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The anatomy of a ripoff (nydailynews.com)
232 points by rglovejoy on Jan 10, 2012 | hide | past | web | favorite | 180 comments

My wife is the manager of budget and reimbursement at a hospital, and from many conversations with her, I can imagine that this article is accurate. However, if I were writing this, I would have given greater emphasis to the effect that Medicare has on these problems.

The article does mention that Medicare typically pays fees that are below actual cost for the procedures, and that hospitals must therefore increase charges to other customers (the article says they must do this to make profit, but actually they must do this just to break even and stay in business).

But the problem goes even farther than that. Because Medicare is essentially a monopsony and gets to call the shots as far as charges are concerned, it actually matters far less what the actual costs are. As a result, few hospitals today have modern cost accounting processes, and so they only have wild guesses as to what a given procedure costs. Obviously, then, their charge list is going to be made largely from guesswork, and so it's very much expected that two different hospitals will, at the micro per-item level at least, have very different charges.

Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. And in the coming years this isn't going to get any better. What you are likely to see, though, is increased politicization of these charges, as the political process takes even greater control of the industry.

> Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality.

This is a pretty big logical jump.

I'm American, but have been living in the Netherlands for a while. Health care is probably more regulated here than in the US, yet in all of the ER visits I've experienced (myself or friends/family) I've never seen bills like that. Regulation does not have to cause bills like that.

Something is very wrong if sick people in life threatening situations are being charged hundreds (or thousands!) of times for the same care based on whether or not they have insurance. That screams "more regulation is necessary" to me.

The American health-care system thrives in the uncanny valley between the government and the free market. There are all sorts of laws and regulations that prevent normal market procedures from working (for example, emergency rooms can’t turn someone away because they can’t pay), but at the same time, American anxiety over “socialism” has prevented Congress from letting the government take a more active role in actually managing the system. Instead you have this weird patchwork of nonprofit institutions, private companies, and public agencies.

If I recall correctly, the United Kingdom, with its much-maligned National Health Service, spends about 40% of what the US spends per capita on health care, and yet when you measure things like life expectancy, Britons are as healthy as Americans. That gives you an idea of how much money is going down the tubes due to administrative inefficiency.

...when you measure things like life expectancy, Britons are as healthy as Americans. That gives you an idea of how much money is going down the tubes due to administrative inefficiency.

It's hardly clear the money is going down the tubes due to administrative inefficiency. It might just be spent on unnecessary medicine, and costs might be higher in the US.

According to one fairly decent source, administrative inefficiency is a pretty minor contributor - the biggest contributor is outpatient care.


A couple things, first off, if costs are higher in the US, they shouldn't be, we're not living in a radically different reality in the UK. Market forces should be lowering those costs, but they're not, because the actual cost centers are completely insulated from any market whatsoever by the insurance system.

RE: administrative inefficiency, from my limited experience (laying off teachers in local gov't back in 2004 because healthcare premiums were going up by 15-18% a year), the administrative overhead in actually managing the insurance is pretty small as a % of the costs paid to hospitals.

But then you step back and think, well what the hell, why are the costs paid to the hospitals so high? Because the whole system's broken. So if you try to measure administrative overhead, it looks small, but the general administrative system is creating this environment where the costs themselves are through the roof. Some is unnecessary medicine, a lot seems to be the completely arbitrary price structure. In the linked article, one hospital charged 6 bucks for a treatment, another charged several thousand. That's not a market.

I switched to an HSA in 2005 and it's been the best thing ever.

Most doctors offices have given me anywhere from an immediate 20-50% discount for immediate payment. I even got a 66% discount last year for paying before the procedure.

The reasoning behind it is simple..

If you did $100 of work and weren't going to get paid for 3-6 months, you would charge more than $100. There's the time value of money. If you have to spend a lot of time and effort to get that money, you would charge significantly more. If you knew that you would have to give up some of what you asked for, you would charge more. (When I worked in a hospital, we had one person that her only job was to call and argue with insurance companies.)

Now.. on the flip side. If you did $100 of work and were used to Net-90 or even Net-30, what discount would you accept to get the money now? And not just now but with zero arguing, effort, etc?

Oh.. and with an HSA, I have consistently gotten same day appointments when there's a "two week wait" for people paying with insurance.

In that case, it's simple cash flow management.. if you have one slot open and you can take a customer that will pay 3-6 months later but only with lots of effort OR a guy who will pay less but before they leave the office, which would you take?

One of the reasons it costs less in the UK is because the NHS bargains the costs of drugs (and machinery etc) it buys down. This works partially because they can and do refuse to buy the drugs deemed too expensive. I don't have any statistics to back this up, but because the US system ends up spending as much as the pharmaceutical companies can possibly charge meaning they pay more for the same drugs. Somewhat of a perpetuating system, as the US pays more the pharmaceutical companies can handle the NHS bargaining the prices down some more. It's vaguely analogous to how the lesser paying medicare is subsidized by private insurance.

Note the theory of second best - 2 monopolies (i.e. a union and the owner of a company town; or a health service and the monopoly owner of a patented drug) can negotiate a better and fairer deal than 1 monopoly and a fragmented party. 2 fragmented parties is best (in theory), but that doesn't always happen.

But most economists don't learn this in school. They just learn "monopoly = bad, government = monopoly".

You could argue that the reason outpatient care is so high in the US is because people who can't afford, insurance or otherwise, for "normal" care only go to the hospital when their condition becomes acute and emergency departments that can't turn away people have to treat them. You could probably argue that in this case acute treatment cost is higher because the primary condition has been left untreated for so long ; xref the stories of poor children dying from tooth abscesses, something that could normally be treated with $15 worth of antibiotics and $25 worth of dental work; tooth pulled, hardly aesthetic but it works. That $40 of timely intervention is probably hundreds cheaper than a child presenting to emergency with septicemia.

I'm also certain that much of the unnecessary medicine is provided because of the legal climate in the US; doctors practice under the assumption that they will be sued if they don't provide unnecessary medicine.

Also, if you pay a bajillion dollars for an MRI machine, then you amortize the cost over the number of times it's used. The times you use it, it's just the cost of electricity. So there's an incentive to use it a lot.

That still doesn't explain being charged several thousand for an x-ray, though. That's 150 year old technology, this isn't like Dr. House and a team of neurosurgeons at work here.

> That still doesn't explain being charged several thousand for an x-ray, though

If you want to try and understand this stuff, you have to abandon the idea of the charged cost of a procedure relating to how much it cost to provide. It's truly depressing.

This econtalk podcast does a good job diving into the nightmare of non-prices in the medical system: http://www.econtalk.org/archives/2008/12/lipstein_on_hos.htm...

Well, yeah, if you ignore all the studies and only read libertarian blogs, then it's hardly clear. Administration accounts for 31% of healthcare costs in the U.S., and 16% in Canada, for example.

The Incidental Economist is the premier healthcare policy blog as far as I can tell. I've been reading it for years, and it is anything but libertarian. They actually have several posts on why competition based schemes will not reduce posts - pretty much the exact opposite opinion of a libertarian.

In fact they have two series of posts (one being what Yummyfajitas posted) that are basically required reading for anyone interested in discussing the healthcare problems in the US. I would also recommend their 10 part series on healthcare quality.

The views of the bloggers at the incidental economist tend to be moderate liberal. Seriously, go read the blog, and find me a single post indicating libertarian views.

I'm sorry that data driven liberalism conflicts with mainstream ideology and your favored talking points.

Moreso than that: there's a fundamental break from free market assumptions in that use decisions and cost decisions are divorced. Health care recipients (patients) and primary providers (doctors/medical personnel, though to a lesser extent facilities which are more aware of costs) don't bear and/or often don't know the costs associated with a given therapy or intervention. Instead, these are born by and/or negotiated by insurance providers. Even at a given facility, compensation rates for a given therapy can vary widely by insurance carrier, or even by plan within a given carrier.

More broadly, this is a problem at other areas of what we consider to be "free market" economies. Healthcare and defense are classic instances, but many group-negotiated services (utility contracts, broadcast media, "free" online services, even Microsoft's software sales channel (mostly OEMs and corporate site licenses, not individual end-users) violate base assumptions of free market economics.

While microeconomics is hugely useful describing behaviors in which it applies, I'm increasingly coming to believe that only a small fraction of what we consider to be free market activity in fact meets the core assumptions.

