The Thing to Read This Weekend is: “Bitter Pill”

Yesterday, TIME published its longest story in history—a 36-page investigation by Steven Brill on the craziness of medical billing in the U.S. It took me a little more than two hours to read, but it’s worth it and it’s the story I’m encouraging everyone to read this weekend. Why does a run to the hospital for a heart attack scare that ends up being heartburn result in a bill for $21,000? The word that we learn and that’s brought up several times throughout the story is: chargemaster. The chargemaster is the hospital’s internal price list, a massive computer file that assigns prices to everything from blood tests to every square of cotton used (“alcohol prep pad”) to treat you while you’re in the hospital. To summarize, insurance companies and programs like Medicare negotiate big discounts off of the chargemaster figures, so a $21,000 heartburn bill will cost an insurance company, say, $10,000 minus a copay fee. Patients often pay $50 or $100 copays for their treatments not realizing that their bill was $21,000.

But one of the people in the TIME story, Janet S., a 64-year-old uninsured woman who had a heart attack scare that turned out to be heartburn did get to see her $21,000 bill because she didn’t have a health insurance provider negotiating a discount on the chargemaster figures on her behalf. She was asked to pay the chargemaster list prices: $17,000 for the hospital, $3,000 for the doctors who treated her, and $995 for an ambulance ride. If she were a year older and qualified for Medicare, her bill would have been much lower. Among many other charges she received three “TROPONIN I” tests (basically, blood tests) for $199.50 each.

…seeing what Medicare would have paid Stamford Hospital for the troponin test if she had been a year older shines a bright light on the role the chargemaster plays in our national medical crisis — and helps us understand the illegitimacy of that $199.50 charge. That’s because Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver. Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation. Thus, under the law, Medicare is supposed to reimburse hospitals for any given service, factoring in not only direct costs but also allocated expenses such as overhead, capital expenses, executive salaries, insurance, differences in regional costs of living and even the education of medical students.

It turns out that Medicare would have paid Stamford $13.94 for each troponin test rather than the $199.50 Janice S. was charged.

Janice was just a year shy of qualifying for Medicare, and earned too much to qualify for Medicaid, which provides care for the poor, but didn’t earn enough to afford health insurance for herself. Essentially, the person who is least able to pay for medical care is asked by hospitals to pay the highest rates. Why? This is one of the many, many questions the story asks and attempts to answer.

Why does a hospital charge $7 for a single square of cotton used to apply alcohol on a patient when a box of 200 cotton squares can be bought for $1.91? Why does a person like Janice have to worry about a $21,000 heartburn bill and then discover on her own through a “medical-billing advocate” that the bills are actually negotiable? (“‘The hospitals all know the bills are fiction, or at least only a place to start the discussion, so you bargain with them,’ says Katalin Goencz, a former appeals coordinator in a hospital billing department who negotiated Janice S.’s bills from a home office in Stamford.”) Goencz negotiated Janice’s bill down to $11,000. And patients are unlikely to go through their bills line by line to prepare themselves for negotiation. As another patient says in the story: “‘Are you kidding?’ she said. ‘I’m dealing with a husband who had just been told he has Stage IV cancer. That’s all I can focus on … You think I looked at the items on the bills? I just looked at the total.’”

Do read this story this weekend.

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13 Comments / Post A Comment

Thanks for posting this. I read it yesterday for work (I work in health policy) and the whole thing is just so sickening. I cannot adequately enumerate the ways in which our system is fucked, but widows in nearly a million dollars of indecipherable debt from their loved ones’ chemo is a good place to start. I don’t normally like Time that much, but I hope this gets a lot more attention. More people outside the bubble need to understand why and how they are being screwed over.

My dad got a similar bill for a similar situation, though it was covered by insurance. IIRC they charged him more than $100 each for aspirin.

Worker Parasite (#2,292)

My Canadian mother had to spend about a week in an American hospital ICU – it was life threatening so they couldn’t deny her treatment without payment. Those of us who came to the hospital were constantly hounded by bill collectors for a deposit on her bill. We advised them to send the bill to the medical services plan of her home province, which reimbursed them the amount they would have spent on the same treatment had she been at home. The difference was HUGE. The US hospital wanted $125,000 or so, the provincial government medical plan sent them about $25,000, as that’s what the treatment would have cost them. After she recovered and returned home the US hospital hassled her for years afterwards for the remaining $100,000, she just kept telling them to go to hell. Utterly ridiculous that hospitals try to overcharge like that!

Also this article makes a very good point that what the government pays for health care is service not some doctor-impoverishing insult, but reflects *the actual cost of providing the service*.

