U.S. hospitals are price-gouging the people who can least afford it,
according to a new paper. But don't blame them. Blame Congress.
The
paper, written by Ge Bai at Washington and Lee University and Gerard F.
Anderson at Johns Hopkins and published Monday in Health Affairs,
compared the 2012 list price for services at 4,483 hospitals to what
Medicare paid that year for the same services. Because Medicare rates
are a proxy for what it actually costs hospitals to provide a given
service, the difference between the two numbers indicates how much
hospitals are marking up their prices.
Bai and Anderson
found that, on average, hospitals charge for a service at 3.4 times
their actual cost. What's more striking is what happened at the top of
the distribution: The highest-priced 10 percent of hospitals charged at
least 5.7 times what Medicare paid, while the 50 most expensive
hospitals charged an average of 10.1 times more.
For people covered by Medicare or Medicaid, which
have their own fee schedules, those differences are irrelevant. The same
is true for people on private insurance, so long as the hospital is in
their coverage network. But if you're among the 30 million or so adult
Americans who don't have health insurance, or if you wind up at a
hospital that's not in your network, then in most cases you're at the
mercy of a hospital's prices. That can mean chewing through your
savings, relying on whatever discounts the hospital is willing to
provide or declaring bankruptcy.
You could read these results to
mean that too many hospitals are for-profit enterprises, which describes
49 of the 50 highest-charging hospitals (compared with just 30 percent
of hospitals nationwide): Half of the 50 were run by Community Health
Systems Inc., and another quarter by the Hospital Corporation of
America. (Both companies said in statements that their hospitals offer
discounts to the uninsured.)
But these data are better
interpreted as evidence of policy failure. The Affordable Care Act took
some steps to stop hospitals from price-gouging the uninsured, requiring
they charge these patients no more than what commercial health plans
will pay. But those protections only apply to nonprofit hospitals,
which, as Bai and Anderson's data suggest, aren't the problem. And if
for-profit hospitals are willing to offer meaningful discounts to the
uninsured, as they contend, why not enshrine those policies in
legislation? Meanwhile, there remains little protection against high
out-of-network prices -- and that has become more important as insurers
narrow their networks to reduce costs.
The conservative response
to these types of problems is more transparency: Force hospitals to post
their prices, and people will respond by shopping around. The answer to
market failure is, by this reading, more market.
Bai and Anderson
explain the limits of that approach. First, it requires that
prospective patients know the diagnostic codes for each individual
service they'll receive, which each hospital may bundle differently.
That requires knowing which services the physicians involved will order.
That, in turn, means knowing which physicians will be involved in the
first place. And all that goes out the window if the service is an
emergency.
There are fixes for this. California has a law that
prevents hospitals from charging most uninsured patients no more than
what Medicare pays. From the 1970s until last year, Maryland required
each of its hospitals to charge all payers the same price for services,
and it recently switched to an even more radical system of global
budgets for hospitals, under which they get a fixed amount of money for
treating all patients.
The problem isn't an absence of options but
an absence of time. By wasting the past five years on a fake debate
over Obamacare -- premised on a theoretical Republican alternative that
the party still can't agree on, culminating in a disingenuous argument
over the precise meaning of "established by the state"-- Congress and
the states have squandered time that could have been spent fixing some
of the actual problems that still plague U.S. health care.
The
culprit behind hospital price-gouging isn't the people who run those
hospitals. It's the policy makers who can't get around to fixing it.
_ Christopher Flavelle writes editorials on health care, economics and taxation for Bloomberg View.
For more columns from Bloomberg View, visit http://www.bloomberg.com/view
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