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HOSPITALS: “Soak the Poor:” Uninsured Hit With Higher Hospital Bills

May 9th, 2007

Uninsured patients are billed on average 2.5 times more than insured patients and 3 times more than Medicare patients for hospital care, according to a new study published in Health Affairs. Professor Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health writes: “Fifty years ago the poor and uninsured were often charged the lowest prices for medical services.” Today this pricing policy is reversed, and the gaps are widening from what they were in the mid-1980s.

The five states with the highest markups were New Jersey, Pennsylvania, California, Alabama, and Nevada. Gov. Arnold Schwarzenegger’s office issued a statement from California’s director of health and human services Kim Belshé in response to the study yesterday:

The trend is clear. What we have seen in the last twenty years is extraordinary growth in hospital costs for treating the uninsured. And all insured Californians have been bearing the costs of unpaid hospital bills. The Governor is focused on health care reform that guarantees coverage for all to put an end to the hidden tax associated with unpaid medical bills.

Hospital groups have been quick to criticize the study as dated. Survey data are from 2004. USA Today quotes an American Hospital Association representative:

‘Unfortunately, the study is really out of date. Hospitals have really made changes,’ says Carmela Coyle, senior vice president for policy at the AHA. ‘The serious problem is that we have more people who can’t pay for the care they need.’

The LA Times quotes the California Hospital Association:

Since 2004, hospitals have provided billions of dollars in free and discounted care for the uninsured and have changed their billing practices to lighten the burden on the uninsured, said Jan Emerson, a spokeswoman for the California Hospital Assn., a trade group. In California, a law that went into effect this year requires hospitals to offer discounts to uninsured patients who earn as much as 350% of the federal poverty income level, about $70,000 for a family of four.

The study in Health Affairs also noted that despite their efforts, few hospitals actually recoup the full charge amount from patients. In 2004, for every $100 hospitals charged, they collected $39.

Updated comments from the blogosphere: Wall Street Journal’s Health Blog asks: Are hospitals charities, cheapskates, or both? They spoke with study author Jerry Anderson.

“Anderson tells the Health Blog that from the point of view that matters most to patients, hospitals’ “ratio of charges to costs has just gone up and up and up.” Crunching Medicare data from 2004, Anderson found that hospitals have been raising their list prices an average of 10.7% a year since the mid-1980s; Medicare rates – a proxy for actual costs – have gone up more slowly, at about 6.3%.”

Kevin, MD Weblog says hospitals are “caught between a rock and a hard place” on pricing.

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5 Trackbacks for “HOSPITALS: “Soak the Poor:” Uninsured Hit With Higher Hospital Bills”

  1. Health Affairs Blog
    June 4th, 2007 at 5:37 pm
  2. Health Disparities & Bioethics » Blog Archives » Uninsured Hit With Higher Hospital Bills
    May 25th, 2007 at 11:21 am
  3. InsureBlog
    May 16th, 2007 at 1:51 pm
  4. 24/7 Quote US - Insurance Blog » Blog Archive » Health Companies Soak the Poor - According to Health Affairs Blog
    May 10th, 2007 at 1:00 pm
  5. Health Care BS » Blog Archive » Hospitals Overcharging the Uninsured? It’s BS!
    May 9th, 2007 at 3:17 pm

6 Responses to “HOSPITALS: “Soak the Poor:” Uninsured Hit With Higher Hospital Bills”

  1. Jane Hiebert-White Says:

    Thanks, Dr. Ozeran, for your comments. Actually, I agree with you that American society has NOT made it abundantly clear that it should “provide at least a minimum level of protection to its most vulnerable citizens.” I quoted that excerpt from a 1985 introduction to a paper in Health Affairs as a stark reminder of how the past 20 years of evolution in our health care system has still left sizeable and growing gaps. The level of uninsured Americans has grown from 30 million to 44 million in that time. Health Affairs is planning to devote its September/October 2007 issue to the theme of “vulnerable populations.” So stay tuned for further debate and proposals on this topic.

  2. L Ozeran Says:

    While the data presented in Ms. Hiebert-White’s 5/17 post may be accurate, I don’t know that the conclusion is complete. As insurers, public and private, have paid for less of the cost of care, the uninsured have certainly been *requested* to pay more. However, often they do not do so and it is the provider of the service who ultimately pays by being uncompensated. This has led to the majority of California ERs losing money and numerous medical groups going out of business. I have a lengthy discussion of our healthcare crisis at my website which discusses another perspective on how we got to where we are and what we ought to do.

