The most useful aspect of this article is the pie charts and line-item comparisons. Ignore the dollar amounts themselves. Why? Because almost no one pays that. Why?
- In California, MediCal (state-wide health insurance safety net) pays about 20% of the cost (not price) of treatment for those without insurance. So if a surgery costs $10k, MediCal says "Here's your $2k. That's all you get."
- Nationwide, Medicare pays something closer to 90%. Much better, but still a loss to the hospitals.
- Insurance companies negotiate with hospitals, but (from what I've heard) generally pay 115-125% of the cost, giving hospitals a 15-25% margin. Certainly better, but not necessarily making up for the above.
- Some patients with no insurance, especially at major academic medical centers, are rich folks looking trying to get the best care in the world for something particularly complicated. UCSF in my neighborhood even has an in-house Saudi liaison for Saudi royals. These folks pay the full rate, which may represent an enormous markup, which does help subsidize the care of the top two categories.
For those without insurance, who don't have the money to pay the full fare (meaning you're not a foreign prince or similar), you're going to get freaked out by the bill, which is based on the last category. But in reality, the moment you ask a billing person about the costs, you'll almost always get knocked down into the insurance rate tier, just for asking. Show proof that you have next to nothing, and you could get well down into MediCal levels.
In order to get the ultra-rich to subsidize the patients that generate the loss, the price card needs to be high. Really high. So they give breaks to everyone else, since you can't do it the other way -- "Oh, you look rich, so we're going to charge you double the rate sheet."
This doesn't happen in community hospitals quite as dramatically, since they don't have the ability to handle the crazy conditions that will result in the high-revenue customers. So their rack rate for an ACL will be at the low end, while the academic medical centers that offer the $2MM neurosurgery will have rack rates for every procedure on the high end.
Is it messed up? Sure. But does it mean that normal people are paying $65k for this ACL procedure? Usually not.
This is true, but often the discounts aren't as steep as you'd think. I had a mitral valve replacement a couple years back (at age 29, due to a one in a million condition), and the insurance company was billed ~350k for the surgery + recovery in hospital. Even after their discounts, the total still came to $~250k (this is not the normal price - I had a complicated recovery, and spent an abnormal amount of time in the cardiac ICU). I, however, only had to pay ~$4,500 or so (high-deductible plan).
Yup, and if course it varies. Complications are a huge driver of costs, so making marginal improvements to the complication rate (either by improving the standard of care OR by insisting that you go to a place with a low complication rate) can have an outsize impact on the cost of care in the aggregate.
Companies like ConsultingMD (horrible name, http://consultingmd.com) are taking this approach to reducing costs.
- In California, MediCal (state-wide health insurance safety net) pays about 20% of the cost (not price) of treatment for those without insurance. So if a surgery costs $10k, MediCal says "Here's your $2k. That's all you get."
- Nationwide, Medicare pays something closer to 90%. Much better, but still a loss to the hospitals.
- Insurance companies negotiate with hospitals, but (from what I've heard) generally pay 115-125% of the cost, giving hospitals a 15-25% margin. Certainly better, but not necessarily making up for the above.
- Some patients with no insurance, especially at major academic medical centers, are rich folks looking trying to get the best care in the world for something particularly complicated. UCSF in my neighborhood even has an in-house Saudi liaison for Saudi royals. These folks pay the full rate, which may represent an enormous markup, which does help subsidize the care of the top two categories.
For those without insurance, who don't have the money to pay the full fare (meaning you're not a foreign prince or similar), you're going to get freaked out by the bill, which is based on the last category. But in reality, the moment you ask a billing person about the costs, you'll almost always get knocked down into the insurance rate tier, just for asking. Show proof that you have next to nothing, and you could get well down into MediCal levels.
In order to get the ultra-rich to subsidize the patients that generate the loss, the price card needs to be high. Really high. So they give breaks to everyone else, since you can't do it the other way -- "Oh, you look rich, so we're going to charge you double the rate sheet."
This doesn't happen in community hospitals quite as dramatically, since they don't have the ability to handle the crazy conditions that will result in the high-revenue customers. So their rack rate for an ACL will be at the low end, while the academic medical centers that offer the $2MM neurosurgery will have rack rates for every procedure on the high end.
Is it messed up? Sure. But does it mean that normal people are paying $65k for this ACL procedure? Usually not.