Inside ‘Bitter Pill': Steven Brill Discusses His TIME Cover Story

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Simple lab work done during a few days in the hospital can cost more than a car. A trip to the emergency room for chest pains that turn out to be indigestion brings a bill that can exceed the price of a semester at college. When we debate health care policy in America, 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?

Steven Brill spent seven months analyzing hundreds of bill from hospitals, doctors, and drug companies and medical equipment manufacturers to find out who is setting such high prices and pocketing the biggest profits. What he discovered, outlined in detail in the cover story of the new issue of TIME, will radically change the way you think about our medical institutions:

· Hospitals arbitrarily set prices based on a mysterious internal list known as the “chargemaster.” These prices vary from hospital to hospital and are often ten times the actual cost of an item. Insurance companies and Medicare pay discounted prices, but don’t have enough leverage to bring fees down anywhere close to actual costs. While other countries restrain drug prices, in the United States federal law actually restricts the single biggest buyer—Medicare—from even trying to negotiate the price of drugs.

· Tax-exempt “nonprofit” hospitals are the most profitable businesses and largest employers in their regions, often presided over by the most richly compensated executives.

· Cancer treatment—at some of the most renowned centers such as Sloan-Kettering and M.D. Anderson—has some of the industry’s highest profit margins. Cancer drugs in particular are hugely profitable. For example, Sloan-Kettering charges $4615 for a immune-deficiency drug named Flebogamma. Medicare cuts Sloan-Kettering’s charge to $2123, still way above what the hospital paid for it, an estimated $1400.

· Patients can hire medical billing advocates who help people read their bills and try to reduce them. “The hospitals all know the bills are fiction, or at least only a place to start the discussion, so you bargain with them,” says Katalin Goencz, a former appeals coordinator in a hospital billing department who now works as an advocate in Stamford, CT.

Brill concludes:

The health care market is not a market at all. It’s a crapshoot. Everyone fares differently based on circumstances they can neither control nor predict. They may have no insurance. They may have insurance, but their employer chooses their insurance plan and it may have a payout limit or not cover a drug or treatment they need. They may or may not be old enough to be on Medicare or, given the different standards of the 50 states, be poor enough to be on Medicaid. If they’re not protected by Medicare or protected only partially by private insurance with high co-pays, they have little visibility into pricing, let alone control of it. They have little choice of hospitals or the services they are billed for, even if they somehow knew the prices before they got billed for the services. They have no idea what their bills mean, and those who maintain the chargemasters couldn’t explain them if they wanted to. How much of the bills they end up paying may depend on the generosity of the hospital or on whether they happen to get the help of a billing advocate. They have no choice of the drugs that they have to buy or the lab tests or CT scans that they have to get, and they would not know what to do if they did have a choice. They are powerless buyers in a sellers’ market where the only consistent fact is the profit of the sellers.

Read the full TIME cover story on rising medical costs here.

278 comments
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SalmanMehmood

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FaizaKhan

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AnnStanton
AnnStanton

Try reviewing 1500 pages of itemized statements that cover a nine month period.  This is what was involved prior to my sister's death and the prices were staggering.  Strange to me however that payments were higher for long term acute care hospitals, rehab hospitals, and the nursing home in Pittsburgh where she was injured or developed additional medical problems before returning to the UPMC acute care hospital in between each.  Four specialty hospitals and a nursing home for rehab and wound care and she ended up  in a hypoglycemic coma, respiratory arrest and an anoxic brain injury. She was kept alive on life support while remaining unresponsive because a nurse at the nursing home refusd to give her a doctor-ordered medication and then went on to falsify the medical record.  Neither the PA Health Dept nor Medicare have any problem with falsifying medical records and causing injuries and death by their neglect and abuse of the patient.  I've been at this for over a year and I'm beginning to see that government is a major problem in this health care problem because they just refuse to do their jobs properly and tell these medical facilities that they can do whatever they want with no penalties involved.

