The most newsworthy aspect of the federal government’s announcement last week that hospital prices vary widely for the same procedures is that … the government and the media thought it was newsworthy.
Health policy experts have known for years—decades, really—that hospital prices are a sham, bearing little or no relation to what it takes to provide a specific service.
The Centers for Medicare and Medicaid Serves (CMS) released the data on the 100 most frequently billed procedures at more than 3,000 hospitals. Charges can easily vary by 300 to 400 percent for the same procedure.
As the New York Times pointed out, “In one hospital in Dallas, the average bill for treating simple pneumonia was $14,610, while another there charged over $38,000.”
However, very few people pay what we might call the “list price.” Medicare sets its own prices for various procedures and that’s what the hospital gets. Private insurers negotiate discounts for their members, which can be significantly less than the list price.
The people who get hit hardest are the uninsured. For years, many hospitals forced the uninsured to pay the inflated list prices. But after several groups and the media highlighted this practice, most hospitals started offering the uninsured a discount, usually around 30 percent. However, in most cases that’s still significantly more than Medicare or the privately insured pay.
Apparently CMS hopes that by releasing the data, patients and their doctors will choose the less-expensive hospitals, forcing others to lower their prices. Don’t hold your breath.
The vast majority of Americans have health coverage, which insulates them from the cost of hospital care. Health insurers and employers were transitioning to consumer driven health coverage, which tried to give patients an economic incentive care about the price.
But ObamaCare tries to quash that movement by insulating most patients from the cost of hospital care even more than they are now.
From an economic perspective, why would I care if a hospital charges $5,000 or $10,000 for a procedure if the government-qualified policy limits my maximum deductible to, say, $2,000?
CMS is giving patients important pricing information; ObamaCare ensures that they won’t care.
May 14, 2013