Wednesday, May 08, 2013

Useless noise from CMS

What on earth did CMS have in mind when it released the FY2011 chargemasters for America's hospitals?  Well, according to one report:

The public release of the data is part of an effort by Medicare to increase transparency in the health system. 

“Historically, the mission of our agency has been to pay claims,” said Deputy Medicare Administrator Jonathan Blum. “We’ll continue to pay claims, but our mission has also shifted to be a trusted source in the marketplace for information. We want to provide more clarity and transparency on charge data.”

CMS explains:

Hospitals determine what they will charge for items and services provided to patients and these charges are the amount the hospital bills for an item or service.

This is a case where the release of bad data is worse than having no data at all.

A hospital's chargemaster is an archaic fiction, a way previously used to allocate the joint and common costs of the hospital to particular services.  It does not serve as the basis for how much a hospital is paid by Medicare.  It does not serve as the basis for how much a hospital is paid by Medicaid.  It does not serve as the basis for how much a hospital is paid by private insurers.

Further because of federal and state prohibitions against balance billing of patients (i.e., the difference between the amount paid by an insurer and the amount of the charge), it also provides no basis to consumers that means anything at all.

But it sure creates a stir to be able to say: "For joint replacements, which are the most common hospital procedure for Medicare patients, prices ranged from a low of $5,304 in Ada, Okla., to $223,373 in Monterey, Calif. The average charge across the 427,207 Medicare patients’ joint replacements was $52,063."

For the record, Medicare pays hospitals based on a formula that takes into account the difference in overall wages and prices in different parts of the country.  There are also adjustments for rural hospitals.  There are also adjustments for academic centers to pay for residency training. The chargemaster employed by a hospital is not a consideration in the establishment of these federally determined rates.

Likewise, Medicaid rates are based on a state-determined formula.

Likewise, private insurance companies often base their hospital and physician rates off the Medicare formula, or have their own approach (often not even related to the hospital's actual costs).  Very, very few have rates based on "a percentage of charges."

I don't know what CMS really hoped to accomplish in the way of transparency by publishing out-of-date, irrelevant data.  But such behavior is consistent with CMS publishing out-of-date, irrelevant clinical outcome data.

Transparency, CMS style.
CMS says that the recent release of information is "part of the Obama administration’s work to make our health care system more affordable and accountable."  Oh, wait, this is the same president who had a photo-op with a robotic surgery company that has made its fortune by marketing high cost clinical equipment that lacks clinical evidence to support its relative efficacy.  This is the same president who compared hospital readmissions to going to an auto mechanic and having to bring your car back for re-repair, who doesn't seem to understand the unintended consequences of poorly design federal payment penalty strategies.

Meanwhile, CMS fails to take action to solve the well established and recognized problems in its own rate structure that encourage the medical arms race.  Even Mr. Obama's former adviser wonders why the agency won't or can't solve that kind of problem.

When Brent James advises doctors "Don't wait for Washington," he knows of what he speaks.  Improvement in the health care system will not come from confused and politically conflicted federal officials.  The challenge is whether it will come from the health care professions, or whether we will start heading down an inexorably declining slope towards higher costs, poorer quality, and (quiet) rationing of services.


Mark Graban said...

Speaking of robotic surgery, check this out:

Roy M. Poses MD said...

Doesn't the chargemaster determine what the hospital charges naive patients without insurance?

Isn't it also used for bargaining with insurance companies, who may believe that a large discount off the chargemaster prices is significant?

But I certainly agree that CMS ought to not have disclosed this data without explaining it much more clearly (and explaining that these prices are not those paid either by Medicare or by most insurance companies).

Ronald Bremer said...

As a former health system CFO, I couldn't agree more. Hospital pricing has not bore any meaningful relationship to cost since Medicare, Medicaid and managed care stopped paying based on charges. If CMS and the public are just now realizing that, it's a sad state of affairs. For this "problem" to be fixed, the whole reimbursement system would have to be scrapped and a new charge-based system put in its place. Not likely to happen, so I guess the shocking exposes will just keep coming.

Paul Levy said...


See Ronald's points.

No, they are really not relevant in insurance negotiations any more.