RalphBeckett
RalphBeckett

In response to the post by KristaCantrellBrennan.  I don't think your problem is uncommon.  A neighbor recently had a hand prosthesis repaired -- it was small and needed a minor adjustment.  He was told it would be minor and did not ask the cost.  Later a 30 min job was billed at $600. And, just like you he was stuck with the cost that insurance would not pay.  One expects professionalism not exploitation.  I personally will be asking for a "not to exceed" estimate in the future -- no estimate, no deal.  Or, find a nurse that wants some well reimbursed part time work!

KristaCantrellBrennan
KristaCantrellBrennan

I was recently in the Christiana care hospital outside of Wilmington Delaware. I was there for outpatient services Specifically infusion. The market cost of my medication was approximately $1500 a month. At present because it's a financial burden, the pharmaceutical company gave me the free prescription. I love the hospital had to do was infuse the drug in the infusion center. I was there for two hours. I received a bill for $14,000. My Horrible insurance didn't cover the cost of the infusion, however, my drug was covered by the pharmaceutical company.

How does two hours of infusion cost $14,000?

I go to a small compounding pharmacy/infusion center now. My infusion is $125 cash.

$14,000? Christiana care? When I called to inquire about the bill and stated that it Must be an error, They said it was the cost. How is this possible? Now I am stuck with the medical bill I certainly can't pay.... And will have this medical cost Appear on my credit report.... It makes me look like a deadbeat. I didn't invent this fictitious charge. The hospital did. Other professionals in the infusion industry tell me that the approximate cost for infusion in the hospital is about $1500, Which is outrageous but Is more appropriate than $14,000. Even if they provided the drug, the cost would still only have been about $3000. Who takes responsibility to make sure patients are not Ridiculously overcharged? Is Obama care going to fix this? I'd love to be optimistic… But I'm pretty sure it won't.

RonnaRubin
RonnaRubin

Thank-you Steven Brill for your article! I fainted in a restaurant and was taken to a hospital ER by ambulance which I declined.  The 2 mile "fully loaded" ride cost $1725.00.  I arrived with all normal vitals and the lightheadedness had subsided. I declined all treatment in the ER but somehow got saddled with $825 ER bill and $100 Dr. exam.  Because I was able to reference your artice and threaten to go to the news media with my story they are now finally reviewing my bill and yes the computer generated a list of 12 tests they wanted to perform. The staff harressed me for 90 minutes to have these tests....they finally let me sign AMA papers.  This still may go to collections but I am hoping your article has some clout.

monastev
monastev

I cannot thank Time and Steven Brill enough for lifting the veil of secrecy on hospital billings.  No wonder people fear going into a hospital.  You can become saddled with crushing debt and bankrupted.  We need  some whistleblower insurance coders to come forward and shed more light on the chargemaster.  Thanks for starting a national conversation.

mkb
mkb

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PatriciaMcardle
PatriciaMcardle

Dear Mr. Brill, 

Thank you for your excellent, clear, insightful and incredibly important story.  It should have prompted hearings in congress, headlines around the country and mass protests in front of hospitals.  Sadly, I fear that many Americans (employed and unemployed) are so beaten down by the economy, the endless political infighting of our elected officials and the basic struggle to pay the bills, that those who need this reform most will do nothing and those who need reforming most will carry on with business as usual until sometime in the future there is a crisis of epic proportions that forces reform in our unfair and inefficient health care system.  You have done a great service for us all.  

MedicareMaven
MedicareMaven

In 2011, Sloan Kettering did in fact receive an average of $2,298 per claim for Flebogamma injection.  They were paid $35 per unit and each claim (patient encounter) averaged 65.5 units each.  Each unit is 500 ml.  This data is from Medicare's outpatient files.  Wannabecoder may be thinking about physician payment, not hospital outpatient payment.  Mr. Brill's data was pretty darn close. If you look at Medicare outpatient payments to hospitals in 2011, Sloan Kettering is #1 and MD Anderson is #2.  

adamstaffordsantafe
adamstaffordsantafe

Dear Mr Brill.  

