are. As a result, few hospitals today have modern cost accounting processes, and so they only have wild guesses as to what a given procedure costs. Obviously, then, their charge list is going to be made largely from guesswork, and so it's very much expected that two different hospitals will, at the micro per-item level at least, have very different charges. Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. And in the coming years this isn't going to get any better. What you are likely to see, though, is increased politicization of these charges, as the political process takes even greater control of the industry.
- rdtsc 15y ago
  > Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. You make it sound like one follows from the other in an obvious way. Can you expand on why that would be?
  - CWuestefeld 15y ago
    You make it sound like one follows from the other in an obvious way. I think it does follow logically. I'm assuming that the regulations were intended to serve some purpose. If the system was working as the regulators/legislators wanted, there would have been no point in regulation. The regulations were created for the purpose of altering the way things would normally work out. By analogy, if we see a canal, it's probably a safe assumption that the waterway doesn't resemble the natural flow of water. The only reason to build the canal is that something was needed to be different from the water features that were present.
    - saucetenuto 15y ago
      Speaking as someone who doesn't know much about this stuff, your analogy reads more like, "the canal diverted the waterway, so tigers devoured the Pope". It may well be true, but you need to flesh it out more: explain how the new course flooded the tigers' habitat, forcing them to migrate to Rome.
      - jellicle 15y ago
        The person you're responding to believes that if medical charges are vastly different between providers it must be due to evil government regulation, because after all in other sorts of stores we never see wildly varying prices for the same item and healthcare, where people have plenty of time to comparison shop (even if you're choking on turkey, you still have a few minutes to contact the various local hospitals and determine which provides cheaper ER service before you pass out) is a perfect example of a transparent market.
        CWuestefeld 15y ago
        The person you're responding to believes that The person he's talking to doesn't believe that putting a strawman argument into someone else's mouth is an honest debate tactic. This question has nothing to do with ideology. As a matter of pure logic, regulation changes what the market is doing naturally; that's the whole point of the regulation. This is a non-judgmental conclusion. One doesn't have to say that the market state was good or bad, or that the regulated state is good or bad. Simply that a regulated market differs from a free market. That's it. Now, given that the system is highly regulated, it's clear that the regulators have screwed up. However, this on its own doesn't tell us that the free market was good; it just tells us that the current regulatory regime is crap.
- furyg3 15y ago
  > Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. This is a pretty big logical jump. I'm American, but have been living in the Netherlands for a while. Health care is probably more regulated here than in the US, yet in all of the ER visits I've experienced (myself or friends/family) I've never seen bills like that. Regulation does not have to cause bills like that. Something is very wrong if sick people in life threatening situations are being charged hundreds (or thousands!) of times for the same care based on whether or not they have insurance. That screams "more regulation is necessary" to me.
  - dsplittgerber 15y ago
    I'm from Germany and you do realize that over here (don't know about the exact differences) privately-insured patients (who opted out off the 'mandatory' insurance scheme) basically pay a LOT more for any given medical service just so that patients covered under the mandatory insurance can get treated at all? It's like a giant (inefficient) money redistribution scheme, in all the worst ways imaginable. Regulation does actually cause bills like that. It's just that in Europe, you don't ever see them.
    - tankenmate 15y ago
      Actually I think you'll find that billing like the kind you see in the US doesn't happen in Germany. The US spends nearly twice as much per capita than Germany for a comparable level of service[1]; this is hard to judge but life expectancy is a reasonable proxy, people in Germany on average live about the same. The UK with near mandatory, see below, universal healthcare the cost of per capita is lower still [1 ibid]. In the UK if you opt out of public healthcare you can't mix and match services beyond the GP level, this may change in the future. Obviously with a mandatory universal care the overall cost to the public at large stands a high chance of being lower; efficiencies of scale. The downside is that at the individual level you may be subject to "postcode lottery" healthcare. In many countries this leads to individualism raising the costs of healthcare for everyone. Everyone wants to be treated the best; the problem is that regardless of the system you chose this is impossible. [1] http://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_total_heal...
- jbooth 15y ago
  Hang on, so medicare told the hospitals and insurance companies to run their businesses that way? The transaction described in the article was entirely between private business entities. I get that they set their prices in a way that distorts the market to some extent but it seems that that distortion is far less than what the really-smart-guys-in-suits have been able to manage all by themselves. I understand the impulse that markets make things better. I really do. Look at computer parts for example, there's a robust market that keeps driving down prices and really delivers. But what about the healthcare industry resembles a sane market at all? There's effectively no market forces at work, due to the way that private sector businesses have structured it.
  - CWuestefeld 15y ago
    I'll be honest. I don't get why hospitals continue to play the game. If I were running the place, I'd just pull out of Medicare. It seems that they're afraid of the millions of dollars of lost revenue, without considering the greater sum of expenses that they'd free up.
    - jbooth 15y ago
      I sincerely doubt that the bean-counters at hospital are losing a ton of money on medicare but are too confused by the large 'revenue' figure to subtract a larger 'expenses' figure and realize they're making a loss. As a matter of fact, I can't recall ever reading an op/ed or anything by a hospital administrator complaining that they're being fleeced by medicare and losing a bunch of money on it. But I've seen a billion op/eds in the same template as TFA, bemoaning the byzantine and obfuscatory private insurance regime as something that completely destroys any market forces that should exist in the industry. I mean, one hospital charged one thousand times as much as another for the same treatment. I have to conclude that bringing up medicare while the private insurance industry system is this flagrantly broken is nothing but a red herring.
      - CWuestefeld 15y ago
        And I'm telling you that my wife is that bean counter. Her job is (a) budgeting, and (b) getting reimbursement from Medicare and Medicaid. As well as anyone in the organization (which is to say, not too well, because of the deficiencies with cost accounting that I mentioned), she knows those numbers. I don't think a month goes by when I don't ask her this question. Something always comes up, where she's saying "Medicare just denied another $500K payment" or somesuch. And I'll say to her "you live by the sword, you die by the sword". She admits that the net profit via Medicare is negative. But the decisions makers don't want to consider it. In this case, it's possible that they consider it their mission because they are a Catholic hospital. I can't see any answer in the general case.
- torontos 15y ago
  That is a very good point re: medicare. I was a management consultant in the healthcare industry in a previous life. One interesting study I did found a direct correlation between percent of patients on medicare/medicaid and hospital profitability... The higher the percent of medicare and medicaid patients, the lower the profitability. The correlation was essentially a straight line.
- Lagged2Death 15y ago
  Medical care is the most highly regulated industry in the economy... Uh huh. Talk to the (quite profitable) utility companies about that.
  - CWuestefeld 15y ago
    See, e.g., http://econlib.org/library/Enc/HealthCare.html http://econlib.org/library/Enc/HealthCare.html - - - - - Quote Regulation and the Health Care Market The health care industry is one of the most heavily regulated industries in the United States. These regulations stem from efforts to ensure quality, to facilitate the government’s role as purchaser of care, and to respond to provider efforts to increase the demand for their services. Hospitals and nursing homes are licensed by the state and must comply with quality and staffing requirements to maintain eligibility for participation in federal programs. Physicians and other health professionals are licensed by the states. Prescription drugs and medical devices are regulated by the Food and Drug Administration (see pharmaceuticals: economics and regulation). Some state governments require government permission before allowing a hospital or nursing home to be built or extensively changed. All of the above regulations restrict supply and raise the price of health care; interestingly, those who lobby for such regulations are medical providers, not consumers, presumably because they want to limit competition. Some state governments limit the extent to which managed care plans may selectively contract with providers. All state governments have imposed laws governing the content of insurance packages and the factors that may be used to determine insurance rates. While these may enhance quality, they do impose costs that raise the price of health insurance and increase the number of uninsured. In testimony before the Joint Economic Committee of the Congress, one analyst reported the annual net cost of regulation in the health care industry to be $128 billion.10
- drumdance 15y ago
  Here is a good article about how wildly Medicare costs can vary from place to place: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_... The second highest reimbursement district in the country is in Texas, which passed a draconinan tort reform law back in the 90s (if memory serves), so you can't blame courts or defensive medicine directly.