But yes: US healthcare is hugely inefficient.

"You can't jump half-way across a gorge". Letting it be free market wouldn't work nearly as badly as most people expect. "Socializing" medicine and making it a fully planned section of the economy wouldn't work nearly as badly as most people expect.

Half-assing it between the two will work far worse than most people expect.

Well, there there are some places where the government messes about with the healthcare system about as much as we do, and it works out really well. Singapore for example http://en.wikipedia.org/wiki/Healthcare_in_Singapore

I think the main problem with the US healthcare system is that it's a elephantine monstrosity, a system that tries to hit every corner case with an ad hoc exception, and which nobody can understand more than a fraction of. And there are various boneheaded implementation details, the equivalent of bubblesort - like using the frigging labor theory of value to set physician reimbursement rates. And complex interdependancies that cause different parts of the system to affect each other for very non-obvious reasons. For instance, a rule to prevent people from defrauding Medicare now prevents corporations from giving free birth control to college students like they used to. </rant>

I'm from Germany and you do realize that over here (don't know about the exact differences) privately-insured patients (who opted out off the 'mandatory' insurance scheme) basically pay a LOT more for any given medical service just so that patients covered under the mandatory insurance can get treated at all? It's like a giant (inefficient) money redistribution scheme, in all the worst ways imaginable.

Regulation does actually cause bills like that. It's just that in Europe, you don't ever see them.

Actually I think you'll find that billing like the kind you see in the US doesn't happen in Germany. The US spends nearly twice as much per capita than Germany for a comparable level of service[1]; this is hard to judge but life expectancy is a reasonable proxy, people in Germany on average live about the same.

The UK with near mandatory, see below, universal healthcare the cost of per capita is lower still [1 ibid]. In the UK if you opt out of public healthcare you can't mix and match services beyond the GP level, this may change in the future.

Obviously with a mandatory universal care the overall cost to the public at large stands a high chance of being lower; efficiencies of scale. The downside is that at the individual level you may be subject to "postcode lottery" healthcare. In many countries this leads to individualism raising the costs of healthcare for everyone.

Everyone wants to be treated the best; the problem is that regardless of the system you chose this is impossible.

[1] http://en.wikipedia.org/wiki/List_of_countries_by_total_heal...

life expectancy is a reasonable proxy

I disagree. The USA differs significantly from Germany, both in cultural aspects and genetic/racial makeup. Different lifestyles contribute significantly to life expectancy differences, as does heredity.

That is not actually important in the overall picture of healthcare spending - http://theincidentaleconomist.com/wordpress/what-makes-the-u...

"In the UK if you opt out of public healthcare you can't mix and match services beyond the GP level, this may change in the future."

What do you mean by this? You can have pretty much any health service privately in the UK if you want to pay for it e.g. from BUPA:


If you choose to get elective surgery for a condition rather than waiting in the queue for the NHS your room isn't covered by the Govt, your post-op prescriptions aren't covered, etc. If you do wait however they are covered. If you need corrective surgery afterwards to fix something that went wrong in the first op you normally aren't covered for that by the NHS either.

For some reason none of that sounds particularly unreasonable to me - once you decide to opt out of the NHS then you have to accept that you are paying for all of the costs. Note that this view might be because I'm in the UK and have private health insurance - although everything major (accidents, childbirth) I've relied on the NHS.

While mixing and matching might seem sensible I suspect that the resulting administrative complexities might introduce the same kind of inefficiencies that the US system appears to suffer from.

That's different from opting out, which would mean not paying for the NHS at all. This is buying additional coverage.

You can't opt out of the NHS in the UK, except by not paying taxes, which usually results in a spell in prison.

You forget to mention a few details: Younger privately insured patients actually generally pay less than their publicly insured counterparts (especially if they're male), since private insurance companies are allowed base premiums on risk (which grows with age). Private patients generally get better service, wait less and have access to more drugs and procedures. So yes, it's probably more expensive overall, but it's a voluntary decision and you get something in return.

Hang on, so medicare told the hospitals and insurance companies to run their businesses that way? The transaction described in the article was entirely between private business entities.

I get that they set their prices in a way that distorts the market to some extent but it seems that that distortion is far less than what the really-smart-guys-in-suits have been able to manage all by themselves.

I understand the impulse that markets make things better. I really do. Look at computer parts for example, there's a robust market that keeps driving down prices and really delivers. But what about the healthcare industry resembles a sane market at all? There's effectively no market forces at work, due to the way that private sector businesses have structured it.

I'll be honest. I don't get why hospitals continue to play the game. If I were running the place, I'd just pull out of Medicare.

It seems that they're afraid of the millions of dollars of lost revenue, without considering the greater sum of expenses that they'd free up.

> I'd just pull out of Medicare.

Many hospitals do; many don't because they feel it's a moral obligation to provide care to Medicare patients. Here's an example of that attitude: http://www.kevinmd.com/blog/2011/12/dropping-medicare-break-...

In order to stay in Medicare/Medicaid (which, as I said, many see as a moral requirement), hospitals are often required to lay off staff. Here's an example of 100 layoffs at Dartmouth Hitchcock hospital: http://www.unionleader.com/article/20111109/NEWS02/711099983

I sincerely doubt that the bean-counters at hospital are losing a ton of money on medicare but are too confused by the large 'revenue' figure to subtract a larger 'expenses' figure and realize they're making a loss.

As a matter of fact, I can't recall ever reading an op/ed or anything by a hospital administrator complaining that they're being fleeced by medicare and losing a bunch of money on it. But I've seen a billion op/eds in the same template as TFA, bemoaning the byzantine and obfuscatory private insurance regime as something that completely destroys any market forces that should exist in the industry. I mean, one hospital charged one thousand times as much as another for the same treatment.

I have to conclude that bringing up medicare while the private insurance industry system is this flagrantly broken is nothing but a red herring.

And I'm telling you that my wife is that bean counter. Her job is (a) budgeting, and (b) getting reimbursement from Medicare and Medicaid. As well as anyone in the organization (which is to say, not too well, because of the deficiencies with cost accounting that I mentioned), she knows those numbers.

I don't think a month goes by when I don't ask her this question. Something always comes up, where she's saying "Medicare just denied another $500K payment" or somesuch. And I'll say to her "you live by the sword, you die by the sword".

She admits that the net profit via Medicare is negative. But the decisions makers don't want to consider it. In this case, it's possible that they consider it their mission because they are a Catholic hospital. I can't see any answer in the general case.

Well, I'll take your word for it. I do think that the major problems come from being in a halfway-space between public and private sector for the whole industry, combined with the fact that the entirely-private insurance system breaks any market forces which could lower prices.

I've worked as the IT guy in a hospital, and have talked to our "finance guy", and he says the same thing--outpatient surgeries and childbirths pay for Medicare (in)patients and the ER.

And yes, there is inefficiency unrelated to Medicare, and yes, I've seen the anecdote about how doctors who own an MRI machine refer patients to get MRIs six times more frequently.

But Medicare underpaying, alongside what I remember hearing was a "bad payor mix" from ER patients, hurts.

If you're truly curious about how healthcare works, follow this blog http://histalk2.com/ and get a flavor for what's concerning IT people (which oftentimes is money).

Eh? Every source I've read on the subject says Medicare doesn't cover the cost of service. And that is, in part, the reason for the "byzantine and obfuscatory private insurance regime". When you go to the hospital you're paying for the medicare patient in the next bed, and you're paying for the indigent guy in the bed beyond.

But they can't very well give you a bill that with a line item that says "shifted costs from the old guy in bay 3 - $900".

Unsurprisingly, it's complicated.

For example, at one hospital where my family member works as a therapist: The hospital receives federal funding for area X, so the clinic area Y must accept Medicare. in Area Y, medicare pays far less than private insurance per hour of therapy, doesn't reimburse for patient no-shows, but doesn't allow the clinic to drop no-showing patients. So the clinic section of the hospital ends up paying staff hourly wages to do nothing some of the time, and is barely treading water the rest of the time.

Now, there's overhead, so it's better to have a full clinic with Medicare underpaying than a half-full clinic with no Medicare, but it's still a ripoff: private insurance / private pay is paying more for the same service than Medicare. If private insurers could and would demand the same terms as Medicare, the clinic would die.