In your recent article you have referenced operating profit as excluding depreciation.  Though this is a favorite and common "yardstick" measure of operating profitability, or as I would rather say, "viability" in the non-profit world, excluding depreciation expense from operating profit is an internal measure by which companies and organizations measure executive performance.  When one discounts depreciation from the calculated operating "profit" of any enterprise it must be realized that the measure effectively says, "Let's ignore all of the capex it took to get to the operational status we have at the current time."  The assumption, when evaluating executive performance and excluding depreciation, is that capex is a necessary expenditure for the on-going viability of the enterprise, or, pursuit of the mission of the organization, and hence, ought not be included in the calculation of an executive's operational performance, because the expenditure would have had to have been made in order to remain competitive, regardless of those steering the ship.

That being said, ignoring capex (ie depreciation) in your calculation of profitability is most likely somewhat, if not grossly, misleading and unjust. If doctors were able to perform their duties without hospitals, tools, hospital beds or the like, then your calculation is sound.  However, in a world where medicine is preferred to be practiced indoors and in a sanitary environment, your allegations are both unfounded and uninformed.  Please let me know if you disagree.

garagebrew
garagebrew

I would like to see one change in health care that I think would change the face  and costs of health care overnight. I would like to see legislation that would require the free market practice of up-front pricing or a good faith estimate for all non-emergency health care procedures that require a pre-determined appointment. This would mean the consumer would know the price up front prior to office visit, procedure, test, evaluation, rehab, etc...

You cannot have a free market if no ones the costs!!

PaulTDavis
PaulTDavis

So where are the plaintiff attorneys? This sounds like the mother of all class action suits to me!


I am a retired physician and this seems like an example of why the legal profession was created. Is price gouging of such magnitude legal in this country under existing laws?

WannabeCoder
WannabeCoder

I'm very curious as to how Mr. Brill determined Medicare would reimburse Sloan-Kettering $2,123 per treatment for Flebogamma.  According to CMS, current maximum payment limits for the drug are just shy of $35 for 500mg (source: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/Downloads/January2013_ASP_Pricing_File-12-06-2012-.zip, cell D198), and the maximum vial size is 20g.  This would result in a capped Medicare Part B reimbursement of $1,400 per vial - suspiciously close to the doctor's guess as to its cost.

Further, the $1,650 price the other two hospitals quoted is barely under that vial's Wholesale Acquisition Cost, or WAC, of $1,653.20.  WAC acts as the manufacturer's "ceiling" price. Manufacturers sell product at prices exceeding this level only in exceedingly rare circumstances.

The allegation that Grifols is manipulating their reported Average Sales Price to drive product utilization is an extremely serious charge.  Massive fines, jailtime for pricing analysts, managers, and corporate executives found guilty of such a charge would be both expected and welcomed if it were true.  However, it appears that Mr. Brill is the one who has been misreporting the data.  Whether this is due to ignorance or malevolence is uncertain, but neither bodes well for this piece and the periodical that published it.

GJGUSTAS
GJGUSTAS

Unbelievably, The Chargemaster price list is a key tool in keeping nonprofit hospitals tax-exempt under current IRS regulations, which require them to have a primarily charitable function.. Hospital's treat discounts given against the chargemaster prices to Insurers, Medicare , Medicaid and individuals as free care justifying their charitable existence.

Result is that hospitals like UPMC in Pittsburgh, shown in your article as being the most profitable of the nonprofits, being able to brag of their $500 million of free care given, while still generating a surplus of over $500 million.

hag2hag2hag2
hag2hag2hag2

Health care in America remains the only industry in the world which fails to compete capitalistically based on the quality of a product.  Medical, surgical and preventative outcomes are the only products produced by health care.

