Bitter Pill: Why Medical Bills Are Killing Us

The total cost, in advance, for Sean to get his treatment plan and initial doses of chemotherapy was $83,900.

Why?

The first of the 344 lines printed out across eight pages of his hospital bill — filled with indecipherable numerical codes and acronyms — seemed innocuous. But it set the tone for all that followed. It read, “1 ACETAMINOPHE TABS 325 MG.” The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital’s purchasing power.



Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

Every time a nurse drew blood, a “ROUTINE VENIPUNCTURE” charge of $36.00 appeared, accompanied by charges of $23 to $78 for each of a dozen or more lab analyses performed on the blood sample. In all, the charges for blood and other lab tests done on Recchi amounted to more than $15,000. Had Recchi been old enough for Medicare, MD Anderson would have been paid a few hundred dollars for all those tests. By law, Medicare’s payments approximate a hospital’s cost of providing a service, including overhead, equipment and salaries.

On the second page of the bill, the markups got bolder. Recchi was charged $13,702 for “1 RITUXIMAB INJ 660 MG.” That’s an injection of 660 mg of a cancer wonder drug called Rituxan. The average price paid by all hospitals for this dose is about $4,000, but MD Anderson probably gets a volume discount that would make its cost $3,000 to $3,500. That means the nonprofit cancer center’s paid-in-advance markup on Recchi’s lifesaving shot would be about 400%.

When I asked MD Anderson to comment on the charges on Recchi’s bill, the cancer center released a written statement that said in part, “The issues related to health care finance are complex for patients, health care providers, payers and government entities alike … MD Anderson’s clinical billing and collection practices are similar to those of other major hospitals and academic medical centers.”

Read more: http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/#ixzz2LgYMT0Mh

Lack of consumer education + lack of transparency of the market place + greed is a pretty close equation as to why prices are so high.

I once read a book that likened the U.S medical system to walking into a store blind folded handing the store employee your wallet/credit card and telling them to start buying things. Then once they are done, and you are leaving, you refuse to look at or even accept the receipt.

Another book discussed how insurance premiums were sky rocketing because everyone used insurance to cover their basic medical needs (i.e their check ups for their child's cough, etc) rather than using insurance for what it was intended for, to ensure you could pay for your catastrophic care needs.

I disagree with the video on taxing non-profit hospitals and "putting the money back in the system" which is another way of saying "Politicians should use guns to extort money from one group then use that money to buy the votes of another group". If we need to do anything it's to increase consumer education and transparency of the system so people can make education decisions regarding their medical care.

Nonprofit Profitmakers
To the extent that they defend the chargemaster rates at all, the defense that hospital executives offer has to do with charity. As John Gunn, chief operating officer of Sloan-Kettering, puts it, “We charge those rates so that when we get paid by a [wealthy] uninsured person from overseas, it allows us to serve the poor.”

A closer look at hospital finance suggests two holes in that argument. First, while Sloan-Kettering does have an aggressive financial-assistance program (something Stamford Hospital lacks), at most hospitals it’s not a Saudi sheik but the almost poor — those who don’t qualify for Medicaid and don’t have insurance — who are most often asked to pay those exorbitant chargemaster prices. Second, there is the jaw-dropping difference between those list prices and the hospitals’ costs, which enables these ostensibly nonprofit institutions to produce high profits even after all the discounts. True, when the discounts to Medicare and private insurers are applied, hospitals end up being paid a lot less overall than what is itemized on the original bills. Stamford ends up receiving about 35% of what it bills, which is the yield for most hospitals. (Sloan-Kettering and MD Anderson, whose great brand names make them tough negotiators with insurance companies, get about 50%). However, no matter how steep the discounts, the chargemaster prices are so high and so devoid of any calculation related to cost that the result is uniquely American:

Thousands of nonprofit institutions have morphed into high-profit, high-profile businesses that have the best of both worlds. They have become entities akin to low-risk, must-have public utilities that nonetheless pay their operators as if they were high-risk entrepreneurs. As with the local electric company, customers must have the product and can’t go elsewhere to buy it. They are steered to a hospital by their insurance companies or doctors (whose practices may have a business alliance with the hospital or even be owned by it). Or they end up there because there isn’t any local competition. But unlike with the electric company, no regulator caps hospital profits.
Yet hospitals are also 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. As nonprofits, such hospitals solicit contributions, and their annual charity dinner, a showcase for their good works, is typically a major civic event. But charitable gifts are a minor part of their base; Stamford Hospital raised just over 1% of its revenue from contributions last year. Even after discounts, those $199.50 blood tests and multithousand-dollar CT scans are what really count.

Thus, according to the latest publicly available tax return it filed with the IRS, for the fiscal year ending September 2011, Stamford Hospital — in a midsize city serving an unusually high 50% share of highly discounted Medicare and Medicaid patients — managed an operating profit of $63 million on revenue actually received (after all the discounts off the chargemaster) of $495 million. That’s a 12.7% operating profit margin, which would be the envy of shareholders of high-service businesses across other sectors of the economy.
Its nearly half-billion dollars in revenue also makes Stamford Hospital by far the city’s largest business serving only local residents. In fact, the hospital’s revenue exceeded all money paid to the city of Stamford in taxes and fees. The hospital is a bigger business than its host city.

Read more: http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/#ixzz2LnTxfe6E

...so no, you analogy is wrong, because it's not robbery, it's demanding some capitalists to pay their fair share like every other company.

If what you want to say instead is that you don't think taxing is a solution: I wholeheartedly agree, transparency should be returned to the medical industry just like with other amenity providers (electricity, water, etc.).

You and others that wave the banner of "pay their fair share" couldn't even define or even agree on what constitutes a "fair share" because a "fair share" is subjective to the person. My idea of a "fair share" is allowing people to keep the fruits of their labor while you (I presume) would place an arbitrary number such as 10, 20, or 30% and say that it's "fair" (assuming we only discuss income tax rather than alternatives like consumption or flat taxes).



We can't expect the price mechanism of a marketplace to function properly without informed consumers. So taxing these institutions wouldn't solve a problem because they'll just gouge prices more which would lead to another layer of government involvement in regulations or price fixing which leads to more negative externalities, more regulation, more externalities, etc, etc.

You, yourself agreed in the past though, the big corporations can distort the free market, turning it into something else.

(My secondary complaint against libertarianism is the cognitive disjunction that cries for ever "freer" markets, yet fails to see how such conditions would need to be reinforced, assuming them to be "self-enforcing"... a premise going in the face of everything we know historically. The argument that all of this could transpire only through the interference of "government" ignores the fact that big corporations had a similar disruptive effect even in conditions where government was non-interfering or absent altogether).