In Part 1, we began to break Steven Brill's Time cover story into smaller pieces. Brill says that we're arguing about who should pay for our healthcare instead of the more important question of why are our healthcare bills so high.
We were using 64-year-old Janice S. as an example. She spent a few hours in her local hospital one morning learning that her chest pains were simply indigestion. Those few hours brought $21,000 in medical bills, $17,000 from the hospital itself.
Brill points out that while in the hospital Janice had three "TROPONIN I" tests at $199.50 each. These are blood tests conducted in the hospital lab looking for substances in the blood which are good indicators of a heart attack.
If Janice had been 65--instead of 64--and covered by Medicare, Medicare would have paid the hospital $13.94 for each of those tests. And now you are about to learn something that I'll bet you didn't know.
"...Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver. Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation. Thus, under the law, Medicare is supposed to reimburse hospitals for any given service, factoring in not only direct costs but also allocated expenses such as overhead, capital expenses, executive salaries, insurance, differences in regional costs of living and even the education of medical students."
You may want to read the above paragraph again. Then a few more times until it sinks in. I read and think a lot about American healthcare, but this was news to me.
My doctor periodically sends me to the local hospital lab for routine blood tests. Medicare eventually sends me a notice that the hospital charged $139 for the tests and Medicare paid the hospital less than $20. I used to think that this was a terrible abuse of the hospital by the government. Now I understand that the hospital will do just fine with Medicare rates.
Janice, however, was too young for Medicare and she did not have health insurance and so she was billed the full rate as stated in the hospital's "chargemaster." According to Brill, "The chargemaster, I learned, is every hospital's internal price list. Decades ago it was a document the size of a phone book; now it's a massive computer file, thousands of items long, maintained by every hospital."
If Janice had been privately insured, her insurance company would have been able to negotiate a discount from the chargemaster rates. Janice might have received a notice from the company that they had obtained a "discount" of 50% from the $199.50 figure and Janice would have thought that the company did a great service for her. With no insurance, Janice was billed the full $199.50 for each of the three tests.
But wait, a repayment of $13.94 would have covered all the hospitals expenses, both direct and indirect. If other insurers pay more than $13.94 for these same tests--or the uninsured pay the full chargemaster amount of $199.50--the hospital is making a profit. Isn't this supposed to be a nonprofit hospital?
Ready for another revelation? "Under Internal Revenue Service rules, nonprofits are not prohibited from taking in more money than they spend. They just can't distribute the overage to shareholders--because they don't have any shareholders."
If everyone paid Medicare rates, these hospitals would break even and be truly nonprofit. But patients with private insurance will pay about 35-50% of the chargemaster rates and the uninsured will be asked to pay the full rate, resulting in large profits. Only in American healthcare are those with the least ability to pay charged the highest rates!
The hospital that Janice visited made a 12.7% profit last year. The famous MD Anderson Cancer Center in Texas--also nonprofit--has a 26% profit margin, about 10 times that of your local supermarket. These are profit margins which would delight most for-profit businesses.
"Yet hospitals are beloved local charities. The result is that in small towns and cities across the country, the local nonprofit hospital may be the community's strongest business, typically making tens of millions of dollars a year and paying its nondoctor administrators six or seven figures....the 2900 nonprofit hospitals across the country, which are exempt from income taxes, actually end up averaging higher operating profit margins than the 1000 for-profit hospitals after the for-profits' income-tax obligations are deducted. In health care, being nonprofit produces more profit."
What happens to these profits? That's for the next post.
No comments:
Post a Comment