Finally, maybe Medicare is still a good deal, due to that Area X funding? Maybe, but that's in a totally separate area, distorting the economics of both areas X and Y. It leads to political BS where the fancy X ward swimming in money and building a palace (like http://www.seattlechildrens.org/, have you seen that lobby?), so they pressure clinic Y to beg for donations from their own staff to stay afloat.

> Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality.

You make it sound like one follows from the other in an obvious way. Can you expand on why that would be?

You make it sound like one follows from the other in an obvious way.

I think it does follow logically. I'm assuming that the regulations were intended to serve some purpose. If the system was working as the regulators/legislators wanted, there would have been no point in regulation. The regulations were created for the purpose of altering the way things would normally work out.

By analogy, if we see a canal, it's probably a safe assumption that the waterway doesn't resemble the natural flow of water. The only reason to build the canal is that something was needed to be different from the water features that were present.

Speaking as someone who doesn't know much about this stuff, your analogy reads more like, "the canal diverted the waterway, so tigers devoured the Pope". It may well be true, but you need to flesh it out more: explain how the new course flooded the tigers' habitat, forcing them to migrate to Rome.

The person you're responding to believes that if medical charges are vastly different between providers it must be due to evil government regulation, because after all in other sorts of stores we never see wildly varying prices for the same item and healthcare, where people have plenty of time to comparison shop (even if you're choking on turkey, you still have a few minutes to contact the various local hospitals and determine which provides cheaper ER service before you pass out) is a perfect example of a transparent market.

The person you're responding to believes that

The person he's talking to doesn't believe that putting a strawman argument into someone else's mouth is an honest debate tactic.

This question has nothing to do with ideology. As a matter of pure logic, regulation changes what the market is doing naturally; that's the whole point of the regulation.

This is a non-judgmental conclusion. One doesn't have to say that the market state was good or bad, or that the regulated state is good or bad. Simply that a regulated market differs from a free market. That's it.

Now, given that the system is highly regulated, it's clear that the regulators have screwed up.

However, this on its own doesn't tell us that the free market was good; it just tells us that the current regulatory regime is crap.

Bit late to the conversation, and somewhat pedantic, do forgive -

Going from : >>This is a non-judgmental conclusion. One doesn't have to say that the market state was good or bad, or that the regulated state is good or bad. Simply that a regulated market differs from a free market. That's it.


>>Now, given that the system is highly regulated, it's clear that the regulators have screwed up.

is making a jump.

It is not a necessary that the regulators messed up - it is also possible that the parties being moderated, are actively subverting the system.


I will agree with your point behind it all - ie that in such a system it is LIKELY that there is fault by the regulators. This type of fault, the extent of responsibility for the final outcome, these are complex questions which need more than just stating that the regulators were out of line.

You could say that X and Y are responsible for crime A. The punishment/responsibility would depend on a variety of factors. That is the question that requires answering.

It is not a necessary that the regulators messed up - it is also possible that the parties being moderated, are actively subverting the system.

As I see it, that is a problem with the regulation.

By analogy, when a hacker breaks into your system, you can't say, "our security checks weren't wrong; the users just weren't supposed to enter those inputs". It's your job to anticipate all the possible bad inputs, and guard against them.

Similarly, it's the job of the regulators to anticipate all possible routes around the regulations, and account for those.

Now, a bit of thought will lead to the conclusion that this is impossible except in all but the most trivial cases. I submit that this does NOT give us leave to shrug and just go through it anyway. Instead, it should force us to step back and consider whether the intended benefits of the regulations are great enough to counterbalance the cost of the complications that are certain to occur down the road.

(and I note a certain irony in your pseudonym "intended", since the problem here is UNintended consequences)

>> Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality.

>You make it sound like one follows from the other in an obvious way. Can you expand on why that would be?

Two factors: incentives and information.

Regulators do not, by definition and intent, have the same incentives as participants.

They're also not involved, so they lack information.

Here's another way to think of it. When a biz goes bankrupt, employees lose their jobs, owners lose equity, and regulators go to lunch as usual.

If a regulator mis-estimates costs by 1%, that's fantastic. If a supermarket mis-estimates costs by 1%, it goes out of biz (because their margins are less than 1%).

I think part of the problem is that "highly regulated" is an ill defined term. For certain definitions of "highly regulated", the NASDAQ is highly regulated, yet we don't see much price distortion there. The "problem", I think, is with the nature of the regulation, and the nature of the supply/demand equation for medical care.

One simple example, which I don't really have time to explain here, is the health insurance system which makes it so that people generally do not consider price when purchasing medical care. Of course that is going to lead to price distortions.

Another simple example is the inflexibility in the supply of doctors, which is ultimately due to government regulations (many would argue that this is a good thing)

As just one example, look at the RBRVS: http://www.slate.com/articles/news_and_politics/prescription...

Paying people on a cost-plus basis provides them with an incentive to maximize costs, whether they're doctors or defense contractors.

Then there's also the FDA's use of production quotas for drug production. We had a big shortage of Aderall recently because the FDA has to give permission ahead of time for a given amount of production of the drug for each company. And when the FDA decided that one of the producers wasn't up to snuff and was no longer allowed to make the drug, it failed to raise the quotas of the other producers to compensate.

To the extent that you run a section of the economy like the USSR was run, you shouldn't expect it to be run efficiently. The US healthcare system would still have quite a ways to go before it becomes quite that bad, but its closer than most people seem to think.

> We had a big shortage of Aderall recently because the FDA has to give permission ahead of time for a given amount of production of the drug for each company.

As I understand it, the DEA, not the FDA, sets the quotas. They're currently arguing publicly over the shortage: http://www.nytimes.com/2012/01/01/health/policy/fda-is-findi...

The DEA claims there is no shortage (insert Star Wars hand wave here) while the FDA wants them to raise the quotas. (How Soviet does that sound?)

No disagreement on the rest of your comment.

The Adderall example is due to our drug-war paranoia more than due to healthcare regulation; Adderall is a Schedule II controlled substance whose production and distribution is micromanaged as a result.

My guess is that those problems would remain even if we completely deregulated healthcare otherwise, because there is very little political support for widespread drug declassification (maybe marijuana will happen in my lifetime, but I doubt much else).

That is a very good point re: medicare.

I was a management consultant in the healthcare industry in a previous life. One interesting study I did found a direct correlation between percent of patients on medicare/medicaid and hospital profitability...

The higher the percent of medicare and medicaid patients, the lower the profitability. The correlation was essentially a straight line.

Here is a good article about how wildly Medicare costs can vary from place to place: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_...

The second highest reimbursement district in the country is in Texas, which passed a draconinan tort reform law back in the 90s (if memory serves), so you can't blame courts or defensive medicine directly.

Texas is expensive for the same reason Southern California is expensive - a high percentage of the patient population is illegal aliens who a) can't afford the service and b) skip out on the bill.

Medical care is the most highly regulated industry in the economy...

Uh huh. Talk to the (quite profitable) utility companies about that.

See, e.g., http://econlib.org/library/Enc/HealthCare.html

- - - - - Quote

Regulation and the Health Care Market

The health care industry is one of the most heavily regulated industries in the United States. These regulations stem from efforts to ensure quality, to facilitate the government’s role as purchaser of care, and to respond to provider efforts to increase the demand for their services. Hospitals and nursing homes are licensed by the state and must comply with quality and staffing requirements to maintain eligibility for participation in federal programs. Physicians and other health professionals are licensed by the states. Prescription drugs and medical devices are regulated by the Food and Drug Administration (see pharmaceuticals: economics and regulation). Some state governments require government permission before allowing a hospital or nursing home to be built or extensively changed. All of the above regulations restrict supply and raise the price of health care; interestingly, those who lobby for such regulations are medical providers, not consumers, presumably because they want to limit competition.

Some state governments limit the extent to which managed care plans may selectively contract with providers. All state governments have imposed laws governing the content of insurance packages and the factors that may be used to determine insurance rates. While these may enhance quality, they do impose costs that raise the price of health insurance and increase the number of uninsured. In testimony before the Joint Economic Committee of the Congress, one analyst reported the annual net cost of regulation in the health care industry to be $128 billion.10

Bottom line is that if you're middle class and don't have health insurance, a serious accident could bankrupt you. The system was designed with the idea that you don't exist, and would never actually pay the rack rates that hospitals charge.

