Healthcare pricing a ‘Bitter Pill’

When it comes to healthcare and entitlements, it seems we’ve been concentrating on the peripherals and ignoring the core problems. Feb. 15 marked the federal deadline for states to sign on for Medicaid expansion and last-minute reversals saw six more Republican-led states opting in.

Also, many states have refused to organize their own insurance exchanges, choosing instead a federal-state partnership or allowing the feds to set up the online exchanges where individuals and those without employer-based insurance can shop for policies. How this will work when state insurance commissioners have authority over these issues is anybody’s guess.

Congress, meanwhile, faces the looming sequester amid gloom-and-doom predictions as to its impact on average folks. Will lawmakers draw the line between more revenue and acrosstheñboard cuts or by their inaction choose the meat axe option?

With all the angst about cuts to entitlements, little attention has been paid to the underlying problem of soaring medical costs. That is until Time Magazine (March 4 edition) published a 36-page report by Steven Brill called “Bitter Pill: How outrageous pricing and egregious profits are destroying our health care. “

After seven months of research, Brill presents the dilemma in terms most people will be able to understand. It contains anecdotes from victims of a system gone terribly wrong, one that preys on the uninsured or underinsured who earn a bit too much to qualify for Medicaid or are too young for Medicare.

The article is divided into sections such as Routine Care, Unforgettable Bills; Medical Technology’s Perverse Economics; Catastrophic Illness And the Bills to Match; When Taxpayers Pick Up the Tab.


Trying to read this in one or two sittings is a challenge but well worth the effort. From now on when I hear politicians say Medicare is the problem, I’ll be inclined to say Medicare is more likely the solution. Hospitals and pharmaceutical companies in collusion with insurance companies are major contributors to the dysfunction. Because of their lobbying power they have enough clout to affect the writing of legislation that favors their bottom lines with loopholes enough for them to subvert the intent of any law.

And those who favor market-driven policy fail to realize that healthcare is the sector least likely to be affected because it is the least transparent. When one is injured in an accident or suffers a sudden medical event (stroke, heart attack, etc.) they are at the mercy of the nearest hospital emergency room. They can’t shop for the best price or even find out what they will be charged.

Hospital bills start with something called “chargemaster,” a price list for everything from surgical procedures and room rent to Tylenol tablets. That’s where the negotiation begins. Medicare rates are at the bottom. Uninsured wealthy foreigners are at the top, but also individuals who are just above the poverty line. They often must hire a professional to negotiate for them. When the discounts to Medicare and private insurers are applied, the average yield after negotiation is 35 percent of what the hospital bills, Brill states.

Small- to medium-size cities rarely have more than one hospital, which likely serves all of the surrounding towns and is often the largest employer in the area. And non-profit hospitals, tax-free enterprises, are no longer run by religious entities, even if their name still contains “Mercy.” They’re run by CEOs who are paid seven-figure salaries with multiple perks. The CEO makes sure they do actually make large profits.

The losers are patients and doctors who don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game the system, Brill writes.

We’ve known for a long time that doctors tend to order way too many expensive tests to cover their liability. Capping malpractice awards could help, but hospitals that own CT and MRI scanners tend to reward doctors for their use, necessary or not.

I’ve come away from Brill’s research with a different view of our medical system and what it would take to set it right. Draconian cuts to Medicare reimbursement for doctors seems to make little sense in view of the profit margins of nonprofit hospitals and the perverse incentives of drug companies, device manufacturers and insurers.

The Affordable Care Act may be a step in the right direction but it faces an uphill climb. “Put simply, with Obamacare we’ve changed who pays for what,” Brill writes. “But we haven’t done much to change the prices we pay. “

The Malibu Times is the first newspaper in Malibu, serving the community since 1946.

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