After 40 years of market and medical failure, America needs to cut out the taxpayer subsidized middle man insurance industry and move to single-payer national health insurance for all Americans with private doctors, hospitals, clinics, therapists and drug companies competing capitalistically based on the quality and pricing of medical, surgical and preventive outcomes.

Goldhar625
Goldhar625

This Article is a great example of the kind of in depth journalism that a 'real' Magazine/Publisher can/should support.  My thanks to Time for making it possible. Every Member of Congress and all the State Legislatures should be required to read this article and take a test on their ability to comprehend its meaning.


We don't need 'single payer' Health Care/Insurance - we need 'SINGLE PRICE' health care and more competition based upon price.  Publishing costs and prices for all Hospitals and Medical practices would be a good beginning.


We, or the IRS, should also look carefully at the so called 'Non-Profit' sector 'Surplus' and salaries.  Is any Hospital or University or other Charity, or Faith Based Organization really 5 to 20 times more complex than a Cabinet Office. If so, they are too big and need to be broken up to get closer to their 'clients'. 

 Any non-profit that can afford to pay its President over $500,000 per year; can afford to pay local property and sales taxes.  IRS needs to set a cap on the salaries paid at any and all '501c3'  organizations.  State Legislatures can do the same for state/local supported Universities and other 'charitable' institutions that can receive tax free donations.

Vunglay
Vunglay

Read this stories that why I want the Universal Healthcare for all at least or I want this country run by Socialist like as some Europe countries

False_Believer
False_Believer

Interesting: the medical establishment really hated it when someone published a recent study suggesting that being slightly overweight was associated with a longer life. The reaction went far beyond scientific disagreement. Some of the comments here suggest another motive: it undermines the lobbyists' "blame the victim" argument for overcharging patients. Follow the money indeed.

BobBu
BobBu

RE: origin of "Chargemaster"   I am a retired surgeon.  In the early 1970s "price fixing" was a major concern.    Physicians were then, and are now, instructed by Medicare that they must have their own independant fee schedule covering all services; those fees cannot, like the Academy's booklet, be discussed with other physicians since that would be "price fixing."  In the late 1980s, early 1990s, management consultants and the word on the street was that a physician should set his/her fee higher than the most generous insurance contract allowed so recoverable charges would be not be lost.  Thus came about the outrageous fee schedules doctors  (like the hospital chargemaster) maintain.  I retired the first time in 1995 in protest. 

Many are complacent.  Insurance companies are intimately involved in setting prices and fees.  Higher charges by providers = more profits for insurance companies.  Physicians are seduced by the high payments the insurance companies pay to keep them quiet.  

madashell
madashell

Where was this type of in depth reporting BEFORE the so called 'Affordable Care Act' ? Seriously, Mr. Brill - this is a great article...informative and in depth for consumption by the public consumer at the bottom of this pyramid, but why just now in Feb. 2013?

KennethOssman
KennethOssman

When getting medical care why can't we bring our own "negotiable" contract with us?  For instance:  I, the patient, will volunatily pay the rates paid by medicare plus a maximum of 10% markup for any proceedure, supplies, drugs or services I receive.

edshapiro
edshapiro

The most depressing thing is that Brill thinks reform will never happen because the lobbies and their respective communities of health care workers (from Hospital CEOS to doctors , nurses, orderlies, maintanence  folks, etc) have an all too human vested interest in stopping it...GREED at our expense. That said, many of these folks are calling into talk shows, etc. in total agreement with Brill .Efforts at reform will be a battle royal. This is the next real battle to reduce health care costs. Obamacare barely touches the surface. I agree with Brill's statement, "The problem boils down to one main thing:The federal government does not regulate the prices that health-care providers can charge."  If there is a polititian out there right, left, or in the middle  that supports what brill has to say and will take a stand, introduce a bill, i will support that person with everything I have.

