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Editorial: Limits to Obamacare revealed

The health world has been buzzing about “Bitter Pill,” a blockbuster article by journalist Steven Brill that took up an entire issue of Time magazine. The article explains how every component in the system conspires to stick patients with outlandish bills, especially the uninsured, who are charged the highest prices of all.

Brill’s findings point out the limits to Obamacare. The Affordable Care Act will dramatically increase access to care for the uninsured, but it does relatively little to reduce medical costs and the rampant profiteering throughout the health care industry. Those costs are double those paid in other developed nations for outcomes that often are not as good. Obamacare was only the first step in putting the nation on a path to a sane, affordable health care system, a path whose next steps should include an end to most fee-for-service medicine and inflated prices that aren’t justified.

Brill tracked the fate of seven patients. One was a 64-year-old, uninsured woman who feared that she was having a heart attack. After four hours of testing at Connecticut’s Stamford Hospital she was determined to have heartburn. Her bill for the 4-mile ambulance trip and treatment came to $21,000. Because the woman was one year shy of qualifying for Medicare, she was charged $157.61 for a test Medicare reimburses hospitals just $11.02 for. She was charged $7,797.54 for another test that Medicare pays hospitals $554 for performing.

The difference, Brill wrote, is that Medicare, which covers 50 million Americans, has tremendous bargaining power and can tell hospitals, which often have a monopoly in their region, how much it will pay. Uninsured patients have no bargaining power and no ability to shop for care, particularly in a medical emergency.

The stories went on an on. A woman was charged $9,418 for 15 minutes of treatment for a fall that left her with a slightly-broken nose. A man was charged $87,000 for the minor day surgery to implant an electronic stimulator to relieve his back pain. The hospital charged him $49,237, a markup of at least 300 percent over the hospital’s cost, for the device. Another man received a 161-page bill totaling $474,064 for a 32-day hospital stay for pneumonia. His charges included $77 for a box of gauze pads.

The bills were astronomical, Brill argues, because hospitals use what’s called a “chargemaster” a dream-list of ideal charges for every possible procedure, sometimes 10 or 15 times the actual cost of providing the care. Medicare ignores the list and tells hospitals what it will pay. Private insurers negotiate discounts. Hospitals charge outrageous prices, Brill says, not just to cover the cost of treating those who can’t pay and make up losses from Medicare and Medicaid patients, but to pay exorbitant executive salaries and build enormous empires.

The American Hospital Association disagrees with Brill’s conclusions and says operating margins – what would be profit in the private sector – are not as high as he claims. The association also claims that the chargemaster is not invoked routinely, but the evidence in the article suggests otherwise.

Brill suggests several cost-cutting measures: a surcharge on non-doctor hospital salaries above a certain figure, antitrust laws to prevent hospital consolidations that create monopolies, a 75 percent tax on hospital profits, and a ban on the use of chargemasters whose prices bear no relation to the cost of services.

Accountable care organizations, which pay providers a set sum to care for patients and keep them healthy, should reduce health care costs, but they doesn’t address chargemaster prices and shamelessly high prices for medical devices, equipment and supplies.

Brill also suggests saving money by lowering the Medicare eligibility age so more people would pay far less for care. That path, taken to its logical end, would mean Medicare for all. Everyone would have the power the government has when negotiating prices for seniors. The current course is unsustainable. If health care costs, which now consume nearly 20 percent of America’s economy, continue escalating, it could come to that: a single-payer system like the ones used in every other developed nation.

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