The Insanity of What Hospitals Charge and the Solution No One Is Talking About
I would like to take a moment to praise the Obama administration for having the Centers for Medicare & Medicaid Services (CMS) release this huge database of what different hospitals charge for common procedures. The New York Times was given a preview of the data and put together a few examples of the widely divergent and frankly random prices hospitals charge. From NYT:
A hospital in Livingston, N.J., charged $70,712 on average to implant a pacemaker, while a hospital in nearby Rahway, N.J., charged $101,945.
In Saint Augustine, Fla., one hospital typically billed nearly $40,000 to remove a gallbladder using minimally invasive surgery, while one in Orange Park, Fla., charged $91,000.
In one hospital in Dallas, the average bill for treating simple pneumonia was $14,610, while another there charged over $38,000.
There are few such glaring examples of how horribly broken our health care system is than this bureaucratic insanity. By making the data public and easy to access it should help draw attention to the problem.
It is important to note that almost no one pays these prices but they are still what the hospitals officially charge anyway. The prices also have almost nothing to do with what anything costs. They are made up numbers based on what a hospital roughly thinks it can get away with to serve as an opening bid. Every single insurance company then needs to negotiate a “discounted” price separately with every single hospital on every procedure down to what is closer to what the procedure actually costs.
This is a large part of the reason why administration waste and hospital prices in American health care dwarf any other country’s. Even other first world countries that technically use private insurance companies almost always have some form of all-payer system, a single organization or government entity to set standardized prices. Instead, in America every hospital has dozens of different prices based on who is paying. This creates an ocean of paperwork and an army of private bureaucrats to track claims, errors and counterclaims.
Amazingly, despite this clear proof of a problem and with many other countries providing decades long examples of how to easily fix it, there is still no mention of all-payer today.
Photo by Jose Goulao released under Creative Commons License