therealdeal
therealdeal

Perhaps instead of just making comments about pricing, some real research should be done to see the reasons behind the pricing.  So many people think this way, but the truth is no one researches why.  Do you realize the cost of providing 24 hour service.  When you want the hospital there it is great, but you don't want to consider the real issues behind pricing.  As for medicare, they do not even cover the cost of the actual service.  I work for a hosptial the is 50% Medicare and if we had to rely on them alone, we too would be closing our doors like many other hospitals.  Maybe that should be taken into account also.  How many hospitals have closed because they just can't afford to stay open. Is that what you want?  What will happen when you are in a ER situation and need us.  Is is so sickening people like this who just make these kind of statements without really researching the issue.  What kine of journalism is this? 

ajamaldr
ajamaldr

part  b

Marketing of services should be abolished - marketing is a sign of profiting. Have one flat non negotiable price for services - ie create price benchmarks. This wil eliminate third part payers, and business managers (and haggling). CEO and management role should be redefined. Do not use management to manage business aka as revenue generation or to seek revenue opportunities. Hospitals will then grow on a need basis and not competitively and will have to forsake gimmicks and unnecessary equipment purchases to leverage their markets. 90% of equipment is discarded while at 40-50% useful life. One of the biggest gutters where money is wasted and corporate greed of equipment manufacturers gouges out the money. Keep a close eye on disposable equipments - massive wastages there too.

The government needs to take a big stake in generic drug industry and create a trure non profit generic drug industry.

I am a part of an enterprise which is trying to do all the above in Pakistan. www.helpus.pk

ajamaldr
ajamaldr

I am a surgeon and practiced and trained in the US for 13 years before moving back to Pakistan. I am now witness to 2 corrupt healthcare systems and can suggest some remedies.

Healthcare is like firefighting and disaster management - not an industry with business opportunities (ie  people in trouble) but a place where people are taken care of to help them get through their personal calamities. The providers are people who are only in the business of caring and make their livelihood thus. Not a place where infrastructure and usables (drugs and disposables - D and Ds) are sold for profit or built on patient revenues. The infrastructure is created as a collective insurance paid for by the society and government and not by the stricken only.

Non profit should be defined as patient revenues not used for infrastructure, growth and expansion and any surpluses used to create patient endowments, reduce prices or salary raises to the medical workers.

Continued as part B....

greedydoc
greedydoc

I am a radiologist.  Been a radiologist for 2 years.  I've been disgusted by what I've seen since I've been in private practice.  A radiologist is a MD with 5-6 years of training after medical school which is equivalent to most surgical fields and subspecialties (cardiology, orthopedic surgery, etc.)  All radiologists, like most doctors, are mainly in it for the money.  Currently radiologists make 400 to 500K a year.  They used to command 700K a decade ago.  We read MRI's, CT's, PET scans, mammograms, ultrasounds, xrays, and nuclear medicine studies.  The most unethical things about what we do is the volume of studies we read and the speed at which we read studies.  Our number one goal is to crank out as many reports as possible so we can maximize our salary.  We get paid per study.  For example we get $75 for a MRI.  We get $30 for a mammogram.  A radiologist will try to read 40-50 MRI's in a day.  They will try to read 100 mammograms in day.  On saturday call we read over 200 studies.  Because of the speed and overwork the quality goes down and lots of mistakes happen.  I've seen ridiculous life threatening mistakes that a first year resident wouldn't miss but radologists with years of training miss because they are going to fast.  Obvious tumors, perforated bowel, fractures, all missed because going too fast.  Partners cover for each other and don't mention that the mass was their on the prior study.  Does anyone worry that the volume is too high, that it overworks the radiologist, that it is not in the interest of the patient?  No.   Lowering the volume means less of a salary.  And that is the number one motivation.  Maximize salary. Try not to hurt too many people.  Instead of "do no harm."