Planet Money had some good coverage of the joke that is medical billing a couple of years ago:





I don't understand why an uninsured patient who pays out of pocket can not dispute the charges and prove that the price has been fraudulently inflated due to "cost shifting".

You can /try/ to negotiate, but you don't have much leverage after the fact. If your BATNA is going bankrupt, you get into a game of brinksmanship.

Should you really have to threaten to declare bankruptcy to settle a hospital bill?

Actually you simply offer to pay whatever they would have gotten from the insurance company -- they are likely to get even less if they sue you into bankruptcy.

This econtalk podcast with the CEO of a hospital system in St. Louis is also very enlightening: http://www.econtalk.org/archives/2008/12/lipstein_on_hos.htm...

I have spent a week in a hospital twice, once in the late 90s, once in the lates 00s. Different hospitals, different health plans.

Here's the thing: in the 90s experience, I received a complete itemized bill, organized by time and day, for everything that was done to me. I didn't have to pay, my insurance did, but I received copies of the bill. In the 00s, I received virtually nothing. Again, my insurance paid, and I was just given the very briefest of letters explaining that I was covered, and how to handle short term disability, and the like.

I found receiving the complete itemized bill truly enlightening. What I learned was:

    + exactly what was done to me in the hospital and when
      (I was not in a position to understand when I was admitted)
    + exactly what was being charged
    + exactly how expensive everything was
    + some charges did seem erroneous, perhaps for treatments that did not take place
The sum of the bill was staggering. But it was truly a good thing to see the bill. It helped me understand exactly what had happened. It served as a reference for googling my illness and treatment. It helped me understand the costs.

It helped me appreciate the efforts by others to get me that coverage. And it let me return some of that by giving me a way to check for mistakes in the billing.

I hope everyone has the coverage they need when they need it.

I do think that part of every medical service should be a completely itemized bill. I think it's a useful reference for the patient, I think it's a simple way to inform everyone on the complexities and costs of healthcare, and it's a simple way to encourage informed use, and correct mistakes.

If everyone had these bills, there would be websites developed to explain, compare, manage them, and it would help eliminate many of the games that hospitals seem forced to play.

So it would also encourage better accounting and put better incentives in place to have that better accounting.

I agree. I've been active in helping my grandparents manage their affairs the last few years and I find it interesting how frictionless it is for them, under the Kaiser HMO, to get medical services, especially prescriptions. I find it a little too frictionless at times.

They sometimes show me the paperwork Kaiser gives them, but I don't remember ever seeing an itemized bill. I'd find it insightful, as I think they would too, to see a list of expenses. I'd also like them, and everyone (especially seniors), to see how much of those costs the government bears.

Although I don't get too deeply into the politics of it with them, my grandparents are part of that Fox News senior demographic that would probably happily repeal "Obamacare" while being kept blissfully unaware of the benefits they enjoy because of government assistance.

I'd also like them, and everyone (especially seniors), to see how much of those costs the government bears.

At the risk of being pedantic, this is one case where one needs to remember that the government never bears any costs of anything. To the point:

I'd also like them, and everyone (especially seniors), to see how much of those costs their fellow taxpayers bear.

Just curious, who is the government, if not your fellow taxpayers? I always assume the government are fellow taxpayers. A lot people seem to think government is some group of people they've never met that live in a far away land.

It’s possible that in the second case, your insurance company was paying the hospital according to the diagnosis, rather than covering each procedure as a separate line item, and therefore no itemized bill was necessary.


Hmm, that's an interesting take on it. Thank you.

That's not my impression of what happened, but it could fit what I observed, and the concept of diagnosis-related groups seems useful.

"diagnosis-related groups" reminds me of how car repair is sometimes done. A made-up example: a tune-up on your model of car at the local mechanics is $350, regardless of how much time it takes or parts required.

Still, at the end of the day, they give me an itemized bill detailing everything they did, and put in, including waste fees they might be paying.

While some of that may be useful for marketing/upsell reasons, much of that keeps me better informed as to the state of my car.

In my 00s experience in the hospital, there was literally none of that, except for one thing: they gave me a manufacturer's warranty card, which was weird beyond belief, but I guess nice to have. Other than that, no detailed list of what had just happened.

If DRGs are the future for billing, I'm not sure they are the best future for doctor/patient/hospital communications.

My wife recently had some tests done. Hospital's receptionist forgot to add insurance information to wife's profile, so accordingly to hospital's records she was uninsured.

Month later we receive bill for ~$1,400. After quick googling we find that if she would go to any local hospital and pay up front with cash, it would cost her maximum ~$400. Obviously, she went back to hospital to find out what's wrong with them (hospital owned by insurance company, so it is very wrong). There they found they did not record her insurance info, excused and said they will send corrected bill.

Month later we received her new, corrected bill. $74.68

You guys in USA have something very-very-very wrong with health care industry =)

hospital owned by insurance company, so it is very wrong

Wait what?

How on earth is that allowed to happen!

Kaiser Permanente has both insurance subsidiaries and hospitals. I can't imagine this is unique.

Texas, Scott & White

'Something' is indeed wrong when no one can seem to even identify what that is. Opacity is the first problem I suppose.

Something must be tightening up somewhere, though. Just before my daughter went through an outpatient surgical procedure, the hospital (which was acting as the surgical facility only here) called my wife. They noticed we had a high-deductible plan. Would we be willing to prepay part of the O/R costs now?

I talked to the hospital at length to try and understand this change in procedure. Apparently the number of patients with high-deductible plans is growing, and people don't realize what that means. When you visit the E/R and your plan has a $5000 deductible, that's what you're gonna pay. People freak out. People refuse to pay. The hospital starts calling to make sure people understand their obligations. It seems the people they use to rely on for cashflow are disappearing.

This is why high deductible insurance offers the best hope for cost control.

Too bad it becomes illegal in 2014.

I think it only delays the inevitable and ends up making things worse. If people don't have the money for surgery (and really how many of us can pull ou $5000, right no). They'll delay it. Delay it too long and that $4000 surgery becomes a $50000 intensive care, emergency operation.

I keep a savings account around with a minimum balance of $5000. The only reason I have that money sitting there and I am not using it as a down payment for a car I so desperately need is because I need it for my high deductible plan. I also have an HSA (health savings account) that I am slowly adding money to every month, which at the moment is mainly used to pay for prescriptions and the like.

Now, one could suggest that I change my plan to a non-high deductible one so that I don't have to keep that money sitting around in savings, but then my costs per month would go up $300, whereas my high deductible plan is entirely paid for by the company I work for. I don't go to the doctors nearly enough to that the extra money I spend per month would counter-act the amount I am paying out of pocket now because I never reach my deductible.

This misses the point of high-deductable insurance. It's not simply the idea that you should share more of the cost. The idea is, rather:

* Low-deductable insurance is inherently more expensive.

* The difference in premiums between low- and high- deductible insurance gradually funds your HSA.

* When you're young and you start your HSA, you also happen to be actuarially less likely to need the money going into your HSA, so it grows to cover your deductible (or, the savings gradually displaces whatever you deposited to start your HSA; whatever).

In the presumed common case, your deductible is fully funded by your HSA which is itself fully funded by the difference in premiums over a few years. That's all money that would simply have been remitted to your insurer if you had a low-deductible plan. The high-deductible plan leaves you better off.

(There's also the more meta point that health insurance exists to keep you from being bankrupted by e.g. appendicitis, and not as a cost-saving plan for routine care.)

The RAND experiment disagrees with you. It shows that cost sharing induces people to use 30% less medicine with no significant effects on health.


Unfortunately, we never repeated the rand experiment, so it's a bit dated. For some reason we never tried repeating it before pushing massive changes in the law.

"No significant effects on health" isn't entirely accurate; the "average" participant had no negative effects on health, but several of the subgroups did, mainly poor people with chronic conditions who had better compliance with treatment regimens, and better outcomes, in the free-care case. Here's the abstract: http://www.nejm.org/doi/full/10.1056/NEJM198312083092305

I'm familiar with this paper. Unfortunately it's deeply flawed.

The RAND health experiment studied 30 measures of health. Two of them were statistically significantly improved - vision (due to free eyeglasses, p=0.001) and blood pressure (p=0.03).