  - tsotha 15y ago
    Texas is expensive for the same reason Southern California is expensive - a high percentage of the patient population is illegal aliens who a) can't afford the service and b) skip out on the bill.
deleted 15y ago
[deleted]
moozeek 15y ago
As far as I can tell from the facts given in the EU you would have paid about the same amount the author had to pay out of his own pocket (~ 700 USD). If you had no health insurance at all.
- arethuza 15y ago
  The countries in the EU all have pretty different ways of paying for health care. In the UK if you went to a NHS hospital (which you would do if it was an emergency) you would pay nothing - there would never be any charges for the hospital treatment and drugs administered in a hospital aren't charged. NB: Note that NHS is based on treatment being "free at the point of delivery" - everyone knows that it's not "free" and we pay for it through NI and other taxes and people who can't (or even won't) still get the same treatment.
- viandante 15y ago
  As far as I know in EU public insurance is mandatory, so you would never pay such ammount.
  - _delirium 15y ago
    It varies a lot by country. In Denmark, all hospital visits are free to anyone, whether a resident or visitor. In other countries, non-EU visitors to an ER might pay substantial amounts, though usually still quite a bit less than in the US. Also, some EU countries tie insurance to payroll-tax contributions, so the unemployed may not be covered.
    - viandante 15y ago
      Well, been living in 4 European countries and never paid anything but in mine (Italy). I am also pretty sure unemployed are covered too. Don't know in Germany, where I still can't get how insurance works, but I would guess there is a way to get cover there too.
  - gcp 15y ago
    In Germany its optional starting from a certain income level. (At least it was x years ago)
CaptainZapp 15y ago
Sorry, but isn't it just outright fraud to charge > 400$ for a medication, which has a "retail price" of a few $?
- dbcfd 15y ago
  Nope, that's capitalism. Someone (the insurance) is willing to pay that price. It'd only be fraud if the government was paying for it. [Edit]Some hate against my comment. For those that fail to understand... It isn't fraud if you go to a gas station that is charging $0.10 more a gallon, and fill up there. It's fraud if you pay for that gas, and its water. The insurance is still buying the same drug, they have just chosen to negotiate a price that is higher with one hospital than another. They have their own reasons for deciding that price. Likewise it would be fraud if the government was paying for it, since they have set rates. To achieve a higher payment would require billing them for some other product.
  - adolph 15y ago
    Taking advantage of the predicament of others is not capitalism; it is price gouging. It would be one thing if the consumer were able to compare prices and other aspects of the product and make a choice based on the consumer's values (of which price may not be the most important thing). This is a bit more like a gas station charging 10x more during a hurricane evacuation.
    - CWuestefeld 15y ago
      Real world example: Scenario 1: A gas station with bags of ice sells out their inventory of ice and beer to a local fraternity, so they can keep their beer cold while they're on the road.. Then a diabetic guy comes in, looking for a way to keep his insulin supply cold. Too bad for him, the ice is gone. Scenario 2: That gas station jacks up the price to $100/bag during the evacuation. The frat guys aren't willing to pay that much for cold beer, so they grumble and just buy some bottled water instead, since that doesn't need to be cold to drink it. The diabetic guy comes in looking for ice. He too grumbles at having to pay $100, but his insulin supply will now stay fresh. This is a little contrived, but I think it illustrates that even in extreme cases, the system of pricing in a free market allows each participant in the market to communicate his priorities and his ability to substitute other goods. My example shows how the frat guys want beer, but not enough to pay that huge amount -- which leaves the way open for the diabetic to show that the ice is really, really important to him.
a5seo 15y ago
Bottom line is that if you're middle class and don't have health insurance, a serious accident could bankrupt you. The system was designed with the idea that you don't exist, and would never actually pay the rack rates that hospitals charge. Planet Money had some good coverage of the joke that is medical billing a couple of years ago: http://www.npr.org/blogs/money/2010/07/06/128338526/ex-ambulance-driver-tries-squeezing-cash-from-health-insurance-companies http://www.npr.org/blogs/money/2010/07/06/128338526/ex-ambul... http://www.npr.org/blogs/money/2010/07/01/128243987/medical-billing-is-a-hassle http://www.npr.org/blogs/money/2010/07/01/128243987/medical-... http://www.npr.org/blogs/money/2009/11/podcast_paying_doctors.html http://www.npr.org/blogs/money/2009/11/podcast_paying_doctor... http://www.npr.org/blogs/money/2009/08/the_wild_wild_west_of_health_c.html http://www.npr.org/blogs/money/2009/08/the_wild_wild_west_of...
- llimllib 15y ago
  This econtalk podcast with the CEO of a hospital system in St. Louis is also very enlightening: http://www.econtalk.org/archives/2008/12/lipstein_on_hos.html http://www.econtalk.org/archives/2008/12/lipstein_on_hos.htm...
- tomjen3 15y ago
  Actually you simply offer to pay whatever they would have gotten from the insurance company -- they are likely to get even less if they sue you into bankruptcy.
- snorkel 15y ago
  I don't understand why an uninsured patient who pays out of pocket can not dispute the charges and prove that the price has been fraudulently inflated due to "cost shifting".
  - a5seo 15y ago
    You can /try/ to negotiate, but you don't have much leverage after the fact. If your BATNA is going bankrupt, you get into a game of brinksmanship. Should you really have to threaten to declare bankruptcy to settle a hospital bill?
jiggy2011 15y ago
Wow , I'm glad I don't have to expend mental energy on stuff like this. Universal Healthcare, get it. It's really good. Honest.
- gee_totes 15y ago
  "The rates that insurance companies pay are negotiated based on what they believe a hospital’s true costs are. But then those rates are jacked up an average of 30% to 50% to make up for money that hospitals lose in treating patients who don’t have private insurance — which is the majority of them. So to make up the difference, they overcharge patients who are insured. This practice is called cost-shifting." I think this article makes a pretty good argument for Universal Healthcare
  - jiggy2011 15y ago
    The best argument for private healthcare is that it creates competition which drives prices down. If you are being charged random amounts of money for the same stuff based on seemingly arbitrary factors then that would suggest this is not happening as it should.
    - dbcfd 15y ago
      The current healthcare model doesn't promote competition. Providers must inflate prices to cover costs, since they know they will be reimbursed by insurance based on the insurers pricing model, not their own. Private healthcare would have to start providing actual costs to insurers, and insurers would have to accept that those costs include losses from people without insurance for competition to take effect.
  - dantheman 15y ago
    There are many objections to universal healthcare, but not healthcare reform (Healthcare Reform != Universal Healthcare). The government has broken healthcare in the US through all sorts scams and tax incentives (why is employment tied to healthcare, wage controls in the 1940s), the solution is not to give the government more control. We can already see this with the medicare "doctor fix" and other broken government programs that actually encourage spending. A better solution would be to allow nonprofits to hold large amounts of money, i.e. save during the good times, and to allow them to operate across state lines.
johnschrom 15y ago
This article only scratches the surface of how messed up our health care system is. I'd be shocked if either hospital system was able to figure out how much money the writer's son actually cost the hospital... the organizations I've worked for take at least a year to calculate cost (if they ever successfully do it), making (as CWuestefeld said) many of their other calculations come largely from guesses. Sometimes that guess is as simple as "just multiply what Medicare pays by 3, and then charge the insurance company for that amount." To compound this problem further, I've worked on federal grant applications that ask what the "cost of care" is. Since the hospital has no means of calculating this, I've been told to just sum the charges for each patient. As the writer experienced, the charges can often be a full order of magnitude greater than the cost. You can imagine how yucky this gets. Someday I would like to walk in to a Best Buy, pick up a Playstation 3, and then inform the cashier that I will only be paying $20 for it. I wonder how well that would go over...
- yummyfajitas 15y ago
  Sometimes that guess is as simple as "just multiply what Medicare pays by 3... Interestingly, medicare does roughly the same thing - multiply the private sector cost by some number less than 1.
  - Symmetry 15y ago
    This seems apropos: http://www.michaeleisen.org/blog/?p=358 http://www.michaeleisen.org/blog/?p=358
- ipince 15y ago
  Why why why do they not know how much things cost them?
joezydeco 15y ago
Something must be tightening up somewhere, though. Just before my daughter went through an outpatient surgical procedure, the hospital (which was acting as the surgical facility only here) called my wife. They noticed we had a high-deductible plan. Would we be willing to prepay part of the O/R costs now? I talked to the hospital at length to try and understand this change in procedure. Apparently the number of patients with high-deductible plans is growing, and people don't realize what that means. When you visit the E/R and your plan has a $5000 deductible, that's what you're gonna pay. People freak out. People refuse to pay. The hospital starts calling to make sure people understand their obligations. It seems the people they use to rely on for cashflow are disappearing.
- yummyfajitas 15y ago
  This is why high deductible insurance offers the best hope for cost control. Too bad it becomes illegal in 2014.
  - _delirium 15y ago