Surgeons can't go too fast because they will kill someone on the table.  Internists/family doctors need to go fast to maintain their $150K salaries... plus they can always order a scan or send to a subspecialist.  Subspecialists like radiology have no excuse.  They could easily cool it down a bit and make a little less money per radiologist and do a better job, but they refuse.  They want to maximize salary.  It is a prime example of what is wrong with fee for service.  I see and do it everyday

Right now an ethical radiologist who is willing to take a lower salary, who wants to take his time and do higher quality work can not get a job.  No group will hire a guy who reads "slow".   Productivity is constantly monitored.  The group actually likes you more if you read more studies and bring in more money rather than if you read more accurately and give better reads.  God forbid if  a radiologist only made 300K and provided better results for their patients.

Comments?




knoxscoop
knoxscoop

"Time" has  reclaimed its spot as a leader in U.S. journalism

Phenix2011
Phenix2011

@TIMEHealthland @time So disgusted by this system,when will America demand better healthcare !

iqueen
iqueen

I'd vote for Mr. Brill as well...nothing needs change more than our US healthcare system.  Since my son's car accident, I've learned more than I can handle in dealing with this a system that, obviously, cares very little about healing and too much about profit.  In fact, I'm convinced it's more about profit than anything else.  Ex: When my son left hospital ventilator dependent, the hospital said he was 70% dependent upon ventilator.  Yet, when arrived at major rehab facility, was told he was 100% dependent upon ventilator and handled his healthcare accordingly.  Also, they used a different type and system ventilator from the hospital--as did the nursing home he went to upon leaving rehab facility.  Which one of these institutions correctly handled his vent dependency?  How is one to truly know if, and to what extent, one is vent dependent, if there are no laws under which all institutions must comply regarding ventilator care?  I contacted several resources across the country and got no where.  This, along with many other lessons since my son's accident, let me know that healing in this country is no longer an art, nor sacred.  It's all about money. 

TingLiu
TingLiu

I'd vote for Mr. Brill if he could be elected to reform the healthcare system.  

WB
WB

Yep.  That is why I pay cash in Europe for medical treatment

michelle.newkirk
michelle.newkirk

Check out Rick Simpson's "Run from the Cure" on You Tube.  

GailZahtz
GailZahtz

@toughLoveforx I saw the original article, had not seen this after article feedback- interesting they used a G+ hangout.

YVRView
YVRView

B. Congratulations "Time Management" and thanks for the courage to publish Steven Brill's analysis. Brill hit "bull's eye" by analyzing "Why exactly the medical bills are so high" in the first place. When the "Affordable Care Act" was being debated (Sept - Dec 2009), I submitted a shorter summary article, "Health Care Reform - Is Real Issue Being Addressed?" to various publications and politicians (including congressional leaders and the President). This article (reproduced as Part A and Part B in two comments because of size) identified medical industry's enormous-profit-mentality as the root cause for the high cost of medical care (and not the Insurance Companies), and offered some possible solutions.

Health Care Reform – Is Real Issue being addressed? Part B (see another comment for part A)

 What Next for Insurers 

How can the failed system of present day insurers be moved out of the way of real reform? Can this costly and limited-value-added function be eliminated? For the short term, it could be challenged to perform better with respect to elements within insurers sphere of control. A public option could be a catalyst for this purpose.

But in the long term this third party system of insurers (private or public) should be eliminated. This cannot be done overnight, and not without implementing effective measures to reduce and control service providers’ charges. It is hard to imagine life without medical insurance. What will be the sources of making a living for thousands now employed by the insurance companies? And of course what assurances there are that the service providers will get their act together and earnestly keep charges from explosive runaway rates of increases. Such changes can be managed with strong will power and through strategic implementation of short term and long term plans including redeployment of insurance companies’ employees. 