Simple math shows that 0.97 ^ 30 = 0.4. This means that the RAND experiment had a 60% chance of showing an effect in at least one particular submeasure even if there was no effect in any of them.

(The result on eyeglasses is strong enough to avoid this effect, however. So we can conclude that free glasses help people see better.)

Did they use 30% less surgery too?

Usually, you should always get an insurance deductible as high as you can afford to pay out of pocket. If you can't afford to pay the deductible out of pocket, you should look for a lower one. So a $5000 deductible isn't for everyone, but it would be good if the people who could afford it would start to use it and bring some price-sensitivity into the system.

Most young people would (a) be better served in the immediacy by the highest possible deductible and (b) once established in one, grow into middle-aged people who have set aside that deductible just by maintaining their HSA.

Converting to high-deductible is a problem if you're living at or above your means and are approaching middle age. But presumably regardless of your socioeconomic status, if you're just starting out in the market, given the choice between high- and low-, you're better served with high-.

What's this about the HSA? I thought HSAs expire every year.

No, that's an FSA. (Amusingly, someone voted this down; on HN, this is apparently a matter of opinion).

and really how many of us can pull out $5000, right now

If you don't have an emergency fund (~$1000) and a few months of living expenses saved up, please try and do so.

It depends on what you mean by "high deductible", but the Affordable Care Act specifically includes a circa-$6000 deductible option that would satisfy the individual mandate. See: http://www.kff.org/pullingittogether/What-Conservatives-Won-...

First dollar coverage of many things is mandated by the ACA. It's not clear yet which things (HHS and other agencies need to first "recommend" the required services), but first dollar coverage is mandated.


The fact that high deductible coverage may be possible for the non-"recommended" chunk of services is a good thing, however.

(I say "may be possible" since 3 actuarial firms couldn't read the law and come to an agreement on what it says.)

Currently, every plan I've come across also covers preventive care (immunizations, cancer screenings etc.), because insurance companies realize that this saves them money in the long run. The ACA just standardizes and regulates this. This is actually in the interest of the consumer, because every plan has to have a common set of preventive care services it has to provide for free, which makes plans much easier to compare.

How does that help anyone in any way?

It creates a downward pressure on health care costs.

In what hypothetical world? It sounds like the hospitals in the US couldn't care less how much they charge people since they'll just sue you into oblivion if you don't pay.

What's the difference between a $1K deductible and a $10K one? How's that going to make one bit of difference?

Consumers have no say in how much the procedures cost. There's no "price pressure" from anyone but the group buyers, those being the insurance companies and Medicare.

In what hypothetical world?

In the world joezydeco lives in. Apparently high deductible plans have already caused hospitals to change their procedures.

Consumers have no say in how much the procedures cost.

Consumers now have an incentive to shop around or try alternate treatments.

With a low deductible plan, their only incentive is to find the doctor they like the best or the hospital closest to their house.

Consumers now have an incentive to shop around or try alternate treatments.

When I'm rushed to the hospital after a taxi runs me down on my motorcycle, I'm not in a position to shop around.

When I'm sick with a flu and subsequent sinus infection, barely able to perform basic daily tasks without mental exhaustion, I'm in no position to shop around.

The wannabe-libertarian ideal doesn't work for healthcare.

"Too bad"? You like thinking about a $5000 bill when you're headed to the OR, perhaps straight from the ER? You think this is feasible for the vast majority of people?

Yes, because you have that amount in HSA. That is the entire point of the high deductible.

I wonder what % of HSA policyholders actually have that amount sitting in savings at the ready. How many took the HSA policy because it was cheapest, not knowing the obligation at the other end of the day?

And even if you did, one incident would wipe that account and you would need to replenish it ASAP.

Sounds like it's still your money being spent. Do poor Americans typically have HSAs? Could people afford multiple hits? Where does the money come from after the HSA has run out?

Of course its still your money being spent (though you get some tax benefits).

People should be able to afford one deductible per year. Not sure what you mean by multiple hits.

I agree with yummyfajitas, but bottom line is, you should only get a high deductible plan if you can afford it. Thinking about a 5k bill as you head to the ER shouldn't be a problem then. If you can't afford it, d;not get it.

Of course, therein lies the problem: people who can't afford it choose it because its the cheapest. Its a problem, but banning high deductible plans for everyone is certainly NOT the solution.

Multiple hits meaning more surgeries per period that the savings can be refilled. Like, say, if you get into a major accident requiring multiple surgeries, or get a condition that requires multiple surgeries or extensive treatment. People can get seriously ill, not just "average" sick.

The $5000 deductible is per year. Your typical decent high-deductible plan will have a $5000 deductible and 100% coverage thereafter until year end.

The worst-case scenario with such a plan is that you end up with a chronic condition that requires extensive treatment every year, at which point it will cost you $5000 per year. Oh, and that's typically a per-family deductible, not per-person.

Just to put that in perspective, health care spending in the US as of 4 years ago was about $7400 per person. It's likely higher now. So if we managed to get into a situation where everyone was spending $5000/year on the deductible and $100/month on premiums, that would actually be less spending... and that assumes that everyone is sick all the time.

Now in practice, we won't get there; even high-deductible plans cost have more than $100/month premiums when you take away employer subsidies. But the point is that having high deductibles and HSAs that automatically get money put into them every year for those who can't afford to do so themselves is not a completely unreasonable approach to the situation. Actually getting the politics and details worked out could take some work, of course.

"that's typically a per-family deductible"

A little better...

"HSAs that automatically get money put into them every year for those who can't afford to do so "

That's encouraging too, although I bet it doesn't refill at the same rate as topping it up yourself?

I still think it's the wrong thing to do, though. I can appreciate the market pressure idea, but there are other ways to lower prices charged for procedures, and this way still involves people actually worrying about whether they have enough money for health care. Do Americans realize just how much mental angst they cause themselves actually devoting this mental energy to worrying about whether they will have enough money to make themselves not sick, if they get sick? All this pride or whatever at choosing clever HSA solutions or having an awesome work health care policy is simply relief at not having to worry about health care bills. It's not a value add, you're simply avoiding the horror of a double whammy: getting very sick and going bankrupt (or seeing your lifestyle change drastically due to budget concerns). It's the awesome opportunity to get completely fucked.

But if this HSA/whatever is some kind of compromise towards progress... well, hope it works.

   That's encouraging too, although I bet it doesn't refill
   at the same rate as topping it up yourself?
No one is doing that sort of thing yet, so it's impossible to say how it would work if it were done.

I think we Americans have a pretty good idea of how much the current situation sucks. The issue people worry about has three aspects (in a very oversimplified view):

1) How do we make it not suck for individuals? 2) How do we, as a society, stop spending 16% of GDP (and climbing) on healthcare? 3) How do we avoid some sort of explicit rationing?

People's worries are that a lot of proposed solutions for #1 seem to imply giving up on #2 or #3. I suspect the worries about #3 are overblown, but it's hard to say without doing an experiment of course.

Luckily, perhaps, experimenting on humans is considered acceptable in politics. ;)

The details may change between the policies, but I do think the limit is per period, not per incident (how would you classify that, anyhow? Does several rounds of chemo count as one, or more incidents?).

This article only scratches the surface of how messed up our health care system is. I'd be shocked if either hospital system was able to figure out how much money the writer's son actually cost the hospital... the organizations I've worked for take at least a year to calculate cost (if they ever successfully do it), making (as CWuestefeld said) many of their other calculations come largely from guesses. Sometimes that guess is as simple as "just multiply what Medicare pays by 3, and then charge the insurance company for that amount."

To compound this problem further, I've worked on federal grant applications that ask what the "cost of care" is. Since the hospital has no means of calculating this, I've been told to just sum the charges for each patient. As the writer experienced, the charges can often be a full order of magnitude greater than the cost. You can imagine how yucky this gets.

Someday I would like to walk in to a Best Buy, pick up a Playstation 3, and then inform the cashier that I will only be paying $20 for it. I wonder how well that would go over...

Sometimes that guess is as simple as "just multiply what Medicare pays by 3...

Interestingly, medicare does roughly the same thing - multiply the private sector cost by some number less than 1.

Why why why do they not know how much things cost them?

The real scam perpetrated by hospitals and doctor's offices is rebilling.

It works like this:

1) They send a bill with no information about the services performed.

