Shocked, Shocked, Over Hospital Bills
By UWE E. REINHARDT
Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
Capt. Louis Renault’s famous line in the movie “Casablanca” comes to mind as I behold the reaction to the journalist Steven Brill’s 36-page report “Bitter Pill: Why Medical Bills Are Killing Us,” published in a special issue of Time last week. Mr. Brill was swiftly invited to appear on “The Daily Show with Jon Stewart” and on “Charlie Rose.”
Americans are shocked, just shocked. But what they should have known for years is that in most states, hospitals are free to squeeze uninsured middle- and upper-middle-class patients for every penny of savings or assets they and their families may have. That’s despite the fact that the economic turf of these hospitals – for the most part so-called nonprofit hospitals – is often protected by state Certificate of Need laws that bestow on them monopolistic power by keeping new potential competitors at bay.
As George Bernard Shaw, whose works include “The Doctor’s Dilemma,” might have put it, that any lawmaker would grant hospitals monopolistic powers plus the freedom to price as they see fit is enough to make one despair of political humanity.
Mr. Brill vividly illustrates the harsh financial mauling that the hospitals covered in his report – all nonprofits – visit on uninsured middle-class Americans stricken with serious illness.
Mr. Brill vividly illustrates the harsh financial mauling that the hospitals covered in his report – all nonprofits – visit on uninsured middle-class Americans stricken with serious illness.
Often these people operate small businesses or are entrepreneurs in start-ups and cannot afford anything other than skimpy health insurance with strict upper limits on coverage. When they fall ill and require hospitalization, they become easy marks for what I think of as “extreme billing.”
In fairness, let me note that we cannot be sure whether the vignettes Mr. Brill presents are representative of the entire hospital industry or the policies of the proverbial few bad apples, a line that may well be taken by representatives of the hospital industry.
It does not take away from Mr. Brill’s brilliant journalism – especially his use of the Form 990 on which nonprofit hospitals must report their financial performance to the Internal Revenue Service – nor from Time’s brilliant marketing to note that the practices Mr. Brill reports have been well known to health-policy analysts and health-policy makers for at least a decade. And they should have been known to broad segments of the public as well – certainly to news organizations.
As early as 2003, Marilyn Werber Serafini’s “Health Care — Sticker Shock” was published in The National Journal, which is well known to Congressional lawmakers and their staffs.
Also in 2003, The Wall Street Journal began publishing on its front page a series of investigative reports by a staff reporter, Lucette Lagnado. In one article she reported on patients being hounded by collection agencies and their lawyers, only to end up in jail for failing to make court appearances in connection with their hospital bills.
What Hospitals Charge the Uninsured
By UWE E. REINHARDT
Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
Steven Brill’s exposé on hospital pricing in Time magazine predictably provoked from the American Hospital Association a statement seeking to correct the impression left by Mr. Brill that the United States hospital industry is hugely profitable.
In this regard, the association can cite not only its own regularly published data, but also data from the independent and authoritative Medicare Payment Advisory Commission, or Medpac, established by Congress to advise it on paying the providers of health care for treating Medicare patients.
As shown by Chart 6-19 of Medpac’s report from June 2012, “Health Care Spending and the Medicare Program,” the average profit margin (defined as net profit divided by total revenue) for the hospital industry over all is not extraordinarily high, although for a largely nonprofit sector I would rate it more than adequate.
As shown by Chart 6-19 of Medpac’s report from June 2012, “Health Care Spending and the Medicare Program,” the average profit margin (defined as net profit divided by total revenue) for the hospital industry over all is not extraordinarily high, although for a largely nonprofit sector I would rate it more than adequate.
But in each year there is a large variance about that year’s average shown in Chart 6-19, with about 25 to 30 percent of hospitals reportedly operating in the red and many others earning margins below the averages.
The hospital association also correctly points out that under the pervasive price discrimination that is the hallmark of American health care, the profit margin a hospital earns is the product of a complicated financial juggling act among its mix of payers.
Payers with market muscle — for example, the federal Medicare and state Medicaid programs — can get away with paying prices below what it costs to treat patients (see, for example, Figure 3-5 and Table 3-4 in Chapter 3 of Medpac’s March 2012 report).