Chargemasters are sometimes used to set prices for uninsured, but they are often negotiated down. With Obamacare, though, the number of people who will pay that way will be dramatically reduced, very soon.

Anonymous said...

It matters to the uninsured and for nonprofit hospitals measurement of community benefits.

Paul Levy said...

Thanks for pointing that out.

Anonymous said...

Question 1: Do hospitals know how much a procedure actually costs? For every procedure, for every patient?

Question 2: If they don't, shouldn't they?

Question 3: If we want patients to be better consumers of health care, should that information be public?
Agree that bad data is no good; perhaps goal is to encourage more sharing of 'good' data?

Paul Levy said...

Costs and prices are different. The prices charged are what's important to some, but not most, consumers. (Most never see any indication of those prices.) The CMS data, in any event, does not reflect those prices.

In MA, this information is in the hands of the state government, which has not chosen to make it broadly available. I have called for this to be made open, as have others, but to no avail thus far.

Inquire in your own state, and see what the situation is.

Mark Graban said...

Question 1: I'm not an accountant, but putting on my MBA hat, the "cost" of any procedure will depend greatly on how the cost of hospital overhead and shared services are allocated to departments and procedures.

In my experience, no, hospitals do not really know what a procedure costs. They know the cost of individual supplies and things that are used, but it quickly gets complicated (this is true in other industries).

What's the cost for Apple to produce an iPad? I can tell you the direct cost of materials and the cost of direct assembly labor... but everything else has room for error or bad assumptions. Same is true in any business.

Question 2: Should they? Maybe, but it requires a lot of effort and things like "activity based costing."

Question 3: This same topic came up recently about hospitals wanting CMS to scrub some quality data from the web because it wasn't perfect.

Paul Levy said...

Well stated, Mark.

As consumers, we don't care what it costs a supplier to produce something, or how the firm allocates joint and common costs: We care what price it is sold for.

Mark Graban said...

Thanks, Paul. I think people ask about cost because they assume that price should be cost plus some multiple... but that's not the way the world works anymore and healthcare is certainly moving away from pricing based on cost and activity to pricing based on value, eh?

Paul Levy said...

Sometimes, but not in near-monopoly situations like here in Boston. Prices of the dominant provider remain far above market, with no demonstration of comparable value.

akhan13 said...

The chargemaster publication is a response to Steven Brill's Time magazine expose which brought up some great points but focused way too much on the chargemaster- it is a political play. That said, although the chargemaster is largely defunct, it remains relevant for the uninsured, which still accounts for millions of Americans. I think for that reason if nothing else, this move could shame hospitals into updating those lists. That said, CMS should be focusing on incorporating cost-effectiveness into its consideration for services rendered using taxpayer dollars instead of making low impact, high publicity moves such as this, especially when they know this information will be misinterpreted by the general public.

Barry Carol said...

Several years ago, the NJ state legislature passed a law that limits how much uninsured hospital patients can be charged to 115% of the Medicare rate. The law applies to patients with incomes at or below 500% of the federal poverty level or about $117K for a family of four. The original proposal called for limiting charges to the 100% of Medicare but the hospitals argued that Medicare paid them somewhat below their costs on average.

Personally, I think the legislation should have applied to every uninsured person in the state even if you’re as rich as Bill Gates or Warren Buffett. The NJ legislation could be easily copied by other states as a reasonable way to help the uninsured deal with outrageous hospital charges.

I’m still waiting, though, for full disclosure of actual contract reimbursement rates coupled with relevant quality metrics to finally make comparison shopping in healthcare feasible at least for care that does not have to be delivered under emergency conditions.

John said...

Maybe I'm contrarian, at least on this discussion thread, but believe something has to be done to bring true cost transparency to this mkt, a mkt that is accustomed to a cost plus revenue model.

I get EOBs that make absolutely no sense, pricing all over the map and in our research to date, we have found >1% of Hosp due true activity based costing.

It's a mess, consumers/employees are being asked to bear more of the costs and Hosp of all sizes are very reluctant to expose true costs, frankly because it appears they really do not know. Maybe, just maybe, actions such as this will force the industry in the right direction.

Paul Levy said...


I am sympathetic, but "true transparency" doesn't come from publishing irrelevant and outdated numbers. Also, as someone has mentioned, costs are not the issue. Prices are.

