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I was told there would be no math…

March 13, 2013

Last month Time magazine devoted virtually an entire issue to one article by one writer.  Steven Brill spent seven months researching an expose called “Biter Pill. How outrageous pricing and egregious profits are destroying our health care”.  What Mr. Brill writes must be read.  By everybody.

Mr. Brill analyzes the itemized bills of sevel patients who actually received hospital bills because they were un-insured or under-insured for various reasons.  Most patients don’t see these documents because they are sent to medicare or an insurance company.  He examined each bill line by line, then asked hospitals for the basis for their charges and compared the charges to what Medicare pays.  He uses Medicare numbers because it collects reams of data on all it’s services and is required by law to pay for any service based on average direct cost over all hospitals with adjustments for overhead, capital expenses, salaries, differences in regional cost of living, and medical education.  So, at least according to this article, Medicare reimbursement rates are based on some true cost measure.  He also took some of the charges and compared them to open-market prices.  Here are a very few of the things Mr. Brill found:

1. Every hospital has a list of the prices it charges for things.  It’s called the chargemaster.  These figures have no basis in actual cost and each hospital has a different chargemaster list.  Most of the time those list prices aren’t paid, because Medicare and insurance companies have cut deals to pay less.  It’s only if you don’t have insurance you see these list prices.  Most hospitals actually receive about 35% of the chargemaster list prices.

2. Hospitals are supposed to be non-profit institutions, giving them special tax status.  But the average hospital operating profit margin is about 11.7%.

3. Teaching hospitals, usually associated with universities, pay hospital CEO salaries are usually in the millions, significantly more than the presidents of those same universities make.

4. Health care lobbyists spent $5.36 billion dollars since 1998.  Defense spending during that same time was $1.5 billion.

5. The list price for a tylenol tablet at MDAnderson is $1.50.  You can get 100 of them on Amazon for $1.49.  MDAnderson had a profit margin of 26%.  $531 million on a revenue of $2.05 billion.  And it is a “non-profit” institution.

6. A CT scan in Connecticut is billed at $200 at one hospital, $239 at a different hospital, and Medicare, which remember is required BY LAW to reimburse hospitals for cost and overhead, would pay $13.94.

7. An appendectomy in France costs about $3000.  In the US it costs about $13,000.  Also in France you can get eight Nexium pills for the price of one in the US.

Time Magazine.  March 4th, 2013 issue. $4.99 newsstand price.  You gotta read it.

One Comment
  1. ytauma permalink

    Our model are pricey but why? Do you realize for medical personnel to work the they do requires money. The materials are not free and remember some have debt (i.e. doctors) and need to support themselves and families. Other nations aren’t like America and many come here for care than vice versa for a reason.

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