There can be little doubt that the U.S. healthcare system is not only woefully inefficient, but often capricious and predatory. The New York Times has a sobering piece that reveals the extent of this insanity: basic and routine treatment is often charged in the hundreds, if not thousands, of dollars:
At Lenox Hill Hospital in New York City, Daniel Diaz, 29, a public relations executive, was billed $3,355.96 for five stitches on his finger after cutting himself while peeling an avocado. At a hospital in Jacksonville, Fla., Arch Roberts Jr., 56, a former government employee, was charged more than $2,000 for three stitches after being bitten by a dog. At Mercy Hospital in Port Huron, Mich., Chelsea Manning, 22, a student, received bills for close to $3,000 for six stitches after she tripped running up a path. Insurers and patients negotiated lower prices, but those charges were a starting point.
These depressing anecdotes aside, there’s plenty of metadata showing this to be indicative of a systemic problem:
Hospital charges represent about a third of the $2.7 trillion annual United States health care bill, the biggest single segment, according to government statistics, and are the largest driver of medical inflation, a new study in The Journal of the American Medical Association found.
A day spent as an inpatient at an American hospital costs on average more than $4,000, five times the charge in many other developed countries, according to the International Federation of Health Plans, a global network of health insurance industries. The most expensive hospitals charge more than $12,500 a day. And at many of them, including California Pacific Medical Center, emergency rooms are profit centers. That is why one of the simplest and oldest medical procedures — closing a wound with a needle and thread — typically leads to bills of at least $1,500 and often much more.
Indeed, the process is every bit as arbitrary as it sounds — there is no legitimate basis for these prices, nor even a consistent rule or policy. It varies from hospital to hospital, with not even the pretext of an explanation.
There is little science to how hospitals determine the prices they print on hospital bills.
Orla Roche with her mother, Emer Duffy. Orla, 2, fell and cut her forehead during a family vacation. The visit to the emergency room, where her cut was treated with skin glue, cost $1,696.Fred R. Conrad for The New York Times
“Chargemaster prices are basically arbitrary, not connected to underlying costs or market prices,” said Professor Melnick, the economist. Hospitals “can set them at any level they want. There are no market constraints.”
Prices for any item or service are set by each hospital and move up and down yearly, and show extraordinary variability, health economists say. The codeine that costs $20 and the bag of IV fluid that costs $137 at California Pacific are charged at $1 and $16 at the University of California San Francisco Medical Center, across town. But U.C.S.F. Medical Center charges $1,600 for an amniocentesis, which costs $687 at California Pacific.
In fact, another recent report from the Times found that even ambulances, once free, are contributing to the skyrocketing costs. There seems to be no aspect of this health care system that isn’t exploited to serve some for-profit motive.
To add more insult to injury, all of this expense doesn’t amount to better health outcomes for patients — everything from average life expectancy to infant mortality is at best mediocre compared to the developed world average. It should be fairly obvious how broken the system is, even for those with insurance.