KittyConner (#3,108)

Haven’t read the story yet, but one answer as to why a square of cotton is $7 out of a $2 box:

(Not saying it’s not completely fucked up, just the way the logic works…)

Surveys exist that provide national/state fee information for each and every Tylenol and cotton square. This information is reported as percentile ranges. Good billing practice dictates that an institution wants to be in the higher range of these fees, if not above the 100th percentile. So each year, the chargemaster is adjusted. (Usually upwards, but occasionally downwards, if the Fee Reference indicates a drop in price due to something like a generic release or whatever. No one wants to be flagged for possible fraud.) Since this is standard practice, everyone does it. And so the survey shows higher rates and so the chargemasters go higher and then are surveyed and the survey increases and then the charg…. ad infinitum.

So why is it good billing practice? Because the increasing charges are a way to justify an increase in the rates paid by contracted insurers and the government. Each party involved knows good and well than that cotton square didn’t cost $7. They know it cost a little less than the $.17 that has been previously negotiated for payment. BUT if the hospital can show that nationally, the charge for a cotton square has gone from $7 to $7.50, well, maybe they can negotiate a new rate of $.19. Multiply those tiny increases across the board? Suddenly your overall reimbursement rate is up 4% for the year.

Dumb, stupid, painful…you betcha. But not without (arcane, twisted) reason.

Oh and as always: DO NOT PAY 100% OF ANY AND ALL MEDICAL CHARGES. EVER.

@Ash@Work this is like that bizarre Amazon robot pricing thing that produced books being priced at $4,000, only so much huger and more terrible and involving decisions by actual thinking human beings and really the worst part is that it does make sense from the provider’s point of view.

I am so far from an expert on this and no one should ask me for healthcare policy input, but as far as I can tell, the entire individual fee-for-service model of paying for healthcare is broken. The incentives end up so out of line with reasonable decisions and like, actual patient well-being, and “normal” market pressures that might otherwise discourage the worst abuses don’t come into play because consumers don’t have anywhere near the kind of information they need to make informed decisions, whether it’s about pricing, the actual effectiveness and risks of treatments, what their insurance is going to cover, or…anything. Any part of it.

sony_b (#225)

@Lorelei@twitter Yeah, I see what Ash@Work is saying, but it all amounts to fraud anyway.

IMHO things that should not be for-profit (or “nonprofit” in the case here) – schools, jails, basic medical and dental care. The people who work for those institutions should be well paid. The government should provide those basic services to everyone by way of taxes. Anybody who wants to start a for-profit hospital, jail, school, is welcome to. But those services should be available to all as a part of living in a civilized society.

This is not helping me screw up my resolve to actually find a primary care physician in the city I’ve lived in for almost 3 years, you guys. I’ll just be continuing to ignore the strange sensations that have been happening in the general vicinity of my heart the last few months and go on with my plan to get more consistent cardiovascular exercise and call it fixed. If I were about to die, my gyno would notice, right? Right.

@Lorelei@twitter and I *am* insured!

sony_b (#225)

A decade ago I received a 30k bill for a four hour stay – outpatient surgery to replace a defective implant in my abdomen. I had to sue Allergan (makers of the implant) to pay for it. They paid 6k and the hospital was fine with that. The hospital would not negotiate with me. On my bill was a $35 box of kleenex that I never touched – it was just part of the standard crap on the side table in recovery. I’m quite sure they didn’t give me a new one, nor did they replace it for the next person.

blueblazes (#1,798)

I work in “nonprofit” health care and was pretty much engrossed by the article when I read it yesterday. For all that I am personally benefiting from the system right now, I hope that more people make it through all 20,000 words and force us to change. If I told you how much money my boss makes, you would vomit into your keyboards.

Why wasn’t this article written before/during the “debate” that resulted in Obamacare?

Perhaps single payer wouldn’t have been taken off the table by Obama in his deal with the insurance companies & drug manufacturers.

Perhaps “reimportation” of drugs from Canada — resulting in lower prices — would have been supported.

Perhaps allowing Medicare to bargain with drug companies for lower prices would have been allowed.

All sorts of good provisions that never made it in to legislation because there was insufficient knowledge and concern over how bad our medical “system” really is.

orejitasmiamor (#2,678)

@Kokuanani Schwartz@facebook I know it is not the same thing, but a book by the name of “The Healing of America” by T.R. Reid is about pre-Obamacare healthcare in the US as compared to other countries. A fast and interesting read. Our system is a mess, and there are a lot of reasons for that aside from the free-market and for-profit insurance companies aspects. If you want to read an old but respectable book on that subject, check out “The Social Transformation of American Medicine” by Paul Starr. You will never look at the AMA the same again.

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