Health charges

While the Affordable Health Care Act that will begin to be implemented at the beginning of 2014 is producing plenty of criticism about what is known and unknown about its mandated insurance coverage, a topic that is certain to loom large soon after has been with this country for decades: wildly disparate hospital charges with no transparency or predictability.

The federal Centers for Medicare and Medicaid Services released a report last week that included examples of hospitals in the same state, and sometimes in the same city, that reported wildly different charges for the same procedure. The differences were sometimes three, four or five times for procedures on a list of 100 treatments. Heart operations and hip replacements, for example, were among them.

Forty thousand dollars for a gallbladder removal at one hospital, while about $9,000 was charged at several other hospitals.

The story was on The New York Times’ front page.

What message the hospitals were sending the Medicare and Medicaid programs with their rates is unclear, as the two federal programs for the elderly and those with low incomes reimburse hospitals at a fairly standard rate that varies only a little by location and condition. Perhaps it was as simple as a crude effort to signal that federal reimbursement rates should be higher than they are.

In the survey, according to the Times, for-profit hospitals typically charged more for a procedure than did nonprofit hospitals, and government hospitals charged the least.

What the survey does is overlay a thick layer of cost inconsistency to what is already known about how patients in different financial conditions pay different rates. Those with insurance plans, sometimes the larger the plan membership the better, pay much lower negotiated rates than do those without insurance.

While hospital spokespeople included in the Times’ story responded by saying the survey did not take into consideration the age of the patient, that the patient might have been sick with other issues or that teaching hospitals have higher costs to recover, the wildly varying prices clearly suggest hospitals are not basing their billings on actual costs. Instead, that hospitals may be setting high prices for negotiating purposes, before applying the different discounts that different insurance companies negotiate or the payment reductions that are almost always required when a patient has no other payment method than cash.

If true, that does not instill confidence in there currently being a starting point for an effort to get a grip on health-care costs. Health-care costs are something like 17 percent of the gross domestic product and climbing steadily. Obamacare is expected to add about two-thirds of the 44 million people without health insurance to insurance rolls, which is welcomed by insurance companies and health-care providers. While many of the 44 million may be young and healthy and, at least for the time being, immortal, others in the number will begin to receive the health care that they have not been able to afford. That will add to costs.

It should be recognized that in some states, including Colorado, there are mandated or voluntary rudimentary public or private efforts in place to make health-care prices more transparent and thus more predictable and comparable. But the efforts are incomplete, and too little known and much more needs to be done.

The question eventually is where will a consistent cost-reporting format originate. Will hospitals and their associations step up to the task to gain credibility, or do they view the inconsistency in charges to be part of a competitive marketplace? State public-utility commissions have the staff members to research and evaluate rate requests by monopolies. Will health-care charges eventually fall under PUC purview?

In the meantime, a large part of the economy is caught up in an environment of uncertain costs and payments. Unless industry or state solutions are found, the federal government will eventually step in. That may not be what some people want.

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