What About This Hospital Bill, Dear?
On Aug. 13, my son, 8, was rushed to Yale-New Haven Hospital with a broken right femur. Within about six hours, he was in the operating room, where six metal, dowel-like “pins” were run through his bone and secured to an external steel frame via an assemblage of clamps and rods.
Twenty-eight hours and a wheelchair later, we were on our way home with a temporarily disabled boy.
The cost? According to Yale-New Haven Hospital, $29,738.16.
I won’t pay that [Dash] and neither will my insurance company, ConnectiCare. In fact, virtually no insured Americans will pay anywhere near what doctors or hospitals charge [Dash] a fact hospitals know because they’ve already negotiated how much insurance reimbursement they’ll accept. But that doesn’t stop doctors and hospitals from charging exorbitant fees [Dash] often three to four times the actual cost [Dash] even though most health care experts say those fees are laughably inflated.
“One of the dirty little secrets in our industry is that there is this extreme difference between what a hospital charges and what it ends up accepting from insurance or the federal government,” Mickey Herbert, CEO of ConnectiCare told me. “It’s almost irrelevant what the hospital or physician charges.”
“It’s a sham,” Merrill Matthews Jr., director of the Council for Affordable Health Insurance, told me. “The cost is completely fabricated.”
Not exactly, said William S. Gedge senior vice president of Yale New Haven Health System. “Every hospital determines its own charges and everybody gets the same charge regardless of what kind of insurance they have, or do not have.” On the other hand, he said, “We have virtually no one” who pays full charges.
So why bother? Particularly when everyone knows, as Glenn Melnick, a health economist at the Rand Corporation, asserted, “These billed charges do not have any relation to reality. The hospital can make them up and can raise them to any amount they want.”
Most industries, said Melnick, a professor at the University of Southern California, charge 120 percent (or less) of the actual cost of their product —– leaving them a 20 percent profit margin. In hospitals, that ratio is close to 300 percent. In Connecticut hospitals, only 40 cents out of every dollar covers the cost of care.
In my son’s case, ConnectiCare paid Yale $7,784.59. I kicked in another $500. That left Yale with an unpaid balance of $21,453.57. That seems like a lot of money to lose, particularly if you multiply that by the number of patients Yale sees daily.
But, according to the Centers for Medicare and Medicaid Services, most hospitals charge roughly two to three times their actual cost to provide care. So when private insurers offer to cover a third or two-thirds of the cost, the hospital makes out. “It’s like the old maxim where a store goes in at night and bumps up its prices by 100 percent and has a 50-percent-off sale the next day,” Matthews said. “That’s essentially what happens.
Of course, somebody is paying those charges[Dash] if not to the last dime, at least to an amount far above what it costs hospitals to provide the service. Who? The uninsured, those who have coverage that will pay as much as 80 percent of the billed charge [Dash] and, ultimately, you and I.
“There are people who pay 100 percent of that charge because they don’t know any better,” said Melnick. “They’re good, solid Americans. The hospital took care of them. They’re going to pay them back.”
It’s hard to believe that an uninsured American with a bill for nearly $30,000 would pay it back, but one study estimates that nearly 95 percent do. Most hospitals, at Yale, will negotiate a discounted fee for uninsured patients. Yale, of course, was part of a class-action lawsuit, settled back in 2004, in which uninsured plaintiffs claimed they were being charged “substantially more”than Yale charged its insured patients for the same services.
Yale's new Cancer Center, scheduled to open in October 2009.
The lawsuit charged that Yale used “aggressive, abusive, and humiliating practices, including lawsuits, liens, and garnishments, to recover this inflated medical debt.” In one case, reported in The Wall Street Journal, a Bridgeport man was indebted more than $40,000 to the hospital, which had treated his wife, in spite of the fact that his wife had been dead nearly 10 years.
Now you might ask yourself: What difference does it make to me, an insured American, and my son? After all, I’m responsible for the same co-payment regardless of what the insurance company’s arrangement is with the hospital. But ultimately, I and the rest of the insured will bear the brunt of increasing hospital charges through increased premiums.
“Health care premiums are going up because hospital charges are going up,” said Melnick. Large insurance companies with Cadillac plans that still pay 80 percent of these charges will pass those increased costs on to consumers. “All hospitals [Dash] not just Yale-New Haven [Dash] have figured out that without doing anything else [Dash] all they have to do is raise their charges because they’re going to get more money from them. Everybody does it. The charges are not real market prices. They’re fictitious prices [Dash] unless you’re uninsured.”
To be fair, however, many hospitals struggle to get by financially. That’s not because they’re charging too much. It’s because Medicare and Medicaid, which accounts for 42 percent of revenues to state hospital, is the stingiest insurer around. Its reimbursements have scarcely budged since 1986, leaving hospitals with deep losses [Dash] and private insurance companies forced to pick up some of the slack. If you’ve done your arithmetic, you can guess what that means [Dash] higher premiums for you and me.