A new study is making the blog rounds in a big way. Health Affairs has reported that hospital charges to many uninsured and other “self-pay” patients in 2004 were 2.5 times what most health insurers actually paid and more than three times the hospital’s Medicare-allowable costs. The options for hospitals: lower your mark ups voluntarily, or you will be forced there anyway through litigation or legislation.
This study fits well with the populist narrative on health care — the evil-doers are everywhere! But the fact that individuals pay retail while larger purchasers pay wholesale has been with us since the beginning of time. I’m only surprised it took this long for the researchers to figure it out.
To understand the real meaning of this study and not the implications of its title (“From ‘Soak The Rich’ To ‘Soak The Poor’”) one has to understand the cost shift phenomenon that dominates U.S. health care. Here’s how Porter and Teisberg describe it in their book, Redefining Healthcare:
“Current health care competition takes the form of cost shifting rather than fundamental cost reduction. All system participants seek to lower their own costs by shifting the burden to other parts of the system. Costs are shifted from payer to patient, from health plan to hospital and vice versa, from hospital to physician, from health plan to subscriber, from employer to employee, from employer to government, from insured to uninsured, from government to private insurers, from states to federal government, and so on. Even patients play the cost-shifting game. They attempt to use political influence to obtain expanded coverage from health plans and greater contributions from government. Passing cost from one player to another like a hot potato creates no net value . . . All this cost shifting does nothing to improve health care at all.”
Catching a glimpse of just one point of this often hidden cost transfer can be deceiving. The truth is we are all culpable in a system in which every player is both a perpetrator and victim in this financial shell game.
