And I don't think the chargemaster price is even correlated with the final price, so it's not even useful as a relative measure.
I wish it was a real price though - maybe this site could push hospitals that way. But I doubt it because the reason hospitals are able to afford Medicare prices is only because they overcharge the rest, and the prices are made opaque specifically so that that people do not complain about that.
The only way to make transparent healthcare prices is to raise medicare prices so that everyone pays the same, but that'll never happen. So what happens is that insured people pay an extra premium to help out the rest.
Airlines do the same thing, and they too have very convoluted hard to understand prices.
>because the reason hospitals are able to afford Medicare prices is only because they overcharge the rest
That's simply not true. Medicare prices are explicitly designed to cover costs, based off of collected data and input from the self-interested American Medical Association[1]. They almost carte blanche accept the AMA at their word, and I doubt the doctors at the AMA are shooting themselves in the foot (although they appear to be backstabbing under-represented GPs). What Medicare doesn't do is pay excessively, so poorly ran facilities may go red. One of the motivations behind incentivizing (and soon requiring) electronic health records is the ability it gives Medicare to objectively analyze this information, rather than taking the doctor's subjective assessment.
What does inflate private insurance rates is unnecessary market saturation, where hospitals are expanding to capture patients from competitors and lowering per-hospital utilization in the process. Particularly an issue with non-profits, which have little other recourse to spend their profits on except higher salaries and facility expansion. The other main reason for higher insurance rates is bad debt, which is the percentage of care hospitals write-off because they don't expect to recoup the charges[2]. Since Medicare payments are supposedly break even, this is almost solely absorbed by private insurance. That's one of the reasons hospitals are for Obamacare, because there will be fewer uninsured and hence less write offs; yet, current reimbursement contracts account for that bad debt already, so they're going to get a lovely profit boost until the payors correct the imbalance.
Anecdotely, revenue cycle departments (that collect payments) love Medicare, because it just pays. Private insurers dispute everything and threaten to pass the bill directly to patients, which the hospital knows will never get paid because the member expects their insurance to take care of it.
Yeah, I get the feeling one could fix healthcare overnight by allowing any private person to pay cash at Medicare prices, or a low multiple (1.5x?). I guess there would still be prescription drugs and devices to deal with, though.
Another idea: make it illegal for anybody but the patient to pay for their healthcare. Insurance pays the patient, who then pays the hospital. If the patient doesn't like the service, or feels they're getting ripped off? They probably won't pay as much.
Bush or Clinton, I forgot who basically was pushing that. Create high deductible plans, add tax benefits attached to them (tax sheltered health saving accounts) so that people are more directly involved in shopping for prices and it was being sold as that would drive the prices and competition to get better.
Yeah, I think the HSA was one of G W Bush's best accomplishments (and, probably, one of the only net-positive accomplishments other than helping in Africa somewhat), which is why I'm sad the new health reforms are basically incompatible with the HSA concept.
As I see it, there are basically two separate ways to make healthcare work -- expose consumers to prices AND give them the tools to make decisions (with subsidies, etc. if we want to let poor people consume more health care than other things, as a matter of policy; I don't think that's an economic argument), or have an external entity with the correct incentives acting on the consumer's behalf. Medicare seems to mostly work on the latter model.
It's clearly possible to screw up both ways, but an even surer way to screw up is to do neither/both-partially.
Ending employer deduction for healthcare (and/or making it deductible for individuals) would be a huge step, too (in either model). I see no actual upside to employers paying for health care vs. individuals or the state at all.
There are a few insurance companies like this. However, the patient must have the cash flow for these large expenses. It often takes takes time to get reimbursed.
so much for... let's see... expensive treatments like heart transplants, free enterprise, risk sharing... impecunious family member/relative/unrelated S.O. needs expensive treatment and let's see how fast opinions change on that.
Not letting me spend my post-tax money how I see fit (which might include paying for an open source developer who makes a tool I love's inherently expensive medical care) is bad, too.
And stuff like charities to help certain classes of people (poor kids who would benefit from a $300-5000 operation once, like Watsi, seems like a better use of charity money than an 80 year old guy living one extra day) seem like absolute good, too.