With few exceptions, private insurers tend to be relatively weak when bargaining with hospitals, so that hospitals can extract from them prices substantially in excess of the full cost of treating privately insured patients, with profit margins sometimes in excess of 20 percent.
Finally, uninsured patients — also called “self-pay” patients — have effectively no market power at all vis-à-vis hospitals, especially when they are seriously ill and in acute need of care. Therefore, in principle, they can be charged the highly inflated list prices in the hospitals’ chargemasters, an industry term for the large list of all charges for services and materials. These prices tend to be more than twice as high as those paid by private insurers.
In Obesity Epidemic, Poverty Is an Ignored Contagion
By GINIA BELLAFANTE
Under the category “Summer Rentals That Have Gone Terribly Wrong,” there are perhaps few parallels to the experience of Charles Henry Warren, a Manhattan banker who, in 1906, took a house in Oyster Bay on Long Island’s North Shore. By the end of the season, Mr. Warren’s young daughter had developed typhoid. She was soon followed in illness by Mr. Warren’s wife, a second daughter, two maids and a gardener. At the time, typhoid, a bacterial illness spread through contaminated food and water, was largely a disease of the urban poor. The property’s owner, George Thompson, concerned that the house, on which he relied for rental income, would become associated with tenement filth in the minds of wealthy New Yorkers, invited a sanitary engineer to determine the source of the outbreak.
What the medical investigator, George Soper, discovered was that the Warrens’ cook, Mary Mallon, an Irish immigrant, had left an imprint of malady in other quarters of upper-class Manhattan and its summer enclaves. Typhoid, he wrote, had erupted in every household in which Mallon had worked over the previous decade. An asymptomatic carrier of the disease, Ms. Mallon would be known to history as Typhoid Mary and spend most of the remainder of her life quarantined on North Brother Island in the East River, having failed to abide by a promise to cease working in the city’s kitchens.
The events supply the narrative of “Fever,” a new novel by Mary Beth Keane, which arrives at a time when we are once again debating the parameters of public health policy’s encroachments on our behaviors. Last week, a State Supreme Court justice in Manhattan used the words “arbitrary and capricious” in striking down the Bloomberg administration’s efforts to limit the size of sugary drinks (which pertained to certain sweetened beverages but not others, and some retail environments but not all). The phrase, though, could have been similarly applied a century ago to the city’s treatment of Ms. Mallon, given that officials were not in the habit of isolating other healthy carriers whom they had identified as ignoring ordinances against the spread of the disease.
Sequestering Ms. Mallon was not the only possible solution to her defiance. As the medical historian Judith Walzer Leavitt has argued, the city might have helped provide her with the kind of long-term employment that would have given her a salary commensurate with what she was earning preparing meals for the well-off. But it didn’t. Health officials were presumably most unnerved by the fact that Ms. Mallon was transporting an illness of the steerage classes uptown.
Then as now, economic disparity was, in many cases, driving disparate demographic patterns of disease. (Just to be clear, typhoid, though communicable, was not a greater threat to public health than obesity is today. In the early 20th century, there were about 3,000 to 4,000 new cases a year in New York, approximately 10 percent of them resulting in fatalities. Last fall, Mayor Michael R. Bloomberg said 6,000 New Yorkers a year died from obesity.) Obesity and its related illnesses, as we know,disproportionately affect low-income communities. In Brooklyn, for instance, the rate of heart-attack hospitalizations among adults 35 and older in East New York is nearly twice the rate in wealthier Brooklyn Heights and Park Slope.
Caring for constituents: Medicaid debate reaches beyond state, party lines
Republican Rep. Robin Weisz is a farmer who grows corn, beans and wheat. He describes himself as coming from a “very conservative background.” And on Feb. 27 he cast a vote to expand Medicaid under the Affordable Care Act.
Weisz doesn’t come from Maine. He lives in Hurdsfield, N.D., and for 18 years has served in the North Dakota Legislative Assembly, the last three sessions as chairman of the Human Services Committee. Three-quarters of the House are Republicans. The Senate is 70 percent Republican. The head of the state is Republican Gov. Jack Dalrymple, who supports expansion.