    It depends on what you mean by "high deductible", but the Affordable Care Act specifically includes a circa-$6000 deductible option that would satisfy the individual mandate. See: http://www.kff.org/pullingittogether/What-Conservatives-Won-In-Health-Reform.cfm http://www.kff.org/pullingittogether/What-Conservatives-Won-...
    - yummyfajitas 15y ago
      First dollar coverage of many things is mandated by the ACA. It's not clear yet which things (HHS and other agencies need to first "recommend" the required services), but first dollar coverage is mandated. http://www.healthcare.gov/law/resources/regulations/prevention/regs.html http://www.healthcare.gov/law/resources/regulations/preventi... The fact that high deductible coverage may be possible for the non-"recommended" chunk of services is a good thing, however. (I say "may be possible" since 3 actuarial firms couldn't read the law and come to an agreement on what it says.)
pavelkaroukin 15y ago
My wife recently had some tests done. Hospital's receptionist forgot to add insurance information to wife's profile, so accordingly to hospital's records she was uninsured. Month later we receive bill for ~$1,400. After quick googling we find that if she would go to any local hospital and pay up front with cash, it would cost her maximum ~$400. Obviously, she went back to hospital to find out what's wrong with them (hospital owned by insurance company, so it is very wrong). There they found they did not record her insurance info, excused and said they will send corrected bill. Month later we received her new, corrected bill. $74.68 You guys in USA have something very-very-very wrong with health care industry =)
- ErrantX 15y ago
  hospital owned by insurance company, so it is very wrong Wait what? How on earth is that allowed to happen!
  - steve-howard 15y ago
    Kaiser Permanente has both insurance subsidiaries and hospitals. I can't imagine this is unique.
  - hippich 15y ago
    Texas, Scott & White
- rgraham 15y ago
  'Something' is indeed wrong when no one can seem to even identify what that is. Opacity is the first problem I suppose.
jerrya 15y ago
I have spent a week in a hospital twice, once in the late 90s, once in the lates 00s. Different hospitals, different health plans. Here's the thing: in the 90s experience, I received a complete itemized bill, organized by time and day, for everything that was done to me. I didn't have to pay, my insurance did, but I received copies of the bill. In the 00s, I received virtually nothing. Again, my insurance paid, and I was just given the very briefest of letters explaining that I was covered, and how to handle short term disability, and the like. I found receiving the complete itemized bill truly enlightening. What I learned was: + exactly what was done to me in the hospital and when (I was not in a position to understand when I was admitted) + exactly what was being charged + exactly how expensive everything was + some charges did seem erroneous, perhaps for treatments that did not take place The sum of the bill was staggering. But it was truly a good thing to see the bill. It helped me understand exactly what had happened. It served as a reference for googling my illness and treatment. It helped me understand the costs. It helped me appreciate the efforts by others to get me that coverage. And it let me return some of that by giving me a way to check for mistakes in the billing. I hope everyone has the coverage they need when they need it. I do think that part of every medical service should be a completely itemized bill. I think it's a useful reference for the patient, I think it's a simple way to inform everyone on the complexities and costs of healthcare, and it's a simple way to encourage informed use, and correct mistakes. If everyone had these bills, there would be websites developed to explain, compare, manage them, and it would help eliminate many of the games that hospitals seem forced to play. So it would also encourage better accounting and put better incentives in place to have that better accounting.
- klenwell 15y ago
  I agree. I've been active in helping my grandparents manage their affairs the last few years and I find it interesting how frictionless it is for them, under the Kaiser HMO, to get medical services, especially prescriptions. I find it a little too frictionless at times. They sometimes show me the paperwork Kaiser gives them, but I don't remember ever seeing an itemized bill. I'd find it insightful, as I think they would too, to see a list of expenses. I'd also like them, and everyone (especially seniors), to see how much of those costs the government bears. Although I don't get too deeply into the politics of it with them, my grandparents are part of that Fox News senior demographic that would probably happily repeal "Obamacare" while being kept blissfully unaware of the benefits they enjoy because of government assistance.
blyuher 15y ago
FYI: there is a recent big thread on reddit about how a man was charged $105k for one night hospital stay: http://www.reddit.com/r/WTF/comments/ngngy/merry_fucking_christmas_what_to_expect_for_1/ http://www.reddit.com/r/WTF/comments/ngngy/merry_fucking_chr...
dbcfd 15y ago
Further obfuscation on the part of the medical industry to hide the cost of covering the uninsured. Hospitals need reimbursement, insurance only wants to pay for your procedures, not the cost of others receiving treatment without insurance. Taxed as single payer or taxed as hidden costs, anyone with insurance is being taxed for those without insurance. At least with single payer, you know those receiving treatment are now kicking something in as well.
- roc 15y ago
  Absolutely. Cost-shifting is why philosophical discussions about whether the US should have private insurance or socialized medicine (or even some hybrid) are pointless. Our society has long since decided that doctors shouldn't let people die in the gutter and that they shouldn't be then themselves forced into poverty for serving society's will. So everyone who pays, whenever they pay, pays more to cover the rest. So the whole question of whether we should pay is a charade. We do pay and if Americans were remotely willing to let people die in the gutter, there would already be people dying in the gutter. People might as well be arguing about whether or not we ought to live on Mars next year. [2] [1] Many young people in the US spend significant amounts of time uninsured. Many families will also fall in and out of coverage as household members switch jobs, as marital statuses change, etc. Most of us make largely the same decisions, but by dumb luck alone some will acquire an illness or be involved in an accident during a period of non-coverage and be, if not bankrupted outright, seriously financially penalized for the grand sin of having only been as conservative and careful as everyone else. [2] Which is to say: a question that isn't wrong to discuss, but one that's irrelevant to any practical discussion about housing costs.
js2 15y ago
Tangent: I was curious about the widget the article uses to present the bill as it's really well done. It's provided by DocumentCloud, which I'd never heard of before: DocumentCloud is a catalog of primary source documents and a tool for annotating, organizing and publishing them on the web. Documents are contributed by journalists, researchers and archivists. http://documentcloud.org/ http://documentcloud.org/
- lizzard 15y ago
  DocumentCloud is pretty cool. It won a major Knight Foundation grant and a bunch of newspapers are using it now.
joeyespo 15y ago
The print-friendly version, with no ads and all on one page: http://www.nydailynews.com/opinion/anatomy-a-ripoff-article-1.1002077?print http://www.nydailynews.com/opinion/anatomy-a-ripoff-article-...
tansey 15y ago
Can someone please explain to me why it would be a bad idea to make it illegal for hospitals to negotiate rates? It seems like the majority of the problem here is that we let the insurance companies bargain with hospitals, so everyone pays a different rate. Just make everyone pay the same rate and let insurance worry about how to drive the costs down across the board by encouraging people to get/stay healthier and reducing the burden on the hospital.
- drumdance 15y ago
  This American Life did a story on this a while back. I don't remember all the details, but it turns out that insurance companies have very little bargaining power with hospitals in general. What ends up happening is that one or two carriers dominate a given local market and get preferential pricing, and everyone else either leaves or doesn't try hard to compete.
brianbreslin 15y ago
Not to sound like an ass, but their kid choked twice in 2 weeks?? Anyone else see a problem there?
- lizzard 15y ago
  Did you finish reading the article? The kid choked twice in two weeks because he had an inflammation or infection of the esophagus, which the second hospital diagnosed and treated.
- mcherm 15y ago
  If you read the full article, he explains that there was an underlying medical cause and that the second hospital found it.
  - brianbreslin 15y ago
    Ah I didn't see that part. Now I do seem like an ass.
    - epistasis 15y ago
      Even without an underlying medical cause, what sort of "problem" do you see with a child choking twice? Are you insinuating that it's the child's or parents' problem? I don't understand what you could be getting at.
lizzard 15y ago
This is a big part of what's driving people into poverty in this country.
viandante 15y ago
The more I see this prices, the more I think that: 1) we have too less doctors due to stupid closed numbers policies in schools; 2) we have a patent system that allows companies to legally rip us of for medicines and machinery. With an aging population, this is just not sustainable.
Mc_Big_G 15y ago
The real scam perpetrated by hospitals and doctor's offices is rebilling. It works like this: 1) They send a bill with no information about the services performed. 2a) You waste your time tracking down what it was and then pay it. OR 2b) You pay the bill without wasting your time to verify. 3) They wait somewhere between a month and 6 months. 4) After receiving payment, they bill you again for the same services. 5a) You waste your time tracking down the services and the fact that you already paid. Then you waste more time calling and forcing them to stop billing you. You get an "Oops, sorry! I can't imagine how that happened." OR 5b) You pay the bill without wasting your time to verify. Repeat steps 3 through 5 until they've sucked as much time and money out of you as possible.
- droithomme 15y ago
