The American Health Care Market Just Became Less Opaque

May 8th, 2013 | By | Category: Featured Articles, Lead Article, Medicine

How much a plate of spaghetti is going to cost you isn’t usually a mystery. Sure, the price can vary quite a bit–from a few cents if you’re making the plate yourself from groceries, to dozens of dollars at a fancy restaurant. You shouldn’t be too surprised by the bill at the end; the price is right there on the menu, or on the box–same for you as anyone else.

The American healthcare system remains remarkably opaque–particularly if you are among the uninsured. The cost of a hospitalization for a heart attack varies tremendously depending upon the hospital giving the treatment. And, unlike a restaurant, hospitals generally refuse to state the price up front.

To reduce healthcare costs, the plan for the past few decades has been to pass on costs to the consumer. The idea here is to use the market (in the Adam Smith sense of the word) to force down prices–expecting patients to find the most efficient, cheapest, hospital for a given problem. (Spoiler: It hasn’t worked.)

But, how can you decide which hospital is most efficient, if you have no idea what they’re charging? The net result is most Americans understand that getting sick–thanks to a lack of insurance, or tremendous copayments–is a good way to end up bankrupt, without any real sense of how to pick a more efficient provider.

Something exciting has happened this week, possibly changing this dynamic: The Center for Medicare Services, for the first time, has published the list prices charged by hospitals around the country (to Medicare) for the top one hundred reasons patients end up in the hospital.

Let’s look at what hospitals are charging, and receiving, in the Seattle area. In each of these charts, the blue bars is the bill charged to Medicare by the hospital, the red the payment the hospital actually received from Medicare as well as all copayments or deductibles paid by the patient. You’ll note, like almost all insurers in the US, Medicare pays a significant discount from the billed cost. A patient without insurance can expect the full, undiscounted rate.

First up, the charge for a pneumonia admission:

For a COPD (rotten lungs, usually after a lifetime of smoking) flare:

Coronary artery disease, requiring a stent (either a heart attack or a heart-attack-to-be):

The overbilling is (in part) a negotiation tactic between the hospitals and the insurers–a way of amplifying the percentage discount to a prospective insurer while maintaining revenues. The side effect is to leave the uninsured or underinsured as road-kill–charged two or three times the total bill payed from an insured person.

If nothing else, the Affordable Care Act (i.g. Obamacare) will make this better by shifting a majority of people from the uninsured into the insured group–paying the discounted rate, with insurance picking up most of the total tab.

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  1. Jonathan,

    Just came across this article (which actually SUPPORTS what I was saying to someone, that the “cash” price for any doctor’s/hospital’s service for “x” ought to be published/stated…), comparing healthcare with the proposed rule requiring airlines to be more transparent with fees/costs…

    I understand, and agree with you 100% on the “overbilling” as a “negotiation tactic,” point… (which is why I’ve occasionally paid cash to a doctor, regardless of my insurance coverage)… I think your “cost of a plate of spaghetti,” analogy is a perfect one… (and hope you don’t mind if I share it w/others…)…

    But you lost me saying, “the Affordable Care Act (i.g. Obamacare) will make this better by shifting a majority of people from the uninsured into the insured group–paying the discounted rate, with insurance picking up most of the total tab.” I (an Independent… “Fiscally Conservative,” “Socially Liberal” voter…) cannot fathom how you see the ACA as IMPROVING transparency in ANY fashion!!! Not only was America already sold a bill of goods with the “We have to pass the bill to see what’s in the bill,” bologna from Pelosi… Not only did we learn this week that “secretly,” the U.S. Gov’t has already committed millions of dollars to “bail out” the insurance companies, WHEN (not “if”) they find their costs going up, because so many of those who did sign up for Obamacare are those with many known medical problems/costs, old, but not old enough for Medicare, etc.,… Not only has the Obama administration failed to provide “transparency” in ANYTHING it’s backed/promoted/been involved with… BUT NOW… we learn more and more, every single day, that our VA system, has been doing all sorts of unspeakable, unforgivable, hidden, self-serving things… denying those who’ve served and protected our country, and deserve the best care money can buy… to such a point that 26 different VA facilities have now been confirmed to have been deliberately delaying care to these heroes!!!

    I googled to see other comments/articles you’ve published on the ACA, and the VA… and was disappointed to find this:

    “Every time I read about a Teabagger ranting about how socialized medicine will destroy this country I think of the VA system. There it is, a huge and vastly important universal healthcare system—government run, single payer and therefore socialist—right here in the brave and privatized United States: The Veterans Affairs hospitals.”

    In addition to the namecalling (which, frankly, despite knowing the urbandictionary definition of the word, and the origin…, I never understand why anyone feels better about him or herself for using that, “teabagger,” term…)… while I once again AGREE WITH YOU, WHOLEHEARTEDLY that it is a “huge and vastly important,” “system…,” I think the failings/failures we are just beginning to scratch the surface of seeing… are honestly, not only a travesty and tragedy in the way our government takes care of our heroes, but a scary foreshadowing of just how much worse things are starting to/going to become in the American Healthcare System….

    Sadly, those “picking up the tab,” in each and every case… whether VA Health or ACA Health… are those who contribute the most!! The veterans, who contributed their blood, sweat, tears, and time…, AND who contribute as taxpaying citizens… and those who do pay the bulk of the taxes…, who are footing the bill for what is DESTINED to be yet another government program that fails the people it purported to protect…

    Would love a response – personally emailed ( or tweeted (@jilldotter)… to know if your views have changed at all… on the ACA, on the success of “socialized medicine,” vis-a-vis the VA… or even any parts of your views on these… Every time I try to find the good, or “accept what is,” and hope for the best… yet another scandal/preventable mess appears… and I’m finding it very hard to have any faith in the American Government, at all, right now…

    Best to you,
    Jill Dotter

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