The federal government has just released new data about Medicare reimbursement rates showing that the price of treatments vary widely from hospital to hospital. The data, drawn from 3,300 hospitals across the country, looked at how much each facility charged for the hundred most common treatments.
The variations in price were incredible. For example, two different Florida hospitals charged $40,000 and $91,000, respectively, for a gallbladder removal. One hospital in the District of Columbia charged $69,000 for a lower joint replacement, while another charged just $30,000. And these were only a few of the hundreds upon hundreds of examples of staggering price ranges.
The most alarming thing about this data is that nobody has any idea why this is happening. NYT:
Mr. Blum, the Medicare official, said he would have anticipated variations of two- to threefold at the most in the difference between what hospitals charge.
However, hospitals submitted bills to Medicare that were, on average, about three to five times what the agency typically pays to treat a condition, an analysis of the data by The New York Times indicates. And variations between what hospitals charge may be even greater.
Mr. Blum said he could not explain the reasons for that large difference […]
“There’s very little transparency out there about what doctors and hospitals are charging for services,” Mr. Zirkelbach said. “Much of the public policy focus has been on health insurance premiums and has largely ignored what hospitals and doctors are charging.”
We’ve known for awhile now that hospitals vary prices widely. Stephen Brill’s piece in Time delved into some of these numbers on a small-scale basis. A systematic study like this lets us know exactly how widespread the problem is, however. What’s becoming clearer and clearer is that the US health care system is more distorted, less transparent, more dysfunctional, and packed with more perverse incentives than most people realized. Right now, it’s about as far from a functioning market as it can be.
If we fix health care, all our other policy problems get easier. If we don’t, we’re going to go totally broke in a few decades. As this study plainly shows, the problem is hellishly complicated, and bound to get more so with time. All the more reason we should get started now.
[Glove image courtesy of Shutterstock]