Wednesday, March 6, 2013

Mindboggling Medical Billing in the USA

At TIME Magazine, Steven Brill wrote a tremendous essay on why the US medical system suffers under the extreme weight of it's billing practices, especially the disconnect between costs of providing service to amounts patients pay.  Brill describes it as "the ultimate seller's market":
When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?
I wonder the same thing.  Why did one woman in the article pay $21,000 for a false heart attack while someone I know, in Canada, pay $45 for essentially the same experience?

In the US, Brill writes that each hospital charges rates according to a schedule called a 'chargemaster', which specifies the prices for each medical procedures that can be billed (all of them?).  Amounts paid for patients covered under Medicare come under a different set of billing criteria.  Here's the rationale behind Medicare's payment amounts:
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.
This results in huge pricing differentials between the "market" cost stated by the hospitals and what Medicare deems as sufficient for covering costs.  Here are a few examples from Brill's article:
  • Troponin I tests to check for evidence of heart attack: Private cost is $199.50, Medicare pays $13.94.
  • Complete Blood Count:  Private cost is $157.61, Medicare pays $11.02,
  • CT scan with radioactive dyes: Private cost is $7997.54, Medicare pays $554.
The strategy Medicare uses to set prices seems very similar to how prices are set in Canada, specifically Ontario, where we have the Ontario Health Insurance Plan (OHIP).  Generally speaking, OHIP rates are set by negotiation and review:
OHIP provides coverage for physician services in Ontario, and 95% of Ontario’s doctors receive some reimbursement from OHIP for their services. Fees for various consultations and procedures which are performed by Ontario’s doctors are listed in the Schedule of Benefits, which contains more than 8000 different fee codes. In theory, each of these fee codes is based on the time and complexity associated with a specific procedure or consultation. However in practice this is not always the case, especially as technology and practice methods change. The Schedule of Benefits is updated approximately every 4 years through a negotiation processes between the Ontario Ministry of Health and Long-Term Care and the Ontario Medical Association (OMA).

Though one could argue that these costs are insufficient for proper care, for the most part, it works: I've never known anyone in medical need of a physician to not be seen in a reasonable amount of time.  Even in cases of emergencies where I've known people rushing to hospital, everyone was seen and cared for promptly, or sent away once no issues were found.

The key phrases are "medical need" and "reasonable amount of time", so the otherwise healthy teenage male in need of a few sutures usually needs to wait a long time.

And the cost of Ontario health care to taxpayers? 

Part is embedded into income taxes, while another part (euphemistically called a 'premium') is based on income.  The average person pays between $300 and $600 a year on the variable part.  After that, most medical visits are free, except for a few things like eye exams and ambulance services.  While drugs aren't covered, most routine hospital visits don't bankrupt your average person.

I'll finish with the comparison of two people that believed they were going through a heart attack: One person I know (let's call him 'Jonathan'), and Janice S. in Time's article.

Jonathan's ambulance ride in Toronto?  $45.  Janice S. paid $995 for same ambulance ride in Stamford.  Janice S. paid another $20,000 to find out she had heartburn.  'Jonathan' also found out that he was fine, but left the hospital for free.