Uwe Reinhardt Does Something I Like

He describes it here:

Five months after the commission [Chi aired by Reinhart] filed its final report, Governor Corzine introduced and New Jersey’s State Assembly passed Assembly Bill No. 2609. It limits the maximum allowable price that can be charged to uninsured New Jersey residents with incomes up to 500 percent of the federal poverty level to what Medicare pays plus 15 percent, terms the governor’s office had negotiated with New Jersey’s hospital industry.

I don’t favor government price fixing. But if an uninsured patient enters a hospital, somebody has to figure out what fee should be paid. The hospital’s list prices are phony prices that other customers are not paying and that were basically selected in order to maximize against third-party payment formulas, given the wacko way that Medicare pays. When the hospital tries to charge the uninsured patient list prices it is implicitly pretending that these are market prices, when they are not. So if I were on a jury having to decide who owes what, the New Jersey solution is about what I would decide.

Comments (16)

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  1. Jack says:

    Thanks Uwe, for actually sticking up for the middle-income American. It’s nice not having to carry the margin because I’m suspected by hospital administrators of being above the FPL. It would be interesting to see how hospital charges for the uninsured look on a race scale.

  2. Jordan says:

    500 percent of the FPL is like $57k a year for a household with no dependents. Wow.

  3. bart says:

    Imagine making 501 percent of the FPL and getting stuck with a large bill. Talk about effective tax rates…

  4. Devon Herrick says:

    I concur with this assessment. I typically believe that stores and customers should negotiate prices. However, the health care industry is not in the business of competing on price; and they are not prepared to deal with cash-paying customers. Moreover, many hospitals are non-profit corporations established for charitable purposes. Given that many hospitals are tax exempts because they were established for charitable purposes, yet not willing to deal with the people who are most in need of charity (the uninsured), I see nothing wrong with the state stepping in and requiring (as a condition of tax exempt status) that non-profit hospitals establish and disclose a benchmark price. I would be a little more hesitant with for-profit hospitals. However, I still see nothing wrong with requiring all hospitals to — at the very least — disclose their prices to patients in advance. This could not be described as pure free market. Howver, it’s closer than the convoluted system that resulted from suppressing markets in the first place.

  5. Tim says:

    “I don’t favor government price fixing.”

    - Neither do I, but I do agree with Uwe’s solution.

  6. Ashley says:

    This is very clever. I’m very against government intervention when it comes to health care matters, since history shows that nothing good ever comes out of it. However, in this case Governor Corzine is going right to the point. One of the main reasons why the current health care system is so defective is because some medical insitutions don’t make it clear to patients how much they will end up charging for their services, and thus it takes patients for surprise when they get the final bill. Disclosing fixed prices for the uninsured is truly a great approach to getting some of the control back when it comes to how much physicians charge for their services. At the end of the day, everyone knows how much some people tend to overpay for certain services without even knowing so.

  7. Mike Charles says:

    Price fixing and government intervention are usually not a good mix. However, in this case it seems to be a great way to solve some of the variations in medical costs charged to the uninsured. Perhaps other states will see the benefits of doing this, and start implementing it throughout the nation.

  8. Kumar says:

    @ Bart

    That would suck wouldn’t it.

  9. Eden Soto says:

    I don’t know what will end up working nowadays. Seems like whatever is addressed will end up corrupting itself into the very lucrative medical industry.

  10. Anthony Sombers says:

    Given the state of our sytem, I see no problem with government stepping in on this. Sounds like a good fix.

  11. Gabriel Odom says:

    A great deal of these issues can be sorted out if the hospitals simply put up a price menu: 15 minutes with a nurse costs this, 15 minutes with a doctor costs that, an hour in an emergency room costs something else. If the poor and uninsured were charged a flat 20% of these rates, then they will be less likely to consume these goods (since prices have increased above the previous ceiling price of $0). Demand will shift to the left, driving down prices for everyone.

  12. Hoads says:

    This sounds good but I can’t imagine it will make much difference in the ability of the hospitals to collect for anything more than a few thousand dollars.

    Prescription drugs also have wacky list prices that no one pays—EXCEPT the UNINSURED and those with HSA POLICIES. I posted this before on this forum and got shot down by many who said HSAs do cover Rx drugs. Perhaps there are some type of hybrid HSA policies that offer Rx drugs but every HSA policy I have ever had (since 2005) does not offer any contractual pricing on Rx drugs until the entire medical deductible is met. So, for instance, when my teenage son was Rx Accutane for cystic acne, we paid over $900 per month for 6 months because we had a $4000 deductible.

    My friend switched from a PPO to an HSA last year and did not understand the restriction on Rx drugs and changed her Nexium to some kind of cheaper drug because Nexium was now $283 per month when she had been paying like $30-40 per month on her PPO.

    AND, it is a FACT that legislation was passed, I believe in 2003 that restricted Rx drug coverage in HSAs until full deductible was met.

    I wish John or somebody would look into this.

  13. bart says:

    Hoads,

    An HSA is not an insurance policy. It’s just a pre-tax savings account, used to cover cover deductibles and copays. They’re usually coupled with high-deductible PPO plans.

    I had an HSA a couple of years ago, coupled with a Blue Cross PPO that was was pretty much the same as the high-cost PPO I had previously, except for the size of the deductible. But I suppose there are good high-deductible plans as well as bad ones, the same as with conventional low-deductible plans.

    You don’t say what insurance company your friend was using.

  14. Bob Hertz says:

    Gabriel, you send in a lot of good posts but you missed the bus on this one.

    What is the point of hospitals putting up a price menu?

    That makes sense in a restaurant, where persons at their leisure can choose to go in and eat or not.

    I have worked in a hospital. Between 20% and 40% of admissions are of persons who are literally unconscious or in great pain. Their relatives (if they are present) are undertandably terrified.

    The other admissions are scheduled surgeries. In many cases the prices are disclosed to the insurer in advance, subject to normal caution about complications that may ensue.

    I never saw too many uninsured persons actually schedule surgery, though I am sure some did. Doctors are normally considerate to them and do disclose prices.

    The scandal of gouging the uninsured would be handled by the AHA and the AMA if these organizations had any cojones.

    Since they don’t, Reinhardt’s solutions will do. I actually look forward to seeing a few hospital execs and non-network surgeons being dragged into court.

    Bob Hertz, The Health Care Crusade

  15. Linda Gorman says:

    Even in the following case?

    Medicare cuts have taken effect so that Medicare payments are like current Medicaid payments–way below costs. Even plus 15 percent is nowhere near costs. The uninsured have now been granted access that is just as bad as it is for people now on Medicaid.

    Why Medicare rates? Why not the commercial contract rate for the largest insurer in the state plus 15 percent?

  16. Bob Hertz says:

    Linda is right, in that any type of ceiling would be better than the rug-merchant bazaar style of charging the uninsured today…….where the hospital puts out a grotesque price, and if the patient is assertive and/or has support then the patient can propose less, and so on.

    Leaving aside the grotesqueness of people who have just survived illness being forced into hard bargaining, the real irony is that by and large, Americans do not like to bargain.

    Walmart does great with one low price always. More and more car dealers have moved away from hard bargaining.

    This is a good thing about America. I too find bargaining repulsive.

    Would that health care be spared this ugly practice!