2a) You waste your time tracking down what it was and then pay it.


2b) You pay the bill without wasting your time to verify.

3) They wait somewhere between a month and 6 months.

4) After receiving payment, they bill you again for the same services.

5a) You waste your time tracking down the services and the fact that you already paid. Then you waste more time calling and forcing them to stop billing you. You get an "Oops, sorry! I can't imagine how that happened."


5b) You pay the bill without wasting your time to verify.

Repeat steps 3 through 5 until they've sucked as much time and money out of you as possible.

Yes. There is extensive intentional fraud and corruption in the system, along with rampant profiteering that exists regardless of whether an entity has been granted "non-profit" status. (Non-profit doesn't mean you can't pay everyone on the board of directions millions in compensation.)

Each time I've dealt with it (mostly helping relatives with their confusing bills) there's been double and triple billing, and billing for procedures not performed, and for work done by people that weren't present, or on days the patient wasn't even present. The more complex the treatment, the more entities jump in to the feeding trough for a share. You have to keep extensive records of everything actually done, which is not always possible if you are not with the patient 24/7. Then when the bills come they are full of hundreds of cryptic codes. You might have some procedure done that takes 30 minutes, and get 20 different bills from 10 different entities, sent over a period of 18 months following the procedure, which apparently now lasted days and involved dozens of people, medicines, tools, and tests, some done multiple times.

The primary reason medicine costs crazy amounts in the US is because of corruption and fraud. Sending a lot of these people to prison could do a lot to reduce costs and straighten things out. That and single payer.

You don’t even need there to be conscious corruption. If the system churns out incorrect bills through simple error (perhaps because the hospital never bothered to drag its accounting system out of the 1970s), and an overcharge is just as likely to be paid as a correct bill¹, then the bad system will stay in place without anyone twirling his mustache and sneering about his obscene profits.

¹Which is to say: Consumers in bad financial situations will dispute or default on overcharges, but they’ll do the same for correct bills. Insurance companies will occasionally dispute an overcharge, leading to six months of paperwork back and forth until they agree on what to pay, but they’ll put correct bills through the same wringer.

Wow , I'm glad I don't have to expend mental energy on stuff like this.

Universal Healthcare, get it.

It's really good. Honest.

Due to my own stupidity I fell off my bike on the weekend. A few minutes later I realised my little finger was swelling up and hurting a whole lot.

Universal healthcare let me go to a hospital get 3 x-rays and a doctor to tell me nothing was broken. Took 3 hours, but multiple people apologised for it taking so long while I was there (to be honest, I thought it was quick. A sore finger must just about be last on the list of emergency room priorities.)

Total out-of-pocket to me: $0.

I expect if I was in the US i'd currently be sitting here awaiting a bill for several thousand dollars.

Huh ? I'm glad that your finger is better, but you procedure was not 'out-of-pocket' $0. Here in Canada, where the similar treatment would be $0 at the time of treatment, I would've paid in thousands already into the health care system in federal/provincial pay deductions. I consider, the money lost to be a continuous out of pocket expenditure. I still like this system more tbh.

The out-of-pocket was 0 in the sense that my tax is already paid and there was no additional expense in me choosing to go to hospital to be checked out.

So, yes, I pay for it. A big chunk of my pay packet goes to tax, but i'm happy knowing I can receiving good treatment without having to work out if I can afford it.

I'm also happy it means those less fortunate than myself (re: current income levels) will receive the same level of treatment.

After hitting the road and dusting myself off, it meant I didn't have to do a cost/benefit analysis of going to hospital vs. walking it off.

And I really can't emphasize enough how much it sucks to do a cost/benefit analysis on going to the hospital or not. A couple of years ago my girlfriend and I were on crappy insurance (i.e. catastrophic coverage only) because that's all we could afford. She had a medium level concussion and we were debating the cost of going or not. Going and getting a cat scan was a sure way to spend $2,000 that we simply did not have. They might proscribe a painkiller, but otherwise she would sit around for a couple of days with a headache and be OK. If she didn't go to the hospital, there was a 99% chance that she would sit around and take advil and be OK. But there was that 1% lingering chance that it was worse than we thought and that not going was a horrible decision. We opted not to go to the hospital. It sucked worrying for days. Luckily she was ok in the end. But now that we have the means, my policy is that no matter what the cost, any recommended/optional healthcare gets paid for.

In 1952 Aneurin Bevan, arguably the architect of the UK NHS, wrote a book about his beliefs - interestingly enough he called it In Place of Fear which pretty much sums up what the NHS achieved:


In the USA health insurance terminology "out-of-pocket" refers to what you have to pay for some procedure in addition to what you normally pay for insurance coverage. With the insurance I had when I was in the USA a visit to the GP would be 30$ out of pocket, on top of the monthly insurance fee (that was 300$, I think).

I'm in the US. A few months ago I stood up into an open cabinet door and required twelve staples in my head. The (non-hospital) emergency medical facility charged me my $100 deductible and billed the remainder to my insurance. About three months later I got a letter apologizing for over billing, and a check for $50.

I don't expect thousands of dollars in bills in the future.

"The rates that insurance companies pay are negotiated based on what they believe a hospital’s true costs are. But then those rates are jacked up an average of 30% to 50% to make up for money that hospitals lose in treating patients who don’t have private insurance — which is the majority of them. So to make up the difference, they overcharge patients who are insured. This practice is called cost-shifting."

I think this article makes a pretty good argument for Universal Healthcare

The best argument for private healthcare is that it creates competition which drives prices down. If you are being charged random amounts of money for the same stuff based on seemingly arbitrary factors then that would suggest this is not happening as it should.

The current healthcare model doesn't promote competition. Providers must inflate prices to cover costs, since they know they will be reimbursed by insurance based on the insurers pricing model, not their own.

Private healthcare would have to start providing actual costs to insurers, and insurers would have to accept that those costs include losses from people without insurance for competition to take effect.

There are many objections to universal healthcare, but not healthcare reform (Healthcare Reform != Universal Healthcare). The government has broken healthcare in the US through all sorts scams and tax incentives (why is employment tied to healthcare, wage controls in the 1940s), the solution is not to give the government more control. We can already see this with the medicare "doctor fix" and other broken government programs that actually encourage spending.

A better solution would be to allow nonprofits to hold large amounts of money, i.e. save during the good times, and to allow them to operate across state lines.

I'd like to, but unfortunately I live in the US and my government doesn't allow legislators to propose universal healthcare systems: the rules state that single payer systems may not be discussed, much less voted on.

I don't care if it's communist, socialist, fascist, or all three at once. It's awesome. I'd gladly pay more if I had to if only to avoid all the paperwork related to private insurance.

I love how this comment is getting up and downvoted all over the place, it has been as low as -1 and as high as 13. Currently on 9

Every time I read about the US health-care system it amazes me more (in a negative way).

The point that I find worrying the most is, that it is impossible to figure out the costs before you get treatment. Also I am surprised, that there are no prenegotiated rates for treatment-procedures. The way it works in Germany is, that there is a catalog which contains all the standard procedures and a price that can be charged for the treatment/procedure, this system dates back to 1924. While "upselling" (doctors performing tests that are not necessary) is pretty common, prices are quite reasonable. Actually there are two catalogs, one for private insured patients and people without insurance (its almost impossible to be uninsured in Germany) and another one for public insured, the later one is based on a points system rather than prices and is supposed to be an administrative nightmare for doctors.

This is not an administrative nightmare for doctors. They all have the software, put the insurance card in the slot, check the right cases and everything is immediately done. The real nightmare for doctors is the private insurances because they need to manage the invoicing themselves. But they get more money out of the privately insured, so they are doing it happily.

If you take the time to discuss with doctors (I have several friends who are doctors in Germany and my family is a doctor family in France) their life is really nice. Way more relaxed than any other engineer working for a company under standard pressure. The only ones who are pushed like any other worker in a company are the ones in hospitals.

Can someone please explain to me why it would be a bad idea to make it illegal for hospitals to negotiate rates?

It seems like the majority of the problem here is that we let the insurance companies bargain with hospitals, so everyone pays a different rate. Just make everyone pay the same rate and let insurance worry about how to drive the costs down across the board by encouraging people to get/stay healthier and reducing the burden on the hospital.