In MA, all the prices are in the hands of a state agency, CHIA, that has chosen not to make them publicly available, notwithstanding a legislative mandate to do so. This is very frustrating.

Meanwhile, CMS, through inaction, has contributed to the higher costs (and prices) of health care. I wish the agency would focus on resolving its own issues rather than setting forth a press vehicle that is clearly in response to the Time Magazine article.

Sean said...

It is true that the Charge Master pricing is not very useful, but look at these three visualizations in order:

It shows that a small community hospital charges way less (charge master BS), is reimbursed by Medicare about the same (slightly less), but has better performance for Pneumonia patients, than the big city hospital.

If you dig deep enough, quality of care HAS to play a role in healthcare reimbursements.

Anonymous said...

Question to Paul and akhan13: Is Brill's assertion in the Time article correct that insurance companies, including Aetna as quoted in the article, are having to negotiate contract prices down from chargemaster now rather than up from Medicare payments, due to hospital consolidation? If so, the chargemaster may not be so irrelevant after all. Any facts on this?

As for Medicare focusing on costs, as you all know it is specifically forbidden from considering cost in its deliberations. Recall the IPAB which was to perform the task of that cost consideration independent of congressional interference (but subject to Congressional veto) - it has yet to be formed and is being shouted down as we speak. Will we let the industry lobbies continue to control prices?

nonlocal MD

Unknown said...

Your post makes sense, but it doesn't explain why the chargemaster creates such artificially high prices to begin with. From what you said, it's not even relevant as the start of a rate negotiation since insurers base their agreements off of CMS rates.

In any case, why bother charging those rates to the uninsured and start a bargaining process? Why not just use an average of existing reimbursement rates?

Roy M. Poses MD said...

Don't some non-profit hospitals also use their chargemasters for their determinations of the amount of charity care they provide? Don't some proclaim that their charity care includes the cost of providing care that is unreimbursed, that is, to uninsured and/or indigent patients? But to calculate that cost, instead of using some relatively accurate measure of true cost, or even some estimate based on what Medicare or insurance would pay them for care that was otherwise unreimbursed, don't some hospitals use the chargemaster amounts, thus possibly drastically inflating these calculations?

MrPete said...

Use this NYT graph:

The data dumb by CMS wasn't helpful to citizens, but the data can be used to do EXACTLY what the NYT did.

The issue many people have is that you can't "shop around" for a hospital while bleeding out in the back of an ambulance. "I wonder who sets leg bones cheaper in my area?" has probably never been said on the way to a hospital.

By showing the public what the gov't pays for routine procedures the black veil is lifted from hospital billings for the people with sub-par insurance, or no insurance. Few people understand that the bill they receive for $30,000 is actually just a hyper-inflated joke that the hospital would gladly accept 10% of. said...

Paul, I love this piece -- though my contrarian view to your contrarian view is this: no matter how irrelevant these prices are, anything that brings attention to the opacity of the marketplace is good.

Did you see our crowdsourcing-of-mammogram prices exercise with the @BrianLehrer show @WNYC? We're getting a lot of good data.

Thanks for writing this. You're a national treasure! cheers jeanne pinder,

Paul Levy said...

Thanks, Jeanne. I hear some current and former federal officials disagree with this post, but none have yet offered a rebuttal on this site. I wish they would.

GOT said...

- Are 2012 figures fully available yet, and if so, would they vary wildly from the 2011 release? If not, "outdated" might not be the proper way to refer to these figures. If more recent numbers are available, one would have to wonder why 2011 stats were used.

- Using terminology like "A hospital's chargemaster is an archaic fiction" paints this as an angled post, especially where commenters have pointed out what the chargemaster is actually used for. Perhaps you could amend your post. To the layman, "transparency" means "all available information" - nothing scrubbed, nothing withheld. By framing your argument, you are in danger of turning "transparency" into another meaningless buzzword.

Paul Levy said...

I don't know what you mean by an "angled post." It is a post with my opinion, if that's what you mean.

Transparency is turned into a meaningless word when it is used to present stuff that doesn't matter very much and then offered to the public as proving something that it does not. The real pricing data for all of the hospitals is very much available. For example, government officials in MA have it and are supposed to make it public, under a law passed the legislature. But they have not.