  Yes. There is extensive intentional fraud and corruption in the system, along with rampant profiteering that exists regardless of whether an entity has been granted "non-profit" status. (Non-profit doesn't mean you can't pay everyone on the board of directions millions in compensation.) Each time I've dealt with it (mostly helping relatives with their confusing bills) there's been double and triple billing, and billing for procedures not performed, and for work done by people that weren't present, or on days the patient wasn't even present. The more complex the treatment, the more entities jump in to the feeding trough for a share. You have to keep extensive records of everything actually done, which is not always possible if you are not with the patient 24/7. Then when the bills come they are full of hundreds of cryptic codes. You might have some procedure done that takes 30 minutes, and get 20 different bills from 10 different entities, sent over a period of 18 months following the procedure, which apparently now lasted days and involved dozens of people, medicines, tools, and tests, some done multiple times. The primary reason medicine costs crazy amounts in the US is because of corruption and fraud. Sending a lot of these people to prison could do a lot to reduce costs and straighten things out. That and single payer.
  - sethg 15y ago
    You don’t even need there to be conscious corruption. If the system churns out incorrect bills through simple error (perhaps because the hospital never bothered to drag its accounting system out of the 1970s), and an overcharge is just as likely to be paid as a correct bill¹, then the bad system will stay in place without anyone twirling his mustache and sneering about his obscene profits. ¹Which is to say: Consumers in bad financial situations will dispute or default on overcharges, but they’ll do the same for correct bills. Insurance companies will occasionally dispute an overcharge, leading to six months of paperwork back and forth until they agree on what to pay, but they’ll put correct bills through the same wringer.
gizzlon 15y ago
I find the name of the hospital highly ironic. After all, didn't the good Samaritan pay for the treatment and "hospitalization" of the victim? One would expect a stay at the Good Samaritan Hospital to be free.
derda 15y ago
Every time I read about the US health-care system it amazes me more (in a negative way). The point that I find worrying the most is, that it is impossible to figure out the costs before you get treatment. Also I am surprised, that there are no prenegotiated rates for treatment-procedures. The way it works in Germany is, that there is a catalog which contains all the standard procedures and a price that can be charged for the treatment/procedure, this system dates back to 1924. While "upselling" (doctors performing tests that are not necessary) is pretty common, prices are quite reasonable. Actually there are two catalogs, one for private insured patients and people without insurance (its almost impossible to be uninsured in Germany) and another one for public insured, the later one is based on a points system rather than prices and is supposed to be an administrative nightmare for doctors.
- Loic 15y ago
  This is not an administrative nightmare for doctors. They all have the software, put the insurance card in the slot, check the right cases and everything is immediately done. The real nightmare for doctors is the private insurances because they need to manage the invoicing themselves. But they get more money out of the privately insured, so they are doing it happily. If you take the time to discuss with doctors (I have several friends who are doctors in Germany and my family is a doctor family in France) their life is really nice. Way more relaxed than any other engineer working for a company under standard pressure. The only ones who are pushed like any other worker in a company are the ones in hospitals.
turar 15y ago
I could never understand why there's such a huge financial difference in the way emergencies that threaten human lives are dealt with in the US. You never expect a huge bill from the fire department or the police department should you require their urgent help. How is ER different?
- deleted 15y ago
  [deleted]
- asmithmd1 15y ago
  The US has socialized fire fighting and policing. We have decided not to socialize medicine.
  - asmithmd1 15y ago
    This is absolutely true. Firefighting used to be handled by the private sector through insurance companies. This was "socialized" mainly because of the free rider problem - firefighters would put out a fire even if the house was Not insured. Now all houses in a town pay for firefighting through local taxes.
rskar 15y ago
tldr; (exactly from the article): "The driving force behind all this, according to Aetna, is the way hospitals and the government do business. The rates that insurance companies pay are negotiated based on what they believe a hospital’s true costs are. But then those rates are jacked up an average of 30% to 50% to make up for money that hospitals lose in treating patients who don’t have private insurance - which is the majority of them. So to make up the difference, they overcharge patients who are insured. This practice is called cost-shifting. In a typical hospital, upward of half the patients are covered by Medicare and Medicaid - neither of which pays the full cost of treatment. Another 10% to 15% of patients are uninsured; maybe they can afford to pay, but more likely they’re broke and can’t cover their bills either. Any profit the hospital makes must come out of the remaining 40% - patients with private insurance." ---- Considering that the per capita medical costs in the US are about twice that of the other OECD countries, clearly there's more than just cost-shifting going on. Whatever your views, as a matter of law (well before "ObamaCare") we are still going to subsidize medical care for the old, poor, children, and the irresponsible through our taxes and direct payments.
RyanMcGreal 15y ago
And we're supposed to believe that universal, single payer health care is inefficient and wasteful?
WalterBright 15y ago
This contains a detailed explanation of why costs are so high: http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/ http://www.theatlantic.com/magazine/archive/2009/09/how-amer...
tdfx 15y ago
I'm in the US. I just recently switched to a high-deductible plan last year with an HSA account. My deductible is $5000 and my monthly premium is $98 (for an individual plan -- self employed here). I have and plan to always contribute the maximum amount to my HSA each year. My plan covers 2 checkup visits a year, and everything else I pay out of pocket up until I hit my deductible. I really think this is the way insurance should be. I have a strong incentive not to needlessly get every possible test done or seek medical care that I don't need. I check my bills very carefully. I already located urgent care clinics that I can go to when I don't really need to visit the ER. I won't go to the doctor for a runny nose. It makes consumers care about costs. I'm far from an expert on US healthcare and I'd love to get other peoples' more informed views on this. Could we put everyone on high deductible plans? If people can't afford their premiums or deductibles then perhaps there could be government assistance to pay those things based on their income. What would the pitfalls be in such a system?
- drumdance 15y ago
  Just curious, what's the maximum you can contribute? If it's $5k, that works out to about $416/month, so you're total monthly cost is $514.
  - bzbarsky 15y ago
    The maximum you can contribute is somewhat inflation-pegged. As of this year, it's $3050 for an individual plan and $6150 for a family plan (plus an extra $1000 per person involved over the age of 55). Note that the contribution is pre-tax, so if you're at the 25% marginal federal rate and contribute $3000 you have to compare that to getting at most ~$2020 in after-tax money: HSA contributions are not subject to FICA (7.65%) or federal income tax (25% on the margin per above assumption). They're not subject to state income taxes either; those can range from 0% to 12% depending on state and income level. Another important thing to keep in mind is that this is a health _savings_ account. Your contribution stays in the account if you're not spending it on actual medical care; it doesn't disappear at year end. Money in the HSA can be invested if desired (though it's probably a good idea to leave at least the deductible amount in liquid funds). Interest, dividends, and capital gains on the money are not taxed. When you reach retirement age, you can withdraw the money for any reason, not just medical care. So basically an HSA is just like a traditional IRA in terms of tax treatment, but with the added ability to make early withdrawals to pay for medical care. The only drawback is that you can only open one if you have a high-deductible plan (defined as at least $1200 for an individual and $2400 for a family, as of this year). So you're basically gambling that the tax savings and possible future growth of the money, plus what you save on premiums, will be higher than the deductible. Going back to our case of a single individual at the 25% marginal rate, with $100 premiums for the high-deductible plan and $300 premiums for the low-deductible plan, the difference in premiums is $2400. If you're depositing those $3000, your tax savings are about $1000. So you'd have to spend more than $3600/year on average on medical care to lose out. For most young-and-healthy folks, spending on medical care is likely to be less than this. Note that the 25% bracket starts at a taxable income of about $34,500, so figure a salary of at most $50,000. If you're earning more than that and are single, chances are an HSA is a good deal for you.
jisaacstone 15y ago
Interesting that California requires posted fees. I'd be interested to see a study of the effects. Back when I was uninsured I was very frustrated that no one anywhere ever knew how much anything cost, and frequently gave false information.
marciovm123 15y ago
For anyone who smelled a startup opportunity increasing pricing transparency in healthcare, check out Castlight Health. They were founded in 2008 to attack this exact problem and are making a killing targeting large employers.
Ex-PraliteMonk 15y ago
How much of the silliness in U.S. health care is caused directly by the tax code? For instance the largest health insurance company in my area also owns several hospitals. The hospital charges the insurance company for a procedure. The insurance company pays only half that amount. The rest I believe is written off by the hospital as a loss which lowers their taxes. But both the hospital and the insurance company are the same company.