    One implication I strongly disagree with is that “the American society has provide at least a minimum level of protection to its most vulnerable citizens.” I believe that we ought to do so and thus far have failed to do so because society has chosen *not* to pay for it. Of note, it has been estimated that insuring the uninsured would ultimately save $180 Billion annually, theoretically enough to cover the cost of insurance. The theory is based upon the presumption that with insurance individuals would obtain timely care (outside of ERs) and costs would drop as quality rose. While I agree with the theory, it is a change that would not occur immediately for many reasons. The two biggest reasons for a delayed effect are the relative increase in physicians that would be needed in primary care and the behavioral adjustment by individuals that would be required. It would be somewhat akin to the push to encourage women to obtain timely mammograms. While widespread today, it was relatively uncommon not too many years ago.

  3. Jane Hiebert-White Says:

    It is interesting how the same data can paint different pictures of what is going on in the health care system. The hospital pricing trend data for uninsured patients can: 1) highlight the need to get more Americans insured, and 2) illuminate the differential between price and payment. But a key point that the author, Jerry Anderson, points out is the wholesale shift over decades where in earlier years, the uninsured were billed the lowest price. The cost of their care was “cost-shifted” to the insurers (both public and private). As insurers now negotiate the “best” price, how do we handle the fall-out for the uninsured, self-pay patients who are billed “retail?”

    In a “classic” Health Affairs paper [free access] from the journal’s first year of publication, Jack Meyer and William Johnson look at the cost-shifting of the late 1970s and early 1980s. In the Prologue to the article, editor John Iglehart writes: “The commercial health insurance industry and, to some extent, large employers have sharply attacked government policies that have led hospitals to shift costs to private patients because of inadequate payment from Medicare and Medicaid. The industry estimates that these cost shifts now total $6 billion. But the industry has not paid attention to another question. If the American society has decided, as it surely has, to provide at least a minimum level of protection to its most vulnerable citizens, how should that protection be financed?”

    And economists Judy Feder and Jack Hadley write in the mid-80s on cost-shifting and the uninsured [free access paper]. The article Prologue states: “One of the most vexing challenges facing the U.S. health care system today is how to care for people who lack health insurance, a population that now numbers about 30 milion…With the implementation of Medicare’s prospective payment system, many analysts believed that hospitals would compensate for government reductions in revenue by increasing their charges to privately insured patients.”

    Today, over 20 years later with some 14 million more uninsured Americans, the cost-shift is not to the privately insured, but to the nation’s growing uninsured population.

  4. lozeran Says:

    While there is a retail / wholesale differential applied to individuals vs. insurers, the bigger issue (as relates to the findings of this study) may be the severe underpayment by government payers. If Medicare pays at or below cost, using it as a suggested level of reasonable pricing is nonsensical. If individuals paid 40% of the bill regardless of the level, then it would benefit hospitals to charge more. Since that is unlikely, it would be rational as we move toward broader use of high deductible health plans for hospitals to begin to look at more appropriate pricing. However, do not expect pricing at the retail level to be below 2 x Medicare while Medicare payments remain inadequate.

  5. David L Rabin MD Says:

    Universal insurance when, if, and for as long as it is implemented by states, will address part of the problem by reducing the number of state residents uninsured. Hospitals in these states will still be visited by uninsured from other states and uninsured immigrants, who will face these untenable charges. More significantly many low and middle income insured will be insured under state universal insurance, through the more affordable high deductible plans. These plans assure presentation of disease in more advanced states, increasing need for high cost services, and as the insurance cap is reached, precipitating bankruptcy and unpaid bills. Health care is now the the most common cause of bankruptcy even among the insured – and that was before we had much high deductible insurance!
    National approaches to the problem of the uninsured are needed as are sustainable national approaches to the increasing numbers of the uninsured and the underinsured whose numbers are increasing rapidly under the current vogue of consumer directed health care.

  6. Neil Gardner Says:

    I don’t think it is just the poor who are so treated, but anyone out there facing the medical-industrial complex on their own! So much for consumer directed healthcare!

    Individual consumers are no match for the medical-industrial complex, but
    just like any other unionization process, the field can be evened out by
    reversing the divide and conquer attitude of those wishing to make only
    money period!

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