As to being current, CMS has a habit of posting old data, whether "pricing" or clinical outcomes. If you are making decisions based on price and/or quality, do you use old information?

Mark Graban said...

We're still just part way into 2013. I'm not sure if I'd expect the government to move fast enough to have 2012 data yet.

Paul Levy said...

Fiscal 2012 was October 1, 2011 to September 30, 2012.

September 30, 2012 was almost 8 months ago. October 1, 2011 was about 1.5 years ago. These numbers are all in computer files. An analyst could crunch them in a very short amount of time.

Fiscal 2011 was October 1, 2010 to September 30, 2011.

So the data presented in the CMS release is 2.5 years old, if we think about the start of FY 2011 or 1.5 years old if we think about the end of FY 2012.

Would you base your purchase decisions on information like that?

Really, what did they hope to accomplish?

Mark Graban said...

My point exactly. It shouldn't take that long, but it does.

Shame on the hospitals, CMS or both?

Sorry for being a cynic :-)


Anonymous said...

Paul, please define 'real pricing data' in your comment at 2:28, as opposed to chargemaster pricing data. You mean that hospitals have 2 sets of prices, chargemaster prices and 'real' prices? Now I'm really confused.


Paul Levy said...

Real prices are the ones that are determined by the government, in the case of Medicare and Medicaid, or the ones that are negotiated with the insurance companies, in the case of private payers.

Anonymous said...

So those are really payments. Right? Oy.


Paul Levy said...

Almost. Except when there are withholds for one reason or another.

Anonymous said...

Very aptly stated: "A hospital's chargemaster is an archaic fiction." You could say the same of physicians' charges. An obtuse, absurd fiction.

Nevertheless, I think publishing charges might help make charges a little more meaningful. Even if they don't impact payment, charges may now begin to impact perception. And, if charges start to matter, it's possible that one day, some day, medical organizations might compete on price (as well as quality).

To highlight the absurdity of it all, I think physicians and hospitals should adopt a blanket policy of charging $1m for every service. More on this idea here:

akhan13 said...

In response to anonymous' question to me and Paul: For the most part, insurance companies negotiate payment based on Medicare rates plus a certain amount (depends on regional balance of provider vs insurance power; Mass, with a dominant provider, looks very different from Maryland, with all payer). The handful of instances where the charges are negotiated down from a chargemaster, there is recognition of tghe absurdity of most chargemaster charges built into the negotiation so it remains of little relevance. As mentioned by several posters, the relevance is more to the uninsured, and calculation of charitable care by non-profits. Another application that has been important is use of chargemaster to the insured who exceed annual or lifetime limits, although this will in theory go away gradually with Obamacare. Where I think there would be some use in this exercise in theory (although I highly doubt this will happen) would be if hospitals had to update chargemasters to form a realistic basis for payments from private insurers, but there are too many other barriers to this in our current system.

Vince Kuraitis said...

Wouldn't you also expect that the quality of this data would improve significantly over time? ...and that another way to look at this as increased pressure for hospitals to be accountable? That's valuable as an end in and of itself.

Hospitals now have dilemma:

* Continue to submit arguably meaningless charges to Medicare and have to explain why to press and public, or
* Submit meaningful charges to Medicare, which then improves transparency and competition

Paul Levy said...

In a word, Vince, no. This story creates no such pressure, and interest in the topic will fade away within days. This is "inside baseball" and not related to most people's lives.

David Joyce MD said...

Hospital charges are a joke, it is just the lazy man's way. Charge whatever we like, they will still buy it, albeit at some discount. The largest medical center is Baltimore has collection at 30% of charges.
Price = varable cost + contribution margin
The contribution margin can vary based on market demand and that is where you will see price variation. There is no reason hospitals can not figure out their cost. Fact is they do not want to, they are very happy to move under the surface where no one can really see.

Vince Kuraitis said...

Paul, If this were a singular blip on the radar screen, I might agree with you that it will fade away within days.

But it's not.

It's representative of the much larger trends of societal demands for hospital/health care accountability and transparency.