Hospitals stay in the Medicare system for a variety of reasons, even though the reimbursements are small. It provides a large volume of predictable revenue to pay for fixed costs, it is necessary for some residency/specialties and medical schools, etc. As long as Medicare and the cash-medicare-1.5 were an all or nothing bundle, it would probably work.
I have noticed a lot of doctors refusing to take medi-cal (Medicaid) and some other doctors who won't take any Medicare and some who won't take insurance at all, but these tend to be specialists and not hospitals.
But I doubt it because the reason hospitals are able to afford Medicare prices
It's not just Medicare. It's insurance in general, and the arms race to try to get paid the same amount (adjusted for inflation) for the same procedure, over time.
So, suppose you get a really nasty cut that needs stitches, and you go to a clinic, and get that done. And suppose that the clinic adds up all the costs -- medical supplies, nurse time, doctor time, facilities (which includes everything from rent to keeping the lights on), time to process the bill through your insurance company, everything, and decide that $100 covers it, so they send a bill for $100 for "suturing" (the stitches to close up your cut). Your insurance company pays, everybody's happy.
Fast forward a few years. Little bit of inflation has happened, so maybe now the clinic needs to make $102. But the insurance company has used the leverage of its network system to get the clinic to accept a lower rate -- they can threaten to stop sending patients to the clinic if the clinic won't agree. And now the "suturing" billing code only pays $90.
So some clever person at the clinic comes up with an idea: instead of billing "suturing" for $102 and getting $90, they can bill for "antiseptic gel" at $20 and get paid $12, and bill for "suturing" at $100 and get paid $90, which means the clinic gets the $102, but now on a total bill of $120.
Fast forward a few more years. Now inflation has resulted in the clinic needing to make $105, but the insurance pays even less now. So now it's billed as "suturing" at $100 (paying $80), plus "antiseptic gel" at $20 (paying $8), plus "cotton swabs" (to soak up the blood) at $30 (paying $17). The clinic gets the $105 to cover its costs, but now the initial bill comes in at $150.
It does not take a terribly long time for this arms race to turn treatment of a simple cut into a gigantic laundry list of services, materials, personnel and facilities, at a total initial bill that might run into the thousands of dollars, just to get, say, $110 out of the insurance company.
And that is basically what has been happening in the US. When you see one of those "shocking" hospital bills for something that seems simple, what you're seeing is the result of the arms race between the medical billing arm of the hospital and the insurance company, which will have dozens or possibly hundreds of items on the bill, all at prices well above what the hospital expects to get, but calculated so that the eventual insurance payment will cover the actual cost.
I suggest you read the Time magazine article "The Bitter Pill". You talk as if the insurance company networks are the only ones who are using leverage to push prices paid down. This is no longer correct. Physicians and hospitals have now banded together into cooperative, consolidated practices/groups/networks, and they have absolutely been exerting huge upward price pressures on negotiated payments with the insurance companies.
If the situation was as you described it, the costs for insurance would have been going up, but not at the levels/rates that have actually occurred.
I suggest you read the article. Is is an incredibly well written, balanced, and well sourced piece of journalism. It is also a long and engrossing read.
FYI, the negotiated Medicare rates are actually designed to make sure that hospitals MORE than make up their costs of doing business.
Yeah, fair. Regarding "I wish it was a real price though" that's why we want to run this analysis for insurance companies. They're the ones that have the best real data, and can benefit from it the most.
Chargemaster is kind of like (a more screwed up) MSRP when you buy a car, so not exactly, but it's an indicator of the pricing disparity for the same procedures.
We've also indexed the Medicare DRGs which are a more accurate predictor. Eventually we'd like to index Paid Claims data for insurance companies, which are what actually gets paid.
The prices are all over the map in general, beyond just the chargemaster prices.
Yah, the joke I've heard from industry folks is that "only the Sultan of Brunei would pay those prices."
But since many actual prices are determined as a percentage of the chargemaster, the provider with the lowest chargemaster price is likely to have the lowest actual price.
Directionally correct data is better than no data? no?
I thought uninsured folks were charged the chargemaster price. They may not end up PAYING that price. . .even if they spend their entire lives trying. . .but I thought that's what uninsured folks were CHARGED.
