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Health Gouging

I believe in free markets, but to have a free market you have to have transparency in pricing and information about the product. Which brings us to the health industry, which has neither. Can you believe a market where the seller doesn’t tell you how much the product will cost or even what you are buying until after you have purchased it? Even when you receive the bill, it is often indecipherable. And then, if you can’t pay, they can bankrupt you (or worse).

How bad is it? According to a nation-wide study, hospitals (especially for-profit hospitals) charge far more than it costs them to provide care. One hospital in Florida routinely charged patients 12.6 times the actual cost of patient care (that’s compared to what Medicare says it should cost).

That hospital is not an outlier. The study found fifty hospitals that charged more than 10 times their cost. All but one of those fifty was a for-profit hospital. Twenty five of the price-gouging hospitals are operated by Community Health Systems. Another fourteen are operated by the Hospital Corporation of America.

Forty percent of the worst hospitals operate in Florida, presumably where they can take advantage of seniors.

How do they get away with it? According to a co-author of the study (a professor at Johns Hopkins Bloomberg School of Public Health):

They are price-gouging because they can. They are marking up the prices because no one is telling them they can’t. These are the hospitals that have the highest markup of all 5,000 hospitals in the United States. This means when it costs the hospital $100, they are going to charge you, on average, $1,000.

It is time for conservatives to stop claiming that the government should stay out of health care and let the free market take care of it. We tried that, and it doesn’t work. Even Obamacare doesn’t regulate how much hospitals can overcharge. Currently, only two states (Maryland and West Virginia) have laws that regulate hospital rates. It is time to do this on a national level.



  1. PATRIOTSGT wrote:

    It goes beyond hospitals as well. Prescription drugs have a wide array of prices. Non hospital visits, like to specialty, radiological, and primary care physicians can vary greatly. Now, while I agree that when people did not have insurance, pre AHC days, it could have benefitted consumers to have price disclosure or regulation. However, since the ACH I think regulating the prices should fall to the insurance industry. Here’s why I think that way. My family is insured by Tricare, who insures the military dependents (I have to be treated on a military base). Virtually every time one of my family goes to the doctor, whether for a primary care apt, or to a specialist, or hospital Tricare sends the results of the billing to us. Every single time the statement will say show overbilling, followed by what the insurance company says is allowable, followed by what our co-pay is. We have dental insurance for the family through MetLife and it’s the exact same thing with the dental bills.

    So my theory is that medical billers intentionally overbill (perhaps because of all the previously uninsured) and then accept what the insurance company says is fair. It’s like they think if they billed the real price, then the insurance company would reimburse them even less, and that could possibly be true I do not know.

    Also I do know that, particularly for surgical procedures, it is impossible to know the exact cost because there are too many variables. No one would want to have to re-negotiate a surgery contract in while there loved one lay on the table. I would say and have seen that they can give you a ball park figure prior, but also let you know that if things go outside the routine then there could be extra charges.

    Tuesday, June 16, 2015 at 7:29 am | Permalink
  2. Zed wrote:

    It’s much worse. A friend consults on computer systems. His firm was brought in by a medical device maker to help them get their software in order so that they could be ACA complaint. What became immediately clear to my friend was that the company (a successful company whose products you will see in medical facilities everywhere) had no idea what it cost to make any of its products. A “free market” would drive a company to optimize prices to provide a fair price to both consumer and producer. Instead, the medical market as currently constructed maximizes profits for certain institutions (hospitals, pharmaceuticals, medical device makers) at the expense of consumers and medical professionals. The ACA was a modest first step at slaying this monster.

    Tuesday, June 16, 2015 at 8:52 am | Permalink
  3. Iron Knee wrote:

    PSgt, there are tons of professions where it is impossible to know the exact costs beforehand. Lawyers, or building contractors, for example. But they deal with it and still have a free market. For example, by being paid by the hour. Or by amortizing (like Kaiser does by charging a fixed amount to keep you well and amortizing that over a large number of people).

    There’s no excuse for the sorry state of the health care market.

    Tuesday, June 16, 2015 at 9:43 am | Permalink
  4. Mike wrote:

    This issue is even worse than it appears.