232 points by rglovejoy 15y ago

deleted 15y ago

[deleted]

My wife is the manager of budget and reimbursement at a hospital, and from many conversations with her, I can imagine that this article is accurate. However, if I were writing this, I would have given greater emphasis to the effect that Medicare has on these problems. The article does mention that Medicare typically pays fees that are below actual cost for the procedures, and that hospitals must therefore increase charges to other customers (the article says they must do this to make profit, but actually they must do this just to break even and stay in business). But the problem goes even farther than that. Because Medicare is essentially a monopsony and gets to call the shots as far as charges are concerned, it actually matters far less what the actual costs are. As a result, few hospitals today have modern cost accounting processes, and so they only have wild guesses as to what a given procedure costs. Obviously, then, their charge list is going to be made largely from guesswork, and so it's very much expected that two different hospitals will, at the micro per-item level at least, have very different charges. Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. And in the coming years this isn't going to get any better. What you are likely to see, though, is increased politicization of these charges, as the political process takes even greater control of the industry.

rdtsc 15y ago
> Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. You make it sound like one follows from the other in an obvious way. Can you expand on why that would be?
- CWuestefeld 15y ago
  You make it sound like one follows from the other in an obvious way. I think it does follow logically. I'm assuming that the regulations were intended to serve some purpose. If the system was working as the regulators/legislators wanted, there would have been no point in regulation. The regulations were created for the purpose of altering the way things would normally work out. By analogy, if we see a canal, it's probably a safe assumption that the waterway doesn't resemble the natural flow of water. The only reason to build the canal is that something was needed to be different from the water features that were present.
  - saucetenuto 15y ago
    Speaking as someone who doesn't know much about this stuff, your analogy reads more like, "the canal diverted the waterway, so tigers devoured the Pope". It may well be true, but you need to flesh it out more: explain how the new course flooded the tigers' habitat, forcing them to migrate to Rome.
    - jellicle 15y ago
      The person you're responding to believes that if medical charges are vastly different between providers it must be due to evil government regulation, because after all in other sorts of stores we never see wildly varying prices for the same item and healthcare, where people have plenty of time to comparison shop (even if you're choking on turkey, you still have a few minutes to contact the various local hospitals and determine which provides cheaper ER service before you pass out) is a perfect example of a transparent market.
      - CWuestefeld 15y ago
        The person you're responding to believes that The person he's talking to doesn't believe that putting a strawman argument into someone else's mouth is an honest debate tactic. This question has nothing to do with ideology. As a matter of pure logic, regulation changes what the market is doing naturally; that's the whole point of the regulation. This is a non-judgmental conclusion. One doesn't have to say that the market state was good or bad, or that the regulated state is good or bad. Simply that a regulated market differs from a free market. That's it. Now, given that the system is highly regulated, it's clear that the regulators have screwed up. However, this on its own doesn't tell us that the free market was good; it just tells us that the current regulatory regime is crap.
furyg3 15y ago
> Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. This is a pretty big logical jump. I'm American, but have been living in the Netherlands for a while. Health care is probably more regulated here than in the US, yet in all of the ER visits I've experienced (myself or friends/family) I've never seen bills like that. Regulation does not have to cause bills like that. Something is very wrong if sick people in life threatening situations are being charged hundreds (or thousands!) of times for the same care based on whether or not they have insurance. That screams "more regulation is necessary" to me.
- dsplittgerber 15y ago
  I'm from Germany and you do realize that over here (don't know about the exact differences) privately-insured patients (who opted out off the 'mandatory' insurance scheme) basically pay a LOT more for any given medical service just so that patients covered under the mandatory insurance can get treated at all? It's like a giant (inefficient) money redistribution scheme, in all the worst ways imaginable. Regulation does actually cause bills like that. It's just that in Europe, you don't ever see them.
  - tankenmate 15y ago
    Actually I think you'll find that billing like the kind you see in the US doesn't happen in Germany. The US spends nearly twice as much per capita than Germany for a comparable level of service[1]; this is hard to judge but life expectancy is a reasonable proxy, people in Germany on average live about the same. The UK with near mandatory, see below, universal healthcare the cost of per capita is lower still [1 ibid]. In the UK if you opt out of public healthcare you can't mix and match services beyond the GP level, this may change in the future. Obviously with a mandatory universal care the overall cost to the public at large stands a high chance of being lower; efficiencies of scale. The downside is that at the individual level you may be subject to "postcode lottery" healthcare. In many countries this leads to individualism raising the costs of healthcare for everyone. Everyone wants to be treated the best; the problem is that regardless of the system you chose this is impossible. [1] http://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_(PPP)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_total_heal...
jbooth 15y ago
Hang on, so medicare told the hospitals and insurance companies to run their businesses that way? The transaction described in the article was entirely between private business entities. I get that they set their prices in a way that distorts the market to some extent but it seems that that distortion is far less than what the really-smart-guys-in-suits have been able to manage all by themselves. I understand the impulse that markets make things better. I really do. Look at computer parts for example, there's a robust market that keeps driving down prices and really delivers. But what about the healthcare industry resembles a sane market at all? There's effectively no market forces at work, due to the way that private sector businesses have structured it.
- CWuestefeld 15y ago
  I'll be honest. I don't get why hospitals continue to play the game. If I were running the place, I'd just pull out of Medicare. It seems that they're afraid of the millions of dollars of lost revenue, without considering the greater sum of expenses that they'd free up.
  - jbooth 15y ago
    I sincerely doubt that the bean-counters at hospital are losing a ton of money on medicare but are too confused by the large 'revenue' figure to subtract a larger 'expenses' figure and realize they're making a loss. As a matter of fact, I can't recall ever reading an op/ed or anything by a hospital administrator complaining that they're being fleeced by medicare and losing a bunch of money on it. But I've seen a billion op/eds in the same template as TFA, bemoaning the byzantine and obfuscatory private insurance regime as something that completely destroys any market forces that should exist in the industry. I mean, one hospital charged one thousand times as much as another for the same treatment. I have to conclude that bringing up medicare while the private insurance industry system is this flagrantly broken is nothing but a red herring.
    - CWuestefeld 15y ago
      And I'm telling you that my wife is that bean counter. Her job is (a) budgeting, and (b) getting reimbursement from Medicare and Medicaid. As well as anyone in the organization (which is to say, not too well, because of the deficiencies with cost accounting that I mentioned), she knows those numbers. I don't think a month goes by when I don't ask her this question. Something always comes up, where she's saying "Medicare just denied another $500K payment" or somesuch. And I'll say to her "you live by the sword, you die by the sword". She admits that the net profit via Medicare is negative. But the decisions makers don't want to consider it. In this case, it's possible that they consider it their mission because they are a Catholic hospital. I can't see any answer in the general case.
torontos 15y ago
That is a very good point re: medicare. I was a management consultant in the healthcare industry in a previous life. One interesting study I did found a direct correlation between percent of patients on medicare/medicaid and hospital profitability... The higher the percent of medicare and medicaid patients, the lower the profitability. The correlation was essentially a straight line.
Lagged2Death 15y ago
Medical care is the most highly regulated industry in the economy... Uh huh. Talk to the (quite profitable) utility companies about that.
- CWuestefeld 15y ago
  See, e.g., http://econlib.org/library/Enc/HealthCare.html http://econlib.org/library/Enc/HealthCare.html - - - - - Quote Regulation and the Health Care Market The health care industry is one of the most heavily regulated industries in the United States. These regulations stem from efforts to ensure quality, to facilitate the government’s role as purchaser of care, and to respond to provider efforts to increase the demand for their services. Hospitals and nursing homes are licensed by the state and must comply with quality and staffing requirements to maintain eligibility for participation in federal programs. Physicians and other health professionals are licensed by the states. Prescription drugs and medical devices are regulated by the Food and Drug Administration (see pharmaceuticals: economics and regulation). Some state governments require government permission before allowing a hospital or nursing home to be built or extensively changed. All of the above regulations restrict supply and raise the price of health care; interestingly, those who lobby for such regulations are medical providers, not consumers, presumably because they want to limit competition. Some state governments limit the extent to which managed care plans may selectively contract with providers. All state governments have imposed laws governing the content of insurance packages and the factors that may be used to determine insurance rates. While these may enhance quality, they do impose costs that raise the price of health insurance and increase the number of uninsured. In testimony before the Joint Economic Committee of the Congress, one analyst reported the annual net cost of regulation in the health care industry to be $128 billion.10
drumdance 15y ago
Here is a good article about how wildly Medicare costs can vary from place to place: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_... The second highest reimbursement district in the country is in Texas, which passed a draconinan tort reform law back in the 90s (if memory serves), so you can't blame courts or defensive medicine directly.
- tsotha 15y ago
  Texas is expensive for the same reason Southern California is expensive - a high percentage of the patient population is illegal aliens who a) can't afford the service and b) skip out on the bill.