This American Life did a story on this a while back. I don't remember all the details, but it turns out that insurance companies have very little bargaining power with hospitals in general. What ends up happening is that one or two carriers dominate a given local market and get preferential pricing, and everyone else either leaves or doesn't try hard to compete.

I'm in the US. I just recently switched to a high-deductible plan last year with an HSA account. My deductible is $5000 and my monthly premium is $98 (for an individual plan -- self employed here). I have and plan to always contribute the maximum amount to my HSA each year. My plan covers 2 checkup visits a year, and everything else I pay out of pocket up until I hit my deductible.

I really think this is the way insurance should be. I have a strong incentive not to needlessly get every possible test done or seek medical care that I don't need. I check my bills very carefully. I already located urgent care clinics that I can go to when I don't really need to visit the ER. I won't go to the doctor for a runny nose. It makes consumers care about costs.

I'm far from an expert on US healthcare and I'd love to get other peoples' more informed views on this. Could we put everyone on high deductible plans? If people can't afford their premiums or deductibles then perhaps there could be government assistance to pay those things based on their income. What would the pitfalls be in such a system?

Just curious, what's the maximum you can contribute? If it's $5k, that works out to about $416/month, so you're total monthly cost is $514.

The maximum you can contribute is somewhat inflation-pegged. As of this year, it's $3050 for an individual plan and $6150 for a family plan (plus an extra $1000 per person involved over the age of 55).

Note that the contribution is pre-tax, so if you're at the 25% marginal federal rate and contribute $3000 you have to compare that to getting at most ~$2020 in after-tax money: HSA contributions are not subject to FICA (7.65%) or federal income tax (25% on the margin per above assumption). They're not subject to state income taxes either; those can range from 0% to 12% depending on state and income level.

Another important thing to keep in mind is that this is a health _savings_ account. Your contribution stays in the account if you're not spending it on actual medical care; it doesn't disappear at year end. Money in the HSA can be invested if desired (though it's probably a good idea to leave at least the deductible amount in liquid funds). Interest, dividends, and capital gains on the money are not taxed. When you reach retirement age, you can withdraw the money for any reason, not just medical care.

So basically an HSA is just like a traditional IRA in terms of tax treatment, but with the added ability to make early withdrawals to pay for medical care. The only drawback is that you can only open one if you have a high-deductible plan (defined as at least $1200 for an individual and $2400 for a family, as of this year). So you're basically gambling that the tax savings and possible future growth of the money, plus what you save on premiums, will be higher than the deductible.

Going back to our case of a single individual at the 25% marginal rate, with $100 premiums for the high-deductible plan and $300 premiums for the low-deductible plan, the difference in premiums is $2400. If you're depositing those $3000, your tax savings are about $1000. So you'd have to spend more than $3600/year on average on medical care to lose out. For most young-and-healthy folks, spending on medical care is likely to be less than this. Note that the 25% bracket starts at a taxable income of about $34,500, so figure a salary of at most $50,000. If you're earning more than that and are single, chances are an HSA is a good deal for you.

I could never understand why there's such a huge financial difference in the way emergencies that threaten human lives are dealt with in the US. You never expect a huge bill from the fire department or the police department should you require their urgent help. How is ER different?

The US has socialized fire fighting and policing. We have decided not to socialize medicine.

This is absolutely true. Firefighting used to be handled by the private sector through insurance companies. This was "socialized" mainly because of the free rider problem - firefighters would put out a fire even if the house was Not insured. Now all houses in a town pay for firefighting through local taxes.

Tangent: I was curious about the widget the article uses to present the bill as it's really well done. It's provided by DocumentCloud, which I'd never heard of before:

DocumentCloud is a catalog of primary source documents and a tool for annotating, organizing and publishing them on the web. Documents are contributed by journalists, researchers and archivists.


DocumentCloud is pretty cool. It won a major Knight Foundation grant and a bunch of newspapers are using it now.

And we're supposed to believe that universal, single payer health care is inefficient and wasteful?

Further obfuscation on the part of the medical industry to hide the cost of covering the uninsured. Hospitals need reimbursement, insurance only wants to pay for your procedures, not the cost of others receiving treatment without insurance.

Taxed as single payer or taxed as hidden costs, anyone with insurance is being taxed for those without insurance. At least with single payer, you know those receiving treatment are now kicking something in as well.

Absolutely. Cost-shifting is why philosophical discussions about whether the US should have private insurance or socialized medicine (or even some hybrid) are pointless. Our society has long since decided that doctors shouldn't let people die in the gutter and that they shouldn't be then themselves forced into poverty for serving society's will. So everyone who pays, whenever they pay, pays more to cover the rest.

So the whole question of whether we should pay is a charade. We do pay and if Americans were remotely willing to let people die in the gutter, there would already be people dying in the gutter.

People might as well be arguing about whether or not we ought to live on Mars next year. [2]

[1] Many young people in the US spend significant amounts of time uninsured. Many families will also fall in and out of coverage as household members switch jobs, as marital statuses change, etc. Most of us make largely the same decisions, but by dumb luck alone some will acquire an illness or be involved in an accident during a period of non-coverage and be, if not bankrupted outright, seriously financially penalized for the grand sin of having only been as conservative and careful as everyone else.

[2] Which is to say: a question that isn't wrong to discuss, but one that's irrelevant to any practical discussion about housing costs.

Sorry, but isn't it just outright fraud to charge > 400$ for a medication, which has a "retail price" of a few $?

Nope, that's capitalism. Someone (the insurance) is willing to pay that price.

It'd only be fraud if the government was paying for it.

[Edit]Some hate against my comment. For those that fail to understand...

It isn't fraud if you go to a gas station that is charging $0.10 more a gallon, and fill up there. It's fraud if you pay for that gas, and its water. The insurance is still buying the same drug, they have just chosen to negotiate a price that is higher with one hospital than another. They have their own reasons for deciding that price.

Likewise it would be fraud if the government was paying for it, since they have set rates. To achieve a higher payment would require billing them for some other product.

Taking advantage of the predicament of others is not capitalism; it is price gouging. It would be one thing if the consumer were able to compare prices and other aspects of the product and make a choice based on the consumer's values (of which price may not be the most important thing). This is a bit more like a gas station charging 10x more during a hurricane evacuation.

Real world example:

Scenario 1: A gas station with bags of ice sells out their inventory of ice and beer to a local fraternity, so they can keep their beer cold while they're on the road.. Then a diabetic guy comes in, looking for a way to keep his insulin supply cold. Too bad for him, the ice is gone.

Scenario 2: That gas station jacks up the price to $100/bag during the evacuation. The frat guys aren't willing to pay that much for cold beer, so they grumble and just buy some bottled water instead, since that doesn't need to be cold to drink it. The diabetic guy comes in looking for ice. He too grumbles at having to pay $100, but his insulin supply will now stay fresh.

This is a little contrived, but I think it illustrates that even in extreme cases, the system of pricing in a free market allows each participant in the market to communicate his priorities and his ability to substitute other goods. My example shows how the frat guys want beer, but not enough to pay that huge amount -- which leaves the way open for the diabetic to show that the ice is really, really important to him.

The itemized bill is basically a convenient fiction; you can't really compare items between hospitals, only totals. It's between the hospital and the insurance and it's all but an accident that you even receive it.

The same effect explains the semi-mythical $75,000 toilets in government procurements; yes, the government may often over pay, even somewhat obscenely, but typically those sorts of stories are because of accounting doing things like dividing the bill evenly according to every item. Yes, you got a $75,000 toilet, but you got a $75,000 MRI machine on the "same bill".

Price gouging is an aspect of capitalism. Demand goes up, price goes up. Without market interference, this should force demand down.

Health care can't be forced down by price (at least, life saving health care), so you either have to stop providing care to those that need it but can't pay, or pass along the costs to others.

Health care costs can be forced down. The supply of doctors, nurses and other health professionals can be greatly increased (with free medical education or immigration, for example). Medicines can be mass produced by walking around (or over) copyrights and patents. Increasing competition (making it easier to switch provider, building more hospitals and facilities, etc. All these approaches have been tried, many of them are still working and result in lower costs without killing everyone.

I'm not saying those approaches don't have flow on effects, because they do but they can be used to lower costs. Don't assume price cannot be controlled by governments or industry, because it can be, and is.

Yeah, that's why I said they can't be forced down by price. The supply/demand side is a whole other issue.