 Some Root Causes and Possible Solutions 

Now let us understand the reasons for medical professionals’ high charges? Basically, it includes rationing of medical care professionals, high profitability focus as opposed to service to fellow human beings and national interest. Use of enormous-profit-mentality from physical well being of citizens continue to weaken the national economics by its heavy burdens on every other business sector, eroding productive jobs away to other countries, and by siphoning off from individual incomes and savings needed for basic survival. AMA code of medical ethics has general guidelines for excessive fee, but these are not sufficient for keeping charges from causing financial discomfort to patient. Shortage of medical personnel keeps compensation at unreasonably high levels. Health care reform can help increase / expand medical educational institutions to allow increased supply of medical professionals with significantly reduced out of pocket expenses for students. This should help reduce the desire to charge unreasonably high, which normally is driven by desire to recover the high out-of-pocket investment in education. Professional medical societies, such as AMA, must promote focus away from controlling down the number of graduates to holding up quality of educational standards without choking-up supply of professionals, and provide better guidelines for service charges for helping to cure physical ailments in balance with financial burden on society. Various other concepts are worth considering by medical community for incorporating in the medical education and training, such as preventive care, alternate medicine and integrated medicine etc.

Next, the problem of high charges by hospitals and medical facilities has its own set of root causes. But the underlying core elements are high profitability and high costs. These facilities are run as big corporate businesses competing with each other. While competition helps in keeping charges down and quality up, it also burdens communities with associated enormous costs of redundant resources (floor space, equipment and medical and support staff, etc.) among hospitals / medical facilities. The delicate balance between healthy competition and elimination of costly redundancies should be targeted by consortium of community leaders and heads of hospitals / medical facilities.

The high costs of pharmaceutical drugs are again associated with greed for high profitability ($ 35 billion in 2008). While profitability is also an incentive for research and development for new drugs to cure unsolved illnesses, it also can result in a high cost burden on society if not balanced with sufficient competition. Like any other industry, global competition with implementation of strict safety requirements will help address this area.

There are many other costly peripheral issues that should be addressed by a comprehensive health care reform: Practice of defensive and/or incompetence driven excessive medical tests, malpractice insurance (another costly non-value added function), and frivolous lawsuits, etc. The first two are associated with medical professionals getting their act together by diligent practice of medicine and avoiding negligence).

Attempting a complete overhaul all issues at once runs a very high risk of chaos. Well thought out plans executed over a reasonable time period (two to three years) using short term and long-term corrective actions as needed, could achieve needed results. A strong national will power to address the ailing health care system appears to be in motion. We need to keep eyes on the ball, not get distracted by distortions and peripheral issues and stay focused on the real issue and associated root causes for meaningful reform and incorporate preventive measures for future deterioration.

Submitted by: Yudh Vir Rajput                                                                                          Dec. 12, 2009


YVRView
YVRView

A. Congratulations "Time Management" and thanks for the courage to publish Steven Brill's analysis. Brill hit "bull's eye" by analyzing "Why exactly the medical bills are so high" in the first place. When the "Affordable Care Act" was being debated (Sept - Dec 2009), I submitted a shorter summary article, "Health Care Reform - Is Real Issue Being Addressed?" to various publications and politicians (including congressional leaders and the President). This article (reproduced as Part A and Part B in two comments because of size) identified medical industry's enormous-profit-mentality as the root cause for the high cost of medical care (and not the Insurance Companies), and offered some possible solutions.

Health Care Reform – Is Real Issue being addressed? Part A (see another comment for part B)

By: Yudh Vir Rajput 

The Real Issue

The real issue is the runaway cost of health care. Therefore the primary objective is to reduce the cost (including its high escalation rate) without compromising quality of health care. The major cost elements are service charges by medical care providers (doctors, hospitals and test labs), pharmaceutical drug manufacturers and medical insurance organizations. Addressing the root causes of all out of control cost elements, without getting bogged down by peripheral issues, needs be done.