For the North Dakota House, which voted to expand coverage to people not traditionally covered under the public health insurance program, the decision was less a question of politics and more one of economics. Weisz said he never liked the idea of the Affordable Care Act, but the state would lose more by not participating in expansion.
“It doesn’t matter what I think of the act. I have to do what’s best for my constituents and the state,” he said in an interview.
It’s a sentiment that could spread to the Republican Party in Maine. Gov. Paul LePage strictly opposed Medicaid expansion in public statements until this week when his office said it has started talking with the Obama administration. Beginning a dialogue is far from supporting expansion, but it is a first step.
Obamacare’s tricky state ‘partnerships’
GOVERNMENT LOVES deadlines. Creating them must give someone a sense of efficiency — at least until they’re ignored. Spending cuts finally kicked in on March 1. Taxes are due April 15. Under the Affordable Care Act, as Obamacare is officially known, deadlines for creating health insurance exchanges crash like waves on a beach. States had until Dec. 15 to announce their own exchange; regulators were supposed to certify those plans by Jan. 1. When just 17 states opted to run their own pools, the government set a new Feb. 15 deadline to join a federal “partnership” overseeing the program.
Like the word “deadline,” “partnership” means different things to different people. In nature, bald eagles mate for life, often building and expanding the same nest for decades. The partnership between the elephant and dung beetle is much less majestic. And in any partnership between states and the federal government, we know who plays the elephant — and who’s left to pick through what it leaves behind.
Obamacare proponents were quick to denounce the 26 Republican governors who refused to set up any form of state exchange. Politics surely played a role in their decisions, and why not? The health care bill passed on a party-line vote in the Senate. Governors never asked for this responsibility, and they have legitimate practical concerns as well.
Care more now, pay less later
Policy and politics have dominated the conversation about health care reform in the Maine State House this year, but a March 13 story about Rep. Ann Peoples, D-Westbrook, and her husband, Patrick, who suffered a stroke last year, offers a timely reminder of the human implications.
The goal of providing the kind of quality, loving care that Ann Peoples gives to her husband — and all of its associated challenges and benefits — must factor more prominently as Gov. Paul LePage and the Legislature contemplate changes to Maine’s health care systems.
Programs that make it possible for Mainers such as Ann Peoples to care for their loved ones, and make it easier for Patrick Peoples to remain a valued member of his community, offer direct financial and medical benefits. They promote the quality of life that comes with living independently, and they save the state money by preventing or delaying the need for aging or disabled Mainers to seek more expensive care in nursing homes or other institutional settings.
A 2012 Weinberg Foundation Market Survey of Long-term Care Costs calculated that every $1 spent to help people care for loved ones in their homes yields $4.62 in nursing home cost savings.
Jessica Maurer of the Maine Association of Area Agencies on Aging estimates that more than 230,000 “informal caregivers” in Maine help people with chronic medical conditions stay in their homes. A2012 report on population and service use trends by older Mainers and people with disabilities, prepared for the Maine Office on Aging and Disability Services, indicates that number will likely increase steadily in a state with the oldest median age.
To better manage the cost of caring for an aging population in a rural state, Maine needs community-based programs that support its informal caregivers and those who want to live independently but aren’t lucky enough to have a dedicated family member like Ann Peoples. The Homemakers Services Program and adult day services are two such programs, and legislation to increase funding for them has gained approval from the Legislature’s Health and Human Services Committee.
One bill, LD 20, sponsored by Sen. Margaret Craven, D-Lewiston, would allocate $1.5 million in each of the next two fiscal years to shorten the program’s waiting list, which exceeds 1,500 people, according to Brenda Gallant of the Maine Long-Term Care Ombudsman Program.
At a cost to the state of $18.75 per hour, sometimes reduced by co-payments, the Homemaker Services Program serves approximately 2,000 low-income, mostly rural Mainers who need help with personal care, shopping and other basic services that allow them to stay in their homes. Intangible benefits include a system to check up on vulnerable Mainers and a remedy for isolation, which takes a physical and mental toll on older people in rural areas.
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