deleted 15y ago

[deleted]

moozeek 15y ago

As far as I can tell from the facts given in the EU you would have paid about the same amount the author had to pay out of his own pocket (~ 700 USD). If you had no health insurance at all.

arethuza 15y ago
The countries in the EU all have pretty different ways of paying for health care. In the UK if you went to a NHS hospital (which you would do if it was an emergency) you would pay nothing - there would never be any charges for the hospital treatment and drugs administered in a hospital aren't charged. NB: Note that NHS is based on treatment being "free at the point of delivery" - everyone knows that it's not "free" and we pay for it through NI and other taxes and people who can't (or even won't) still get the same treatment.
viandante 15y ago
As far as I know in EU public insurance is mandatory, so you would never pay such ammount.
- _delirium 15y ago
  It varies a lot by country. In Denmark, all hospital visits are free to anyone, whether a resident or visitor. In other countries, non-EU visitors to an ER might pay substantial amounts, though usually still quite a bit less than in the US. Also, some EU countries tie insurance to payroll-tax contributions, so the unemployed may not be covered.
  - viandante 15y ago
    Well, been living in 4 European countries and never paid anything but in mine (Italy). I am also pretty sure unemployed are covered too. Don't know in Germany, where I still can't get how insurance works, but I would guess there is a way to get cover there too.
- gcp 15y ago
  In Germany its optional starting from a certain income level. (At least it was x years ago)

CaptainZapp 15y ago

Sorry, but isn't it just outright fraud to charge > 400$ for a medication, which has a "retail price" of a few $?

dbcfd 15y ago
Nope, that's capitalism. Someone (the insurance) is willing to pay that price. It'd only be fraud if the government was paying for it. [Edit]Some hate against my comment. For those that fail to understand... It isn't fraud if you go to a gas station that is charging $0.10 more a gallon, and fill up there. It's fraud if you pay for that gas, and its water. The insurance is still buying the same drug, they have just chosen to negotiate a price that is higher with one hospital than another. They have their own reasons for deciding that price. Likewise it would be fraud if the government was paying for it, since they have set rates. To achieve a higher payment would require billing them for some other product.
- adolph 15y ago
  Taking advantage of the predicament of others is not capitalism; it is price gouging. It would be one thing if the consumer were able to compare prices and other aspects of the product and make a choice based on the consumer's values (of which price may not be the most important thing). This is a bit more like a gas station charging 10x more during a hurricane evacuation.
  - CWuestefeld 15y ago
    Real world example: Scenario 1: A gas station with bags of ice sells out their inventory of ice and beer to a local fraternity, so they can keep their beer cold while they're on the road.. Then a diabetic guy comes in, looking for a way to keep his insulin supply cold. Too bad for him, the ice is gone. Scenario 2: That gas station jacks up the price to $100/bag during the evacuation. The frat guys aren't willing to pay that much for cold beer, so they grumble and just buy some bottled water instead, since that doesn't need to be cold to drink it. The diabetic guy comes in looking for ice. He too grumbles at having to pay $100, but his insulin supply will now stay fresh. This is a little contrived, but I think it illustrates that even in extreme cases, the system of pricing in a free market allows each participant in the market to communicate his priorities and his ability to substitute other goods. My example shows how the frat guys want beer, but not enough to pay that huge amount -- which leaves the way open for the diabetic to show that the ice is really, really important to him.

a5seo 15y ago

Bottom line is that if you're middle class and don't have health insurance, a serious accident could bankrupt you. The system was designed with the idea that you don't exist, and would never actually pay the rack rates that hospitals charge. Planet Money had some good coverage of the joke that is medical billing a couple of years ago: http://www.npr.org/blogs/money/2010/07/06/128338526/ex-ambulance-driver-tries-squeezing-cash-from-health-insurance-companies http://www.npr.org/blogs/money/2010/07/06/128338526/ex-ambul... http://www.npr.org/blogs/money/2010/07/01/128243987/medical-billing-is-a-hassle http://www.npr.org/blogs/money/2010/07/01/128243987/medical-... http://www.npr.org/blogs/money/2009/11/podcast_paying_doctors.html http://www.npr.org/blogs/money/2009/11/podcast_paying_doctor... http://www.npr.org/blogs/money/2009/08/the_wild_wild_west_of_health_c.html http://www.npr.org/blogs/money/2009/08/the_wild_wild_west_of...

llimllib 15y ago
This econtalk podcast with the CEO of a hospital system in St. Louis is also very enlightening: http://www.econtalk.org/archives/2008/12/lipstein_on_hos.html http://www.econtalk.org/archives/2008/12/lipstein_on_hos.htm...
tomjen3 15y ago
Actually you simply offer to pay whatever they would have gotten from the insurance company -- they are likely to get even less if they sue you into bankruptcy.
snorkel 15y ago
I don't understand why an uninsured patient who pays out of pocket can not dispute the charges and prove that the price has been fraudulently inflated due to "cost shifting".
- a5seo 15y ago
  You can /try/ to negotiate, but you don't have much leverage after the fact. If your BATNA is going bankrupt, you get into a game of brinksmanship. Should you really have to threaten to declare bankruptcy to settle a hospital bill?

jiggy2011 15y ago

Wow , I'm glad I don't have to expend mental energy on stuff like this. Universal Healthcare, get it. It's really good. Honest.

gee_totes 15y ago
"The rates that insurance companies pay are negotiated based on what they believe a hospital’s true costs are. But then those rates are jacked up an average of 30% to 50% to make up for money that hospitals lose in treating patients who don’t have private insurance — which is the majority of them. So to make up the difference, they overcharge patients who are insured. This practice is called cost-shifting." I think this article makes a pretty good argument for Universal Healthcare
- jiggy2011 15y ago
  The best argument for private healthcare is that it creates competition which drives prices down. If you are being charged random amounts of money for the same stuff based on seemingly arbitrary factors then that would suggest this is not happening as it should.
  - dbcfd 15y ago
    The current healthcare model doesn't promote competition. Providers must inflate prices to cover costs, since they know they will be reimbursed by insurance based on the insurers pricing model, not their own. Private healthcare would have to start providing actual costs to insurers, and insurers would have to accept that those costs include losses from people without insurance for competition to take effect.
- dantheman 15y ago
  There are many objections to universal healthcare, but not healthcare reform (Healthcare Reform != Universal Healthcare). The government has broken healthcare in the US through all sorts scams and tax incentives (why is employment tied to healthcare, wage controls in the 1940s), the solution is not to give the government more control. We can already see this with the medicare "doctor fix" and other broken government programs that actually encourage spending. A better solution would be to allow nonprofits to hold large amounts of money, i.e. save during the good times, and to allow them to operate across state lines.

johnschrom 15y ago

This article only scratches the surface of how messed up our health care system is. I'd be shocked if either hospital system was able to figure out how much money the writer's son actually cost the hospital... the organizations I've worked for take at least a year to calculate cost (if they ever successfully do it), making (as CWuestefeld said) many of their other calculations come largely from guesses. Sometimes that guess is as simple as "just multiply what Medicare pays by 3, and then charge the insurance company for that amount." To compound this problem further, I've worked on federal grant applications that ask what the "cost of care" is. Since the hospital has no means of calculating this, I've been told to just sum the charges for each patient. As the writer experienced, the charges can often be a full order of magnitude greater than the cost. You can imagine how yucky this gets. Someday I would like to walk in to a Best Buy, pick up a Playstation 3, and then inform the cashier that I will only be paying $20 for it. I wonder how well that would go over...

yummyfajitas 15y ago
Sometimes that guess is as simple as "just multiply what Medicare pays by 3... Interestingly, medicare does roughly the same thing - multiply the private sector cost by some number less than 1.
- Symmetry 15y ago
  This seems apropos: http://www.michaeleisen.org/blog/?p=358 http://www.michaeleisen.org/blog/?p=358
ipince 15y ago
Why why why do they not know how much things cost them?

joezydeco 15y ago

Something must be tightening up somewhere, though. Just before my daughter went through an outpatient surgical procedure, the hospital (which was acting as the surgical facility only here) called my wife. They noticed we had a high-deductible plan. Would we be willing to prepay part of the O/R costs now? I talked to the hospital at length to try and understand this change in procedure. Apparently the number of patients with high-deductible plans is growing, and people don't realize what that means. When you visit the E/R and your plan has a $5000 deductible, that's what you're gonna pay. People freak out. People refuse to pay. The hospital starts calling to make sure people understand their obligations. It seems the people they use to rely on for cashflow are disappearing.

