Two days ago the Centers for Medicare and Medicaid Services (CMS) published the fees hospitals charge uninsured patients. These fees are called the “chargemaster” of the hospital. Hospitals point out that most people have some type of coverage. That is true. But, 50 million people do not have insurance and the fees apply to them. The following are the statistics for Colorado hospitals for which CMS presented data on the charges for heart attack. The column in pink is the amount charged and the MC Allowed column is what Medicare has calculated as a fair payment.
Hospitals are businesses and can charge what they wish for services. Except, many hospitals are “not for profit“; which means the money they would normally need to pay in taxes is instead used to benefit the community. They often prove that benefit by writing off the money they can not collect from people who lack insurance.
The unfortunate effect is that hospital charges are the number one cause of bankruptcy. Furthermore, the extreme penalty of the “chargemaster” for people without insurance drives people to purchase insurance — certainly a happy situation for insurance companies.
If you go to any health insurance web site you can see what the “chargemaster” penalty actually is. Look at the charge for the highest deductible policy. That charge, in large part, is the fee to benefit from insurance company negotiations with hospitals. Of course, the hospital makes the charge very high so any mark-off for insurance companies is just for show. This is an old retail game — raise the price 100% then have a 50% off sale.
A simple solution:
If the charges by hospitals were restricted by law not to exceed 20% above the fee allowed by Medicare the cost of insurance would be substantially less. And, people who select a high deductible plan could really enjoy low rates with protection from the cost of catastrophic illness.
It is important to note insurance reform will NOT solve the US problems with high cost and low quality health care. Insurance just distributes financial pain over a greater number of people. The solution is to fix the underlying problem not distribute the problem to more people.