How much does that Medical Treatment Cost?

It’s a scary thing to have to live without health insurance, but many Americans are forced to do exactly that. While the Government is busy devising ways to force Americans to purchase health insurance, the American people can only hope that they will also take a look at the utter waste and billing abuse practiced by both health care facilities and health insurance companies.

Insurance wants you to be "sick"
By way of example, a major issue that lawmakers have been discussing lately in relation to health insurance and Medicare is the practice of “upcoding.” Upcoding is simply an insurance company’s method of changing codes each time you visit a doctor for the same ailment; it is too complex to explain here, but the end result is that the insurance company makes you seem sicker than you really are—just by the way the codes are used. The Center for Medicare and Medicaid Services (CMS) knows that upcoding is a common practice; consequently, Medicare has attempted to compensate for upcoding by annually reducing the amount Medicare pays the doctors or hospitals.

The following procedures were selected from reports available within several states, depending on the ease of obtaining the information. The procedures were randomly chosen, and while results from a particular state are not necessarily representative of the entire country, the difference from one hospital to another for the same procedure  illustrates the illogic of health care costs to the American consumer—regardless of location.

All insurance companies pattern themselves after Medicare. You can also be sure that all companies practice some variation of upcoding. The annual increase for your age alone is upcoding. You may be in perfect physical condition, excellent physique, a non-smoker, on no medication, and still, if you are in a private plan, your price will go up with your age—simply because the company uses statistics which indicate that the older you are, the sicker you are. These statistics are not even necessarily true. In fact, all life insurance companies recently had to update their mortality tables—resulting in decreases in premium for policies on people over 50—simply because, for the first time in history, young people are dying before their parents! Furthermore, the AARP reported in 2008 that the healthiest segment of American society are the “seniors who take no prescription drugs.” Regardless, the statistics used to support the upcoding say that you are sicker as you get older; thus, up goes the price!

How much did you need to pay?
The illogical billing procedures within the hospital itself will be made apparent if you simply demand an itemized bill for a hospital stay or procedure. One patient we interviewed said that when she was hospitalized for a knee replacement, she took with her an unopened bottle of her blood pressure medicine—medicine that ordinarily cost her about $25.00 per month. The hospital refused to use the medicine she brought with her, insisting on using their own pharmacy and charging her $40.00 PER PILL for the same medication. She refused to take it, insisting that she would take her own prescription or none at all while she was there. In her case, the hospital backed down, but most people don’t even know to ask how much they are being charged for something that would cost them a fraction of the charge if they were at home.

Other overcharges abound. We have seen bills for things like bedpans that were never used, IV tubes, needles, medication never administered and even complimentary accessories. Did you know that the little dishpan kit containing a hospital water bottle, spit dish, toothbrush, Kleenex, and other little take-home goodies is not free? The kit is charged to your bill.

We could go on. Suffice it to say that no one is complaining about fair charges that cover the cost of operations, pay the nurses and aids, and keep the lights on and water running at the hospital. The disagreement is in what appears to be excessive charges—often for services never performed or supplies never distributed.

Same procedure—radical price discrepancies
Aside from that, we thought it would be interesting to see if we could locate the extremes of hospital charges (both the low end and the high end) for some common procedures. While the charges vary widely from one hospital to another, one would not expect the extreme disparity that we found for similar procedures.  Branding is a factor, however; a cancer treatment, for example, at a renowned cancer clinic is likely to cost more than the same treatment at your local oncology center.  However, the web-site journals of Health Affairs reported that the cost of care is unrelated to the quality, so just having a procedure done at a “name” place doesn’t necessarily mean you will be getting better care.

Conclusion
This is only a sample of the disparity in hospital charges; a list three times as long would simply indicate more of the same. One point that should be made is that the prices indicate hospital “charges,” not the actual amount that most hospitals were paid. The charge is often considered a starting point for negotiations with insurance companies and Medicare. Medicare, for example, typically pays from 30% to 70% of the actual amount charged with hospitals in higher cost regions receiving a higher percentage of payment. For the most expensive procedures, insurance companies often pay less than half the amount charged. The payment difference occurs because insurance companies pay on the basis of cost rather than on the basis of “charge.” Thus, hospitals have an incentive to do whatever it takes to incur additional cost, thereby driving up the price until they are able to present a final bill that has little to do with any reasonable “charge” for a given procedure. Furthermore, the hospital bill is often separate from the physician’s charge.

Uninsured individuals pay much more for a procedure than the facility would receive from an insurance company. In fact, an uninsured person can be hit with the entire bill unless he or she has the savvy to ask for a discount. It is, however, getting easier for a person to research anticipated costs in advance of admission as several states have posted tools that allow for comparison. Most of these tools require the entry of the name of a particular hospital, but a few will allow a person to enter a condition or treatment and then search all applicable hospitals in the state. Of these, California seems to have the most user friendly search and comparison tool.

Sources for Medical Procedure Costs (6/2009):

California Office of Statewide Planning and Development

About Health Transparency

Kaiser Family Foundation

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