yummyfajitas 15y ago
This is why high deductible insurance offers the best hope for cost control. Too bad it becomes illegal in 2014.
- _delirium 15y ago
  It depends on what you mean by "high deductible", but the Affordable Care Act specifically includes a circa-$6000 deductible option that would satisfy the individual mandate. See: http://www.kff.org/pullingittogether/What-Conservatives-Won-In-Health-Reform.cfm http://www.kff.org/pullingittogether/What-Conservatives-Won-...
  - yummyfajitas 15y ago
    First dollar coverage of many things is mandated by the ACA. It's not clear yet which things (HHS and other agencies need to first "recommend" the required services), but first dollar coverage is mandated. http://www.healthcare.gov/law/resources/regulations/prevention/regs.html http://www.healthcare.gov/law/resources/regulations/preventi... The fact that high deductible coverage may be possible for the non-"recommended" chunk of services is a good thing, however. (I say "may be possible" since 3 actuarial firms couldn't read the law and come to an agreement on what it says.)

pavelkaroukin 15y ago

My wife recently had some tests done. Hospital's receptionist forgot to add insurance information to wife's profile, so accordingly to hospital's records she was uninsured. Month later we receive bill for ~$1,400. After quick googling we find that if she would go to any local hospital and pay up front with cash, it would cost her maximum ~$400. Obviously, she went back to hospital to find out what's wrong with them (hospital owned by insurance company, so it is very wrong). There they found they did not record her insurance info, excused and said they will send corrected bill. Month later we received her new, corrected bill. $74.68 You guys in USA have something very-very-very wrong with health care industry =)

ErrantX 15y ago
hospital owned by insurance company, so it is very wrong Wait what? How on earth is that allowed to happen!
- steve-howard 15y ago
  Kaiser Permanente has both insurance subsidiaries and hospitals. I can't imagine this is unique.
- hippich 15y ago
  Texas, Scott & White
rgraham 15y ago
'Something' is indeed wrong when no one can seem to even identify what that is. Opacity is the first problem I suppose.

jerrya 15y ago

I have spent a week in a hospital twice, once in the late 90s, once in the lates 00s. Different hospitals, different health plans. Here's the thing: in the 90s experience, I received a complete itemized bill, organized by time and day, for everything that was done to me. I didn't have to pay, my insurance did, but I received copies of the bill. In the 00s, I received virtually nothing. Again, my insurance paid, and I was just given the very briefest of letters explaining that I was covered, and how to handle short term disability, and the like. I found receiving the complete itemized bill truly enlightening. What I learned was: + exactly what was done to me in the hospital and when (I was not in a position to understand when I was admitted) + exactly what was being charged + exactly how expensive everything was + some charges did seem erroneous, perhaps for treatments that did not take place The sum of the bill was staggering. But it was truly a good thing to see the bill. It helped me understand exactly what had happened. It served as a reference for googling my illness and treatment. It helped me understand the costs. It helped me appreciate the efforts by others to get me that coverage. And it let me return some of that by giving me a way to check for mistakes in the billing. I hope everyone has the coverage they need when they need it. I do think that part of every medical service should be a completely itemized bill. I think it's a useful reference for the patient, I think it's a simple way to inform everyone on the complexities and costs of healthcare, and it's a simple way to encourage informed use, and correct mistakes. If everyone had these bills, there would be websites developed to explain, compare, manage them, and it would help eliminate many of the games that hospitals seem forced to play. So it would also encourage better accounting and put better incentives in place to have that better accounting.

klenwell 15y ago
I agree. I've been active in helping my grandparents manage their affairs the last few years and I find it interesting how frictionless it is for them, under the Kaiser HMO, to get medical services, especially prescriptions. I find it a little too frictionless at times. They sometimes show me the paperwork Kaiser gives them, but I don't remember ever seeing an itemized bill. I'd find it insightful, as I think they would too, to see a list of expenses. I'd also like them, and everyone (especially seniors), to see how much of those costs the government bears. Although I don't get too deeply into the politics of it with them, my grandparents are part of that Fox News senior demographic that would probably happily repeal "Obamacare" while being kept blissfully unaware of the benefits they enjoy because of government assistance.

blyuher 15y ago

FYI: there is a recent big thread on reddit about how a man was charged $105k for one night hospital stay: http://www.reddit.com/r/WTF/comments/ngngy/merry_fucking_christmas_what_to_expect_for_1/ http://www.reddit.com/r/WTF/comments/ngngy/merry_fucking_chr...

dbcfd 15y ago

Further obfuscation on the part of the medical industry to hide the cost of covering the uninsured. Hospitals need reimbursement, insurance only wants to pay for your procedures, not the cost of others receiving treatment without insurance. Taxed as single payer or taxed as hidden costs, anyone with insurance is being taxed for those without insurance. At least with single payer, you know those receiving treatment are now kicking something in as well.

roc 15y ago
Absolutely. Cost-shifting is why philosophical discussions about whether the US should have private insurance or socialized medicine (or even some hybrid) are pointless. Our society has long since decided that doctors shouldn't let people die in the gutter and that they shouldn't be then themselves forced into poverty for serving society's will. So everyone who pays, whenever they pay, pays more to cover the rest. So the whole question of whether we should pay is a charade. We do pay and if Americans were remotely willing to let people die in the gutter, there would already be people dying in the gutter. People might as well be arguing about whether or not we ought to live on Mars next year. [2] [1] Many young people in the US spend significant amounts of time uninsured. Many families will also fall in and out of coverage as household members switch jobs, as marital statuses change, etc. Most of us make largely the same decisions, but by dumb luck alone some will acquire an illness or be involved in an accident during a period of non-coverage and be, if not bankrupted outright, seriously financially penalized for the grand sin of having only been as conservative and careful as everyone else. [2] Which is to say: a question that isn't wrong to discuss, but one that's irrelevant to any practical discussion about housing costs.

js2 15y ago

Tangent: I was curious about the widget the article uses to present the bill as it's really well done. It's provided by DocumentCloud, which I'd never heard of before: DocumentCloud is a catalog of primary source documents and a tool for annotating, organizing and publishing them on the web. Documents are contributed by journalists, researchers and archivists. http://documentcloud.org/ http://documentcloud.org/

lizzard 15y ago
DocumentCloud is pretty cool. It won a major Knight Foundation grant and a bunch of newspapers are using it now.

joeyespo 15y ago

The print-friendly version, with no ads and all on one page: http://www.nydailynews.com/opinion/anatomy-a-ripoff-article-1.1002077?print http://www.nydailynews.com/opinion/anatomy-a-ripoff-article-...

tansey 15y ago

Can someone please explain to me why it would be a bad idea to make it illegal for hospitals to negotiate rates? It seems like the majority of the problem here is that we let the insurance companies bargain with hospitals, so everyone pays a different rate. Just make everyone pay the same rate and let insurance worry about how to drive the costs down across the board by encouraging people to get/stay healthier and reducing the burden on the hospital.

drumdance 15y ago
This American Life did a story on this a while back. I don't remember all the details, but it turns out that insurance companies have very little bargaining power with hospitals in general. What ends up happening is that one or two carriers dominate a given local market and get preferential pricing, and everyone else either leaves or doesn't try hard to compete.

brianbreslin 15y ago

Not to sound like an ass, but their kid choked twice in 2 weeks?? Anyone else see a problem there?

lizzard 15y ago
Did you finish reading the article? The kid choked twice in two weeks because he had an inflammation or infection of the esophagus, which the second hospital diagnosed and treated.
mcherm 15y ago
If you read the full article, he explains that there was an underlying medical cause and that the second hospital found it.
- brianbreslin 15y ago
  Ah I didn't see that part. Now I do seem like an ass.
  - epistasis 15y ago
    Even without an underlying medical cause, what sort of "problem" do you see with a child choking twice? Are you insinuating that it's the child's or parents' problem? I don't understand what you could be getting at.

lizzard 15y ago

This is a big part of what's driving people into poverty in this country.

viandante 15y ago

The more I see this prices, the more I think that: 1) we have too less doctors due to stupid closed numbers policies in schools; 2) we have a patent system that allows companies to legally rip us of for medicines and machinery. With an aging population, this is just not sustainable.