    The “over charging” is generally the nominal price a health provider charges for a service, but ins’t an amount which, with few exceptions, ever gets paid. If you look at an EOB (explanation of benefits) you receive from your insurance company for a medical visit, you’ll normally see a large number that the provider billed and a much smaller number that the insurance company approved and (subject to a deductible or co-pay) paid. That’s because the provider has agreed to accept the smaller number as the price to be paid to be part of the insurance company’s network. Medicare has similar limitations on how much they’ll pay for a service.

    So no services provided to anyone with health insurance or Medicare are ever paid at the “billed charge” rate. Unfortunately, those without Medicare or health insurance, generally those least able to afford health care, are the only people who are ever required to pay billed charges, because they don’t get the advantage of having an intermediary negotiate a better price.

    In other words, those who can least afford health care pay the most to obtain it.

    Tuesday, June 16, 2015 at 9:49 am | Permalink
  5. Hassan wrote:

    In years that I did not carry insurance, I always paid cash, and doctors/clinics/labs were more than happy to negotiate price. In fact they tell me upfront. For example I went to labcorp for some tests, they asked me for insurance, I said I do not have it. They said, if you had insurance we would be billing like 600$ (about), but since you are paying cash, we will let you pay 250$ (around that amount).

    Tuesday, June 16, 2015 at 10:34 am | Permalink
  6. Iron Knee wrote:

    If nobody pays the inflated prices, like you claim, why do they bill for them?

    Tuesday, June 16, 2015 at 10:40 am | Permalink
  7. ebdoug wrote:

    I had the same experience as Hassan when I had “major medical insurance.” They were happy to charge me less.

    Not addressed above is the unnecessary MD visits. Skin cancer on my face four times in ten years. I identified, I went to MD. “Its nothing but we will take a biopsy.” Positive all four times, surgery, removed, pops up another place. Now this is all well and good, but the unnecessary part is the “Come back in six months so we can check you.” Translated into English is “Come back in six months so we can get your insurance money.” I finally said, “Four times it has been positive when I came to visit at my request.” I will come in not every six months but when I see something suspicious. Same with eye exams.

    Or meds: Albuterol inhalator: $100, treatment of albuterol with nebulizer $.03.

    Or Prescription drugs when generics are available.

    Or colonoscopies when you can do at home a test for blood on a poop pad instead of the indignity and expense of a colonoscopy. we have the Internet folks. You don’t have to have medical background to go to the Mayo Clinic on-line and read about tests and treatments.

    And each of us has just one life. Spending it waiting in Doctor’s offices is not how I want to spend mine, just so I can give them my money.

    Tuesday, June 16, 2015 at 11:12 am | Permalink
  8. Hassan wrote:

    Iron Knee, just to show people that insurance companies are savior otherwise they are screwed. So people feel happy that because of insurance their prices are remarkably reduced.

    I had same experience with ER (24 hr private ERs) thrice, and same thing happened, price was remarkably reduced to half if not 1/3. Same thing with regular doctor visits for adults and pediatricians for children.

    Tuesday, June 16, 2015 at 12:12 pm | Permalink
  9. Shannon G. wrote:

    I used to work in the business office for a group of pediatricians and part of my job was helping to secure the contracts with insurance companies. The reason why the billed charge is almost always greater than what your insurance pays is dictated by insurance companies. They want to be able to tell their customers, “Look at how much you save by being insured with you. We saved you from having to pay full price.” Doctors are not allowed under many insurance contracts to offer a cash price that is lower than their negotiated rate with the insurance company. If the doctors did then patients may be tempted to drop insurance (back when you weren’t required to have insurance) and simply pay cash, since it was a better price. The was especially true with high deductible plans.

    If you are a cash client you can always call and try to negotiate a reduced price, many practices, hospitals, etc will lower the bill, but to be in compliance with their contracts they can’t advertise that.

    Tuesday, June 16, 2015 at 3:13 pm | Permalink
  10. Iron Knee wrote:

    There might be many reasons for this strangeness, but the bottom line is that the health care market doesn’t resemble a free market in the slightest. It is completely manipulated.

    Tuesday, June 16, 2015 at 10:55 pm | Permalink