May 09, 2013 at 9:12 am
This recent spate of articles about hospitals releasing what they charge for procedures is interesting, predictable, useful, and a timely reminder that our health care system lacks fundamental characteristics of markets, like symmetrical information and consistent pricing.
For example, there’s a huge difference between sticker prices and what insurers, especially Medicare, actually pay.
Data being released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts — sometimes 10 to 20 times what Medicare typically reimburses — for the same procedure, raising questions about how hospitals determine prices and why they differ so widely.
These early results won’t answer that question, but they do make this point very clearly: in case you didn’t know this already, if you’re uninsured, you’re the one they’ll try to hit with the sticker prices. It’s a classic example of why pooling is so important.
You go to buy a Snicker’s bar, you a) face a similar price across the nation, and b) pay that price at the register. Of course, health care provision is far more complex and varied, but the variation in price goes well beyond legitimate bounds, into “rent seeking” by hospitals and providers.
That’s not their fault–the current system incentivizes it. And in fact, the more costs are controlled in the covered sector, the more they’ll try to gouge those on the uncovered side. All of which should remind you of the urgency of getting everyone covered and into the pool. In other words, the best medicine to treat this diagnosis is the implementation of the ACA.
Here are some price comparisons pulled off the NYT interactive site (H/t: Gleeps):
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