have adapted our minds to thinking of hospitals as givers of charitable care in
the business of life saving, without being aware of the price we pay
financially for this care.
Brill's cover story in the Time magazine, shows that non-profit hospitals take
a 12% profit margin on everything from cardio stress tests to gauze pads.
health care system in the U.S is known for confused incentives and over
treatment. The U.S spends $9000 moreper capita per year on health care. Brill's
report exposes the issue very simply - as overcharging.
charges for the same medical services can vary widely, even within the same
area geographically. Brill refers to the hospital price lists as chargemasters.
hospital administrators don't even try to justify the high prices, their
argument being that insurance companies will anyway bargain for lower prices.
As a result people with very little or no insurance are also paying these
inflated prices. The difference is that a woman is billed $6,500 for a C.T scan
for which Medicare pays only $1000.
Medicare, Medicaid and insurance companies are transparent about the prices
they pay - only then would prices fall. Aetna and the State of New Hampshire
have started doing this.
kind of transparency will improve health care system in the U.S, but many
hospitals have contracts with insurers that contain gag clauses which ban the
public release of their pricing system. These gag clauses should be prohibited.
State Health Exchanges, which are being set up will also confront price issues
by Insurance companies selling their products through online marketplaces. They
would need to establish themselves as providers with a record for charging
moderate prices for good quality health care.
a patient is referred for medical tests, it should be ensured that doctors have
no financial involvement with the said facility. The American Medical
Association's Relative Value Scale Update Committee -- a 31-member group that
is led by specialists, has only one seat made available to a primary care
worker, Medicare accepts the prices set by this committee in majority cases. In
fact the committee should examine the prices paid to physicians.
fact as Medicare, Medicaid and Insurance companies pay majority of the bills,
it would be to their advantage if they could work on uniform pricing.
Punitha (IRDA Licence Number: 2710062)
Bloomberg View Newsletter, Feb 2013