Making Hospital Charges Fair and Public

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Sarah Kliff reports that Massachusetts is trying to decide if it should put a cap on hospital charges:

In a report this past spring, the state found that some Massachusetts doctors charge six or seven times as much as their colleagues for the exact same procedures. Across the board, a three-fold variation in prices was pretty standard.

There’s a pretty simple explanation for all the price variation: hospitals negotiate specific rates for specific insurance companies….Insurers and hospitals alike closely guard those pricing agreements as proprietary information, with neither party wanting to see their pricing agreement undercut by a competitor.

Massachusetts wants to do away with all of that. In a proposal released Wednesday, the Massachusetts Special Commission on Provider Price Reform recommends allowing a panel of state regulators to reject rates charged by hospitals and providers if they’re too high….That would be a really big shift from where we are now, where price negotiations are usually a private matter between insurers and providers, and it’s nearly impossible to figure out how much a given procedure costs.

There’s another side to this too. Suppose I decided I wanted to leave Mother Jones and go write a book. Or maybe just retire because my 401(k) is in such awesome shape these days. Well, I couldn’t. Even if I had the independent income for it, no health insurer in the country would take me on. I’m a 53-year-old male with high blood pressure and high cholesterol. It’s controlled well with meds, but that doesn’t matter. I’m far too high a risk for anyone to want my business.

But couldn’t I just go without health insurance and simply pay out of pocket for medical care? In theory, yes, although I suspect my choice of doctors would be fairly limited. But here’s the thing: it would cost a fortune. If I ended up having that heart attack that my cardio symptoms say is coming someday, the resulting hospital bill wouldn’t be $50,000. Or $100,000. That’s only the bill if your insurance company pays. The list price is more like $300,000. Or maybe more. I might be able to afford the risk of a $50K hospital bill, or even a $100K hospital bill. But not a $400K hospital bill.

I’ve long considered this wildly unfair. So I’d do both less and more than Massachusetts. I wouldn’t necessarily cap hospital charges, but I would insist that hospitals charge everyone the same rate. They can negotiate whatever rate they want, and that might be quite different in rural hospitals vs. urban hospitals. But once a hospital has a rate, it’s posted publicly and that’s what everyone pays. Big insurance companies, small insurance companies, individuals, whatever.

Hopefully, of course, this will become largely moot in a couple of years. Obamacare will mostly solve all this — assuming Republicans don’t successfully repeal it — because health insurers will no longer be allowed to turn me away. I’ll still have to pay annual premiums, but I won’t have to run the risk of getting hit by a half-million dollar hospital bill. It’s one of the many market pathologies that Obamacare will address, and one that’s well worth addressing.

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FACT:

Mother Jones was founded as a nonprofit in 1976 because we knew corporations and the wealthy wouldn't fund the type of hard-hitting journalism we set out to do.

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation today so we can keep on doing the type of journalism 2020 demands.

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