Medical school is entirely too expensive, which limits doctors going into general or emergency care, which causes further strain on the system.

FYI: there is a recent big thread on reddit about how a man was charged $105k for one night hospital stay: http://www.reddit.com/r/WTF/comments/ngngy/merry_fucking_chr...

This is a big part of what's driving people into poverty in this country.

The more I see this prices, the more I think that: 1) we have too less doctors due to stupid closed numbers policies in schools; 2) we have a patent system that allows companies to legally rip us of for medicines and machinery. With an aging population, this is just not sustainable.

Interesting that California requires posted fees. I'd be interested to see a study of the effects.

Back when I was uninsured I was very frustrated that no one anywhere ever knew how much anything cost, and frequently gave false information.

tldr; (exactly from the article): "The driving force behind all this, according to Aetna, is the way hospitals and the government do business. The rates that insurance companies pay are negotiated based on what they believe a hospital’s true costs are. But then those rates are jacked up an average of 30% to 50% to make up for money that hospitals lose in treating patients who don’t have private insurance - which is the majority of them. So to make up the difference, they overcharge patients who are insured. This practice is called cost-shifting. In a typical hospital, upward of half the patients are covered by Medicare and Medicaid - neither of which pays the full cost of treatment. Another 10% to 15% of patients are uninsured; maybe they can afford to pay, but more likely they’re broke and can’t cover their bills either. Any profit the hospital makes must come out of the remaining 40% - patients with private insurance."


Considering that the per capita medical costs in the US are about twice that of the other OECD countries, clearly there's more than just cost-shifting going on.

Whatever your views, as a matter of law (well before "ObamaCare") we are still going to subsidize medical care for the old, poor, children, and the irresponsible through our taxes and direct payments.

How much of the silliness in U.S. health care is caused directly by the tax code? For instance the largest health insurance company in my area also owns several hospitals. The hospital charges the insurance company for a procedure. The insurance company pays only half that amount. The rest I believe is written off by the hospital as a loss which lowers their taxes. But both the hospital and the insurance company are the same company.

This contains a detailed explanation of why costs are so high:


The print-friendly version, with no ads and all on one page: http://www.nydailynews.com/opinion/anatomy-a-ripoff-article-...

For anyone who smelled a startup opportunity increasing pricing transparency in healthcare, check out Castlight Health. They were founded in 2008 to attack this exact problem and are making a killing targeting large employers.

I find the name of the hospital highly ironic. After all, didn't the good Samaritan pay for the treatment and "hospitalization" of the victim?

One would expect a stay at the Good Samaritan Hospital to be free.

As far as I can tell from the facts given in the EU you would have paid about the same amount the author had to pay out of his own pocket (~ 700 USD). If you had no health insurance at all.

The countries in the EU all have pretty different ways of paying for health care. In the UK if you went to a NHS hospital (which you would do if it was an emergency) you would pay nothing - there would never be any charges for the hospital treatment and drugs administered in a hospital aren't charged.

NB: Note that NHS is based on treatment being "free at the point of delivery" - everyone knows that it's not "free" and we pay for it through NI and other taxes and people who can't (or even won't) still get the same treatment.

Far from. In Stockholm, for a child she would have paid 120 SEK (~17 USD) for an ER visit. That is assuming she was a resident or in possesion of an EU/EEC insurance card. Going price for an ER visit without EU insurance would be 1650 SEK (~240 USD). So not close even there.

How do the doctors get paid if the patient is only paying $17 per visit?

The fixed cost per visit is not a payment for treatment, but a tax; it's notionally there to stop people using the system excessively.

(See also the prescription tax in England, although there the average cost of a prescribed medicine <= the prescription tax. Here in Scotland we abolished the NHS prescription tax a year ago; the system didn't subsequently collapse under the weight of freeloaders asking for prescriptions for stuff they could buy over the counter. Draw your own conclusions as to whether such taxes make sense ...)

Even before that there were pre-payment schemes, I think you could get a 3 month or annual card for ~£15/£35 or something.

Helpful mostly to people with chronic conditions (IIRC unemployment/disability benefits tend to include relief of prescription charges).

I was quite happy with the prepayment scheme, so really the only difference is I now pay them £60/yr (quarterly cards, oh the optimism) less directly.

As an additional pointless anecdote, I do actually get a prescription for Paracetamol, since it means I can get it in boxes of 100 rather than the stupid 16/32 purchase limit for OTC sales. It's easier for my doctor to tick the box than write a short note for the pharmacist, it seems.

The 16/32 limit on paracetamol (US: acetaminophen) purchases over the counter is there because paracetamol is highly hepatotoxic and in fact kills more people (through liver failure) every year in the UK than any other drug except alcohol or tobacco.

Obviously it's a bit different for you as you're receiving it under medical supervision for a chronic condition, but imposing that cap on ad-hoc purchases cut the death rate (by both pre-planned suicides and idiots who didn't take the health warnings on the label seriously) by around 20-25%.

(Personally, speaking as an ex-pharmacist, I avoid the stuff.)

Yeah, I'm well aware of the reasoning, and I'm scrupulously careful about how often I take it, and have essentially given up alcohol for the last year or more out of paranoia (erm, justified caution). Dying slowly of liver failure over several weeks doesn't sound like my idea of fun.

That fatality reduction sounds incredible though. Since just about every corner shop sells the stuff, I'm surprised it cut the suicide rate by that much - I'd have thought it more likely the aforementioned idiots who think OTC means it's harmless, and a handful is just the thing for yesterdays hangover before hitting the pub tonight.

Out of curiosity, do you have a reference? I'm wondering if it breaks down the figures for the "nuke-your-liver trying to get high on codeine" crowd against the others as well.

Best reference I can find online is here:


It's important to read beyond the initial summary, though, as this is a rather nuanced report with some interesting side-observations. For example: A study in London three years after the regulations were introduced found that 46% of people presenting with overdose had purchased potentially toxic amounts of paracetamol in a manner contravening the spirit of the 1998 legislation.

That's heavily subsidized, of course, but part of it is also that doctors are only paid about half as much in Europe, on average, as in the US.

You also need to take into account how much it costs to become a doctor in the EU and the fact that in places like the UK doctors trained and employed by the NHS are free to go and augment their income by doing work on private paying patients.

Last I checked Sweden doesn't have a 0% tax rate.

As far as I know in EU public insurance is mandatory, so you would never pay such ammount.

It varies a lot by country. In Denmark, all hospital visits are free to anyone, whether a resident or visitor. In other countries, non-EU visitors to an ER might pay substantial amounts, though usually still quite a bit less than in the US. Also, some EU countries tie insurance to payroll-tax contributions, so the unemployed may not be covered.

Well, been living in 4 European countries and never paid anything but in mine (Italy). I am also pretty sure unemployed are covered too. Don't know in Germany, where I still can't get how insurance works, but I would guess there is a way to get cover there too.

In Germany its optional starting from a certain income level. (At least it was x years ago)

First, kind Sir, describe me believeable scenario about how exactly you managed to live uninsured in EU and then we shall talk.

That's pretty easy, at least in Germany: if you are self employed you are not automatically insured, you need to pick a plan from a private insurance company on your own (or go with one of the expensive "voluntary" plans of the public insurances). If you don't, you simply don't have insurance.

I don't know what happens when they find out that you're uninsured, however it's possible to have no health insurance.

At the doctors or at the hospital just say you have private insurance and you'll get a invoice after the treatment.

My whole point is, the invoice amount would be not quite close to what that Amarican hospital charged.

[Edited for clarification]

Hmm, thats news for me. Here also self employed are insured. Even homeless are kind of ensured. Ok, if you mean that rare case when you bill in the name of your company, but do not pay yourself any salary, then yes, this is one rare way.

Not to sound like an ass, but their kid choked twice in 2 weeks?? Anyone else see a problem there?

Did you finish reading the article? The kid choked twice in two weeks because he had an inflammation or infection of the esophagus, which the second hospital diagnosed and treated.

If you read the full article, he explains that there was an underlying medical cause and that the second hospital found it.

Ah I didn't see that part. Now I do seem like an ass.

Even without an underlying medical cause, what sort of "problem" do you see with a child choking twice? Are you insinuating that it's the child's or parents' problem? I don't understand what you could be getting at.

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