Yesterday, I would not want to have been the hospital PR person who went to the CFO, was told "we make this sh*t up", and had to figure out what to say to the press. Not just yesterday, but next year as well.

I would not want to be the CEO who has to go to his Board and say "we make this sh*t up." Might work for one year, but next year?

I wouldn't want to be the hospital attorney or CFO who is asked by Federal auditors how they pull together the numbers? and to be reminded of Federal contracting guidelines which I suspect won't be very accepting of "we made this sh*t up."

I would not want to be the hospital Board member talking to his neighbor who asks him why his hospital is among the most expensive? Do you think Joe the Plumber will just accept "The hospital has to make this sh*t up, don't pay attention?"

Paul Levy said...

We'll see, I guess.

MightyCaseyMedia said...

I'm looking for the "like" button on Vince's comment re: "we're making this sh*t up" - I've long been convinced that the healthcare price-setting protocol included throwing Jello at the wall. Vince tells me I'm not wrong in that conviction.

Vince Kuraitis said...

MightyCasey, you are not wrong in your conviction.

15 years of my 30 year career has been spend working with & for hospitals as C-Suite member or consultant.

Brill's Time magazine account of hospital chargemasters perfectly fits my experience. It was created long-ago by "someone" in Finance, has no connection to anything and no rationality.

I do remember when chargemaster complaint was brought to attention of a hospital leadership team during a routine weekly meeting. The issue was around $25 charge for aspirin -- an item that brought patient complaints because it was one of few items that people could relate to actual prices in their minds. C-team action: lower price of aspirin, raise prices on items folks cannot recognize. Reality stranger than fiction.

Vince Kuraitis said...

I'll take this one step further.

Hospital pricing issue has potential to go viral and become a popular meme.

Doubt it?

See 1185 comments (and counting) on Reddit site:

Paul Levy said...

Contact me in two weeks and let me know if this is in the public consciousness then.

Anonymous said...

Paul, it may not be something people are talking about in 2 weeks, but I bet it will return to their minds every time they encounter the medical system again. Don't underestimate that. It adds up.

nonlocal MD

me said...

(@nonlocal: yeah, just like the sequester. The general public has a short memory and an even shorter attention span!)

Overall, the CMS data release strikes me as a red herring. Publish useless data and claim you're increasing transparency. If people don't understand, it, fine. They can spend their energy trying to decipher the irrelevant information and clamor for improvement. All the while, they're focusing on the wrong thing. As Paul's rightly pointed out, hospitals already collect all of the data on truly meaningful metrics for quality and safety, in real time. Yet, save few institutions, no one is publishing these. And, these same entities, plus the state, have real data available on payments. Where's that information?

Anonymous said...

@me -- I don't think most hospitals are really capturing ACCURATE meaningful quality and safety data in real time. Most problems go un-reported and executives are in blissful ignorance.

The Accidental Floridian said...

You mentioned annual and lifetime limits. In the past, would the negotiated (real) price or the chargemaster price count toward an enrollees annual limit?

Thank you!

Paul Levy said...

The negotiated price.

Sarah Y said...

To Paul Levy @ MAY 08, 2013 5:42 PM and Barry Carol @ MAY 09, 2013 7:04 AM

Let's crowdsource it then.

If we as patients and consumers started entering the information from our insurance Explanation of Benefits into a shared public online database we might start to see some change. I'm sure both providers and insurers would argue that the public database has incorrect information but it would probably still be useful to us. Also it would help push/shame them into making the information public.

As I read through the posts Jeanene (MAY 09, 2013 12:56 PM) is doing exactly that with mammograms. Please update us on how that is working!

Leo said...

I'm amazed at how many of the contrarians take the position that, well, Medicare, Medicaid and insurers all pay something different, so these don't matter to real people, or they get negotiated down. Last time I checked, there were upwards of 48 million uninsured, but it's not clear how many, like many of those featured in Brill's article, were underinsured and thought they were covered. Many had no idea they could negotiate. Estimates are that well more than half of the bankruptcies in the US every year are due to medical bills. So, of the 1.2 bankruptcy million filings, about 700,000 lives are destroyed annually by medical bills. If the charges don't matter, put that in bold and in red on the bill! And let's not pretend that this practice is OK now, in 2011 or ever! Maybe much of this will go away under Obamacare, but there is some accountability that's going to happen even sooner. I suspect (at least) several hospitals will decide to change their practices based on this, just out of embarrassment that they can't explain their own system, and for that, I'll be happy to check back in a couple months.