Mc_Big_G 15y ago

The real scam perpetrated by hospitals and doctor's offices is rebilling. It works like this: 1) They send a bill with no information about the services performed. 2a) You waste your time tracking down what it was and then pay it. OR 2b) You pay the bill without wasting your time to verify. 3) They wait somewhere between a month and 6 months. 4) After receiving payment, they bill you again for the same services. 5a) You waste your time tracking down the services and the fact that you already paid. Then you waste more time calling and forcing them to stop billing you. You get an "Oops, sorry! I can't imagine how that happened." OR 5b) You pay the bill without wasting your time to verify. Repeat steps 3 through 5 until they've sucked as much time and money out of you as possible.

droithomme 15y ago
Yes. There is extensive intentional fraud and corruption in the system, along with rampant profiteering that exists regardless of whether an entity has been granted "non-profit" status. (Non-profit doesn't mean you can't pay everyone on the board of directions millions in compensation.) Each time I've dealt with it (mostly helping relatives with their confusing bills) there's been double and triple billing, and billing for procedures not performed, and for work done by people that weren't present, or on days the patient wasn't even present. The more complex the treatment, the more entities jump in to the feeding trough for a share. You have to keep extensive records of everything actually done, which is not always possible if you are not with the patient 24/7. Then when the bills come they are full of hundreds of cryptic codes. You might have some procedure done that takes 30 minutes, and get 20 different bills from 10 different entities, sent over a period of 18 months following the procedure, which apparently now lasted days and involved dozens of people, medicines, tools, and tests, some done multiple times. The primary reason medicine costs crazy amounts in the US is because of corruption and fraud. Sending a lot of these people to prison could do a lot to reduce costs and straighten things out. That and single payer.
- sethg 15y ago
  You don’t even need there to be conscious corruption. If the system churns out incorrect bills through simple error (perhaps because the hospital never bothered to drag its accounting system out of the 1970s), and an overcharge is just as likely to be paid as a correct bill¹, then the bad system will stay in place without anyone twirling his mustache and sneering about his obscene profits. ¹Which is to say: Consumers in bad financial situations will dispute or default on overcharges, but they’ll do the same for correct bills. Insurance companies will occasionally dispute an overcharge, leading to six months of paperwork back and forth until they agree on what to pay, but they’ll put correct bills through the same wringer.

gizzlon 15y ago

I find the name of the hospital highly ironic. After all, didn't the good Samaritan pay for the treatment and "hospitalization" of the victim? One would expect a stay at the Good Samaritan Hospital to be free.

derda 15y ago

Every time I read about the US health-care system it amazes me more (in a negative way). The point that I find worrying the most is, that it is impossible to figure out the costs before you get treatment. Also I am surprised, that there are no prenegotiated rates for treatment-procedures. The way it works in Germany is, that there is a catalog which contains all the standard procedures and a price that can be charged for the treatment/procedure, this system dates back to 1924. While "upselling" (doctors performing tests that are not necessary) is pretty common, prices are quite reasonable. Actually there are two catalogs, one for private insured patients and people without insurance (its almost impossible to be uninsured in Germany) and another one for public insured, the later one is based on a points system rather than prices and is supposed to be an administrative nightmare for doctors.

Loic 15y ago
This is not an administrative nightmare for doctors. They all have the software, put the insurance card in the slot, check the right cases and everything is immediately done. The real nightmare for doctors is the private insurances because they need to manage the invoicing themselves. But they get more money out of the privately insured, so they are doing it happily. If you take the time to discuss with doctors (I have several friends who are doctors in Germany and my family is a doctor family in France) their life is really nice. Way more relaxed than any other engineer working for a company under standard pressure. The only ones who are pushed like any other worker in a company are the ones in hospitals.

turar 15y ago

I could never understand why there's such a huge financial difference in the way emergencies that threaten human lives are dealt with in the US. You never expect a huge bill from the fire department or the police department should you require their urgent help. How is ER different?

deleted 15y ago
[deleted]
asmithmd1 15y ago
The US has socialized fire fighting and policing. We have decided not to socialize medicine.
- asmithmd1 15y ago
  This is absolutely true. Firefighting used to be handled by the private sector through insurance companies. This was "socialized" mainly because of the free rider problem - firefighters would put out a fire even if the house was Not insured. Now all houses in a town pay for firefighting through local taxes.

rskar 15y ago

tldr; (exactly from the article): "The driving force behind all this, according to Aetna, is the way hospitals and the government do business. The rates that insurance companies pay are negotiated based on what they believe a hospital’s true costs are. But then those rates are jacked up an average of 30% to 50% to make up for money that hospitals lose in treating patients who don’t have private insurance - which is the majority of them. So to make up the difference, they overcharge patients who are insured. This practice is called cost-shifting. In a typical hospital, upward of half the patients are covered by Medicare and Medicaid - neither of which pays the full cost of treatment. Another 10% to 15% of patients are uninsured; maybe they can afford to pay, but more likely they’re broke and can’t cover their bills either. Any profit the hospital makes must come out of the remaining 40% - patients with private insurance." ---- Considering that the per capita medical costs in the US are about twice that of the other OECD countries, clearly there's more than just cost-shifting going on. Whatever your views, as a matter of law (well before "ObamaCare") we are still going to subsidize medical care for the old, poor, children, and the irresponsible through our taxes and direct payments.

RyanMcGreal 15y ago

And we're supposed to believe that universal, single payer health care is inefficient and wasteful?

WalterBright 15y ago

This contains a detailed explanation of why costs are so high: http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/ http://www.theatlantic.com/magazine/archive/2009/09/how-amer...

tdfx 15y ago

I'm in the US. I just recently switched to a high-deductible plan last year with an HSA account. My deductible is $5000 and my monthly premium is $98 (for an individual plan -- self employed here). I have and plan to always contribute the maximum amount to my HSA each year. My plan covers 2 checkup visits a year, and everything else I pay out of pocket up until I hit my deductible. I really think this is the way insurance should be. I have a strong incentive not to needlessly get every possible test done or seek medical care that I don't need. I check my bills very carefully. I already located urgent care clinics that I can go to when I don't really need to visit the ER. I won't go to the doctor for a runny nose. It makes consumers care about costs. I'm far from an expert on US healthcare and I'd love to get other peoples' more informed views on this. Could we put everyone on high deductible plans? If people can't afford their premiums or deductibles then perhaps there could be government assistance to pay those things based on their income. What would the pitfalls be in such a system?

drumdance 15y ago
Just curious, what's the maximum you can contribute? If it's $5k, that works out to about $416/month, so you're total monthly cost is $514.
- bzbarsky 15y ago
  The maximum you can contribute is somewhat inflation-pegged. As of this year, it's $3050 for an individual plan and $6150 for a family plan (plus an extra $1000 per person involved over the age of 55). Note that the contribution is pre-tax, so if you're at the 25% marginal federal rate and contribute $3000 you have to compare that to getting at most ~$2020 in after-tax money: HSA contributions are not subject to FICA (7.65%) or federal income tax (25% on the margin per above assumption). They're not subject to state income taxes either; those can range from 0% to 12% depending on state and income level. Another important thing to keep in mind is that this is a health _savings_ account. Your contribution stays in the account if you're not spending it on actual medical care; it doesn't disappear at year end. Money in the HSA can be invested if desired (though it's probably a good idea to leave at least the deductible amount in liquid funds). Interest, dividends, and capital gains on the money are not taxed. When you reach retirement age, you can withdraw the money for any reason, not just medical care. So basically an HSA is just like a traditional IRA in terms of tax treatment, but with the added ability to make early withdrawals to pay for medical care. The only drawback is that you can only open one if you have a high-deductible plan (defined as at least $1200 for an individual and $2400 for a family, as of this year). So you're basically gambling that the tax savings and possible future growth of the money, plus what you save on premiums, will be higher than the deductible. Going back to our case of a single individual at the 25% marginal rate, with $100 premiums for the high-deductible plan and $300 premiums for the low-deductible plan, the difference in premiums is $2400. If you're depositing those $3000, your tax savings are about $1000. So you'd have to spend more than $3600/year on average on medical care to lose out. For most young-and-healthy folks, spending on medical care is likely to be less than this. Note that the 25% bracket starts at a taxable income of about $34,500, so figure a salary of at most $50,000. If you're earning more than that and are single, chances are an HSA is a good deal for you.

jisaacstone 15y ago

Interesting that California requires posted fees. I'd be interested to see a study of the effects. Back when I was uninsured I was very frustrated that no one anywhere ever knew how much anything cost, and frequently gave false information.

marciovm123 15y ago

For anyone who smelled a startup opportunity increasing pricing transparency in healthcare, check out Castlight Health. They were founded in 2008 to attack this exact problem and are making a killing targeting large employers.

Ex-PraliteMonk 15y ago

How much of the silliness in U.S. health care is caused directly by the tax code? For instance the largest health insurance company in my area also owns several hospitals. The hospital charges the insurance company for a procedure. The insurance company pays only half that amount. The rest I believe is written off by the hospital as a loss which lowers their taxes. But both the hospital and the insurance company are the same company.