Robert Martineau: In hospital-bill mystery, Medicare is the hero

Last Modified: Wednesday, March 6, 2013 at 5:14 p.m.

The Academy Awards presentations prompted discussion on the historical accuracy of several of the major films of last year -- including "Argo," winner of the Best Picture award, "Lincoln" and "Zero Dark Thirty."

Each movie contained conceded or claimed historical inaccuracies. Many people defended the inaccuracies, arguing that the movies are entertainment, not history lessons. The Herald-Tribune published a column by a professor of screenwriting who argued that screenwriters should not be held to a strict accuracy standard.

Notwithstanding the importance of movies in American life, a topic far more important to the country's economic and health well-being is the way that our hospitals -- both nonprofit and for-profit -- bill, and are paid, for the services they deliver to patients.

This topic is the subject of Time's March 4 cover story, "Bitter Pill," by veteran journalist Steven Brill.

Richard Stengel, Time's managing editor, introduced the article with the following comments:

"Why do we spend nearly 20 percent of our gross domestic product on health care, twice as much as most other developed countries, which get the same or better health outcomes? One answer is that health care is a seller's market. ...

"Hospitals and health care providers offer services at prices that very often bear little relationship to costs. They charge want they want ... and mostly we pay. Have you ever looked at your hospital bill? It's largely indecipherable."

(A column that the Herald-Tribune published on Feb. 28 made similar points on excessive drug pricing.)

The article identifies the system's villain -- the hospital chargemaster. That is the internal price list for products and services used by every hospital but to which no one has access.

There is also a hero. Surprisingly, it is Medicare. It can pay only the approximate cost of care -- without regard to the charges on the hospital's chargemaster -- in the bill the hospital sends to the Medicare patient.

Anyone who has seen a notice from Medicare on what it has paid for a hospital bill sent to it knows that Medicare pays only a small portion of the amount billed, often only 10 percent to 20 percent.

The amount paid is 80 percent of what Medicare calculates as the reasonable cost of services provided. Usually the hospital will bill the patient and its supplementary insurance for the remaining 20 percent of the Medicare-calculated cost, not the balance of the hospital bill that exceeds the Medicare calculation.

For those not on Medicare, those with private insurance will have their insurer pay whatever the contract between the insurer and the hospital calls for, usually much less than the bill.

For those without insurance, the hospital will try to collect the full amount of the bill. Taxpayer-funded Medicaid is more difficult to decipher because it varies from state to state, but it does not pay the full amount billed.

Wide-ranging impacts

These facts have major implications for individuals. The uninsured patient can be certain that he or she will pay more than a government or an insurance company for the same medical care.

The public-policy implications are even greater. Hospitals complain constantly how much they lose treating Medicare, Medicaid and uninsured patients.

According to Brill, the American Hospital Association claims that its members provide more than $39 billion in care for the poor. A recent Herald-Tribune editorial stated that Sarasota Memorial Hospital lost $84 million in treating the poor last year.

The problem with these figures is that it is practically impossible to determine to what extent they are based on the billing charges by the hospitals or their actual costs (and this assumes the hospitals know their costs). There is no way for either the patient or the public to know for certain.

The debate over factually challenged screenplays may be interesting but is hardly crucial to our national well-being. The problem of hospital bills that are not based on the cost to the hospitals of the care they provide should be a major part of the debate on the future of Medicare, Medicaid, the Affordable Care Act, the cost of insurance, and what hospitals charge the uninsured. The Time article is a good place to start.


This story appeared in print on page A10


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