Posted 02\/17\/2014<\/p>\n\n\n\n
I regularly revisit last year\u2019s Time Magazine Special Report \u201c<\/span>Why Medical Bills Are Killing Us<\/a>\u201d with the same conflicted feeling I had at about age six when I learned that something painful, like picking a scab or jiggling a loose tooth, also afforded a secret pleasure that could not be shared with friends. <\/span><\/p>\n\n\n\n Time\u2019s revelations about healthcare finances were (and still are) truly painful to read, but there\u2019s a glimmer of hope at the end that we\u2019re not altogether circling the drain. Author Steven Brill, seasoned investigative journalist and founder of Court TV, spent months deciphering hidden costs in the health care system (focusing especially on hospital billing practices) to find out why Americans had been spending $2.8 trillion annually on their care\u2014roughly 20% of the US GNP–while getting so little health in return.<\/p>\n\n\n\n If Brill singled out one villain in his piece, it was the system of hospital pricing you\u2019ve likely never heard of called the \u201cchargemaster,\u201d <\/i><\/b>an internal and extremely secret price list of everything a hospital can charge you for. It\u2019s the hospital\u2019s chargemaster that will list the $77 box of four gauze pads on your bill, $580 for that hour of oxygen you never used, and tens of thousands of other items and procedures. The skin marker used to write \u201cThis one\u201d on your knee so your surgeon didn\u2019t operate on the wrong leg? A bargain at $25.<\/p>\n\n\n\n I once wrote a Health Tip about a student who meandered into Northwestern\u2019s emergency room with a bladder infection and left with five bucks worth of generic antibiotics and a $10,000 bill. That\u2019s chargemaster in action.<\/p>\n\n\n\n There\u2019s virtually no system to check this unmitigated greed except Medicare, which sends every hospital its own chargemaster and tells the hospital, \u201cThis is what we pay. Those $74 gauze pads? We\u2019ll pay you $3. Period.\u201d Medicare\u2019s maximum reimbursements to a hospital are a fraction of the hospital\u2019s usual charges, though a Medicare supplement policy can help the hospital make up some of the difference. Generally when you\u2019ve got both Medicare and a supplement, the hospital will accept the two as \u201cenough.\u201d<\/p>\n\n\n\n Don\u2019t fret if the Medicare payment looks low to you. Hospitals are still raking in plenty of coin.<\/p>\n\n\n\n Private insurers like Blue Cross, Aetna, and dozens of others individually negotiate their rates with hospitals, paying somewhere between the Medicare bargain-basement rate and the full retail \u201crack rate\u201d of a hospital\u2019s chargemaster.<\/i><\/b> The real losers in this system are uninsured patients, who often are billed the chargemaster price (hence the $10,000 bladder infection). Kicking and screaming will usually trigger a 50% discount, which sounds good until you realize it translates into a still-crazy $34 for four gauze pads.<\/p>\n\n\n\n Adding insult to injury, most hospitals enjoy not-for-profit status and as a result are tax exempt. Their management teams, however, are compensated more like the heads of for-profit corporations. Northwestern Memorial Hospital\u2019s CEO made $9.7 million in 2010<\/a>, about 50 times the average salary earned by a Northwestern primary care physician. By comparison, in 2011 the CEO of the American Red Cross earned $561,000.<\/p>\n\n\n\n These not-for-profit hospitals aren\u2019t particularly charitable either. Of Northwestern\u2019s 2010 tax-exempt revenue of $1.16 billion, a pathetic 1.85% was spent on charity care. They did even better in 2011, with $270 million in tax-free profits on $1.3 billion in revenue. As I wrote my property tax check this week I thought that if someone reversed the tax-exempt status on Northwestern\u2019s juicy lakefront property, the hospital could single-handedly support county-funded John H. Stroger Jr. Hospital (formerly Cook County).<\/p>\n\n\n\n What Brill suggests toward the end of the Time article is a total ban on the concept of chargemaster fees and pegging all reimbursements from everyone (Medicare, Blue Cross, the uninsured) to the fees established by Medicare. This is the glimmer of hope I referred to earlier, because personally I think it will eventually occur. It has worked for years in France, where even though there are competing health insurance companies the reimbursements to hospitals and physicians have been standardized by the government. Although US hospital systems would kick and scream in the face of this, there\u2019s something inherently absurd in every insurance company negotiating separately, with better rates given to insurers who have a major presence in a particular geographic area. As you might expect, if a company gets unfavorable rates and has to pay more for services, it passes them on in the form of increased premiums.<\/p>\n\n\n\n And while Brill does a remarkable job alerting us to the financial sinkhole our health system has become, I do want to add that outrageous prices and over utilization of services extends far beyond the hospital setting.<\/p>\n\n\n\n Because there are so few consistent controls on the pricing of any health service, from an office visit when you have the flu to a lab test, x ray, CT scan, prescription drug, or piece of medical equipment (like a cane), health care costs are usually based on whatever the market will bear. If it can bear a lot (i.e., you\u2019ve got great insurance), expect more of everything: diagnostic tests, prescription drugs, referrals to specialists, and possibly minimally useful or altogether unnecessary surgical procedures.<\/p>\n\n\n\n In an area where prices are relatively low and fixed, such as Florida, with its older Medicare population, speed is the name of the game. Primary care doctors in a group will see 50 to 60 patients a day, referring as many as possible for further testing (using equipment owned by the hospital) and also to the group\u2019s specialists for more procedures. A small skin cancer removed from a patient\u2019s cheek may ultimately cost thousands of dollars as various pre-surgery clearances are totted up from internists, cardiologists, neurologists, and ophthalmologists, plus post-operative wound care nurses and dermatopathologists.<\/p>\n\n\n\n Let\u2019s face facts. With this much money involved, it seems as though everyone in the income-generating segment of health care (i.e., fee-for-service) <\/i><\/b>has the potential to get sullied if they don\u2019t watch themselves. Obviously the vast majority of physicians and other health care providers are hardworking, dedicated to the health and well-being of their patients. But then you see a recent news ite<\/a>m that alleges a hospital administrator rewarded emergency room doctors who funneled in the most admissions, red flagging physicians who did not. A few weeks ago, I cited a story about an orthopedic surgeon accused of billing for a multitude of procedures he\u2019d never performed<\/a>. Money poisons the brain.<\/p>\n\n\n\n With healthcare spending a staggering $2.8 trillion annually, let\u2019s recall the late columnist Mike Royko concerning Chicago\u2019s motto, which he suggested be changed from the fairly tedious \u201cI Will<\/a>\u201d to a more accurate \u201cWhere\u2019s Mine?\u201d $2.8 trillion spent in health care every year? Pigs at a trough.<\/p>\n\n\n\nInsurers negotiate individually<\/b><\/h3>\n\n\n\n
Whatever the market will bear<\/b><\/h3>\n\n\n\n
Where\u2019s Mine?<\/b><\/h3>\n\n\n\n