Anonymous said...

A couple of apparent inconsistencies I've noticed in this thread that I'll pose as questions:

1. If the numbers don't matter, why not lower them? I'm guessing there is some reason they are so high, but nobody seems to want to own up to it. I just can't buy the "historical" or handed down from Lord-knows-where. Why raise them at all?

2. If the numbers are wildly inaccurate and out-of-date, isn't that exactly the reason they should be opened up, so inaccuracies can be fixed (while creating a little incentive to fix them) ?

Let's have the conversation. Kudos to CMS for at least continuing it. It's been a couple of months since Brill's article. The interest hasn't died down...

akhan13 said...

@accidental floridian: The negotiated price would count towards annual/lifetime limits until they are exceeded. After that the patient is paying out of pocket and would be hit by chargemaster rates for all services and would have to either pay them, go bankrupt, or find assistance in a an already difficult time (assuming that once this is reached someone is really sick) and try to mitigate the bills, although even then the rates are likely to far exceed rates negotiated by CMS or private payors.

Susannah said...

Last Friday you said something to the effect of check back in two weeks and see if anybody (except us healthcare wonks) is still paying attention to this chargemaster story. Well, it's only one week later, and this isn't a really fair test of people's memories, but the story is in the Times again because they decided to do an "it's a shame" piece about charges at for-profit NJ hospitals, in particular Bayonne Med Center. I'm sure you saw it, actually interesting, although marred just a wee bit by hysteria.
Wonder what will happen next week.

Paul Levy said...

In my opinion, public attention on these matters is unlikely to persist. If we're going to try to get public attention, I'd prefer it be spent on the thousands of people killed each week in America's hospitals. Or, on the things CMS is supposed to be doing, but is not.

Unknown said...

As an individual with a small embedded development business (one that actually is responsible for creating tech jobs in the US), I must pay for insurance on an individual/ family plan. That $826/ month with a 4K deductible leaves me paying for non-catastrophic medical expenses out of pocket. So I expect I'm in the category of those who actually are billed- and pay- the chargemaster pricing, even though I am not technically uninsured. As such the chargemaster pricing is relevant to me- or might be- I have no way of knowing. Particularly interesting, though, is the apparent discrepancy between what various "customers" pay. I've not had any opportunity to negotiate anything down from chargemaster pricing- if that is even what I pay. I just get billed. I understand Medicare gets billed negotiated pricing, as to insurance companies. What about my family? Who do we negotiate with? Bills come often long after the service and are typically inscrutable and filed with arcane billing codes, not natural language.

There is NO transparency or information available to the consumer. Prices vary wildly, even at the same facility. It is essentially impossible to find out what those charges are ahead of time. I just tried to find out what area hospitals charge for a mammogram- could not do it. When I go to my HMO facility, the providers don't know what prices their billing codes translate into. You can't go to a hospital's website and find out what they charge for standard procedures, even preventative ones. A shot of liquid nitrogen to hit a skin spot that "might" look suspicious, "just in case" becomes a $340 bill for "outpatient surgery". My wife was just billed $426 for a mammogram. Is this normal? How can I, as an individual, know? If chargemaster is irrelevant, what is it being used for? If "real prices" are what is important, what are "real prices" for someone like me- not yet eligible for medicare, and paying out of pocket? The prices I pay seem real enough to me.

The way that the medical services delivery system penalizes individuals and small businesses is the single biggest impediment to entrepreneurship I have experienced. If we didn't have excellent health, our business could never have existed.

Paul Levy said...

If you have an insurance carrier, the rates it negotiated will also apply to the deductible amounts you pay.

Unknown said...

In my case the insurer and the provider are actually different parts of the same entity- the insurer runs the care network- I suspect there is little economic motivation to negotiate prices down for those of us paying out of pocket, since it would reduce payments they receive without saving them anything. But there may well be aspects of which I am unaware. More importantly, what are the "real prices" for the uninsured, or underinsured? Is the chargemaster data any guide to that? If hospitals object to making the chargemaster pricing public, maybe they would prefer to publicize their actual prices?

Why should the (actual, billed) charges for standard procedures vary as wildly as they do, with no demonstrable relation to quality? The chargemaster may well be an "archaic fiction"- I don't know, my instincts tell me that if it is maintained it must be used for something- but the incredible variation in what is billed to whom is not a fiction. I can't think of another product or service that is anywhere near as opaque and inconsistently priced as medical care in the US. To consumers like me this often makes it feel like an extortion racket. This is particularly true if you have experienced the systems in other modern countries.

In theory, I should be an exemplar of a "consumer driven" model that would bring down health care costs- I pay out of pocket for anything but catastrophic care, and I should be considering price and value as I would when buying any other service or product. But I can't- the information is hidden. Basic pricing information is simply not made accessible. Ditto for quality of care/ outcomes information. I grew up in a tourist town where restaurants were required to post their menus, with prices, outside their doors. Something comparable for medical care providers would be a start.

I am not an economist (almost, but took a different turn). But near total opacity of pricing, near monopolies, at least on a regional basis, a lack of information as to quality, and extreme asymmetry of information does not seem to me a recipe for a healthy consumer driven market.

I reflect that my catastrophic only insurance, plus a few routine expenses, costs me on the order of 20% of the median family income, before any actual medical problems. That is to say, even such catastrophic-only insurance is unaffordable for a large portion of the working population. Perhaps the individual market will become more affordable with the exchanges- I don't know. But I suspect that the problems are more with medical monopolies and medical arms races than insurers. Like weapons systems, I suspect medical devices are frequently promoted more for profits than for effectiveness. The Time article rang true for me in that sense, whether of not the chargemaster is overemphasized.

I've helped with a family homeless shelter for more than 20 years. The majority of the folks there over that time were put there by medical bills. Most of them were working people who did not have insurance, or had lousy insurance, and someone- a child or a parent, got sick or was injured. This is followed by mounting charges, collections, garnishments, and loss of homes and jobs. These people did not have their charges "negotiated down" to something they could pay, they were sucked dry. Are these the ones that actually are billed the chargemaster prices? If so, how is this justified- to have a system where the most vulnerable lose the little they have and are made homeless while the more affluent pay negotiated discounts?

I appreciate the opportunity to learn more about the subject of heath care- it seems to me one of the most critical problems in our country.

Anonymous said...

I've worked in medical billing for almost 10 years. What I find most amazing in discussions about the healthcare industry, is how much blame is placed on providers for this broken system, while ignoring a large portion of the industry who make out like bandits, the insurance companies. No other industry that I’m aware of can profit so much with so much inefficiency and so little effectiveness. Both before and after, services are provided, medical office staff must wade through some of the most incoherent and inconsistent red tape ever devised. Commercial insurance companies make Medicare and Medicaid look like amateurs by comparison. As many patients know, prior authorization of a service does not ensure that the claim will not be denied after the services are performed, when it is too late.

It is inscrutable to me, with my ten years of experience. For the non-initiated, i.e. most of the US population, it is almost impossible. And that is what an insurance company is banking on; that medical providers and patients will just give up. They profit by every denial of a claim and the medical provider’s overhead increases with every moment of staff time used to work these denials, which are often hopelessly ambiguous and arbitrary. Anything done to 'fix' provider charges would only be fixing part of the equation.

I agree, with other posters, that real prices are what matters to consumers. They want to know what they will pay out of pocket; a reasonable request. However, what a provider charges is only part of that calculation. The other and more important parts are insurance reimbursement and discounts, and patient copay, coinsurance and deductible. Patient responsibility after insurance processes the claim is not set by medical providers but by insurance carriers. However, arbitrary a doctor’s charges may be does not change the fact that a relatively healthy patient with a high deductible will pay most of their medical expenses out of their pocket, on top of whatever they pay in premiums, assuming they use an in-network provider. Whoa to those who go out of network! And this still leave the problem of the uninsured, for which there is no easy answer. They are caught between a rock and a hard place with few options. Indeed a broken system but each group needs to offer more transparency and be held accountable.