Distraction and Confusion

But the national debate continues to get stalled on the subject of insurance providers – pros and cons of private vs. public.The insurance topic has become such a distraction that the real issue continues to escape the attention lest finding solution for it. It has been highly challenging to focus on the real problems with the health care system because of the confusion due to diversion related to insurers survival concerns. Some of these are driven by motives for political and financial gains, where calling the “public option” government takeover of health care system to confuse the citizens is fair game. On the other hand, it is hard to understand why private insurers are afraid of possible extinction (claiming potentially unfair competition) since public option is being proposed for some 35 to 46 million currently uninsured, which are not their customers to start with and can’t afford private insurance rates. Nevertheless, the national attention is diverted to survival of private insurers and away from solving the high cost of medical care.

Failure of Insurers to Reduce Cost: From a broader perspective of high health care costs, it is easy to see that the insurance provider, private or public, is a third party between the user of medical service (patient) and the medical service and drug providers. Is there really a need for this third party, for general health care issues other than catastrophic problems? Let us examine this. Generally, insurances are needed for catastrophic incidents to cover against potential high losses. Homeowners insurance, automobile insurance and life insurance are some examples of potential high losses.  One does not need to insure for routine house or automobile repair, and other life issues. It will be hard to find any other service sector where almost every single revenue item is processed through insurance program. Why then such need for health care? The answer is, “ the charges for general (routine) health care are too high”. And since the health care service providers failed to manage the escalation of service charges, there entered the third party, the health care insurance companies, promising to manage the risk for consumer. Insurance companies manage the risk by taking premiums (wealth) from enrollees and paying off (redistributing money/wealth) for those who actually use the medical services. Of course, to do so the insurance providers have to cover administrative charges and generate profit to the satisfaction of their stockholders. Profits alone, in 2008, were about $ 11 billion. But insurance companies have no authority or leverage to reduce charges for medical services. They can’t increase competition for medical services or increase supply of medical service providers, nor do they provide other incentives, such as scholarships for medical students or research grants etc, to encourage health services at lower cost. They can only negotiate the rate or charges for specific services based upon business volume they claim they can generate for the providers. As far as rate negotiation is concerned, an interesting game is played. The service providers show arbitrarily inflated retail charges and offer a wholesale discount rate to the insurance company. One can see this from a typical Explanation of Benefit. It will be interesting to know what percent of service providers’ revenue is due to retail customers. Chances are that such retail paying customers are non-existent, since retail paying customers, generally, can’t afford insurance premiums in the first place let alone pay retail charges. Thus almost 100% of service providers’ revenue is from discounted rates, the retail charges provide the illusion of bargained discounted rate. Unfortunately, both, the service providers and the insurance companies, continue to raise their respective charges and fail to control cost. Furthermore, to increase profitability, the insurance companies started dropping off high-risk individuals or denying insurance coverage for certain tests/services and pre-existing conditions, etc. Such acts, added to ever (steeply) increasing premiums, have led to widespread outcries of unfairness. Thus the focus shifted to the new villain, insurance companies from the real culprit, the medical care providers. The insurance companies, fearful of punishment or potential loss of revenue, launched counterattacks through lobbyists, ad campaigns, etc. Of course other opportunists, some politicians and talk show hosts, etc. those with least interest in solving the problem, got into the act to create mass confusion by using misrepresentation and distortion of facts and outright lies. The root cause of the primary problem, the perpetrators of exponentially increasing charges for medical care, stays masked under the dense web of confusion. If, in the first place, the so called discounted rate or (fair charges) was effectively managed and charged by the service providers directly from all patients (with or without insurance), it will be clear that the third party, the insurance companies, has a non-productive and non-value-added function with added cost. Furthermore, the third party causes further disconnect between the provider and user in understanding actual cost of services. The bottom line is, the insurance companies are powerless and ineffective in controlling cost, instead they, like any other business pass on the cost increases to the consumer.

Submitted by: Yudh Vir Rajput                                                                                                       Dec. 12, 2009

Canongate
Canongate

“Bitter Pill” did a great deal to explain why we see those unbelievable “chargemaster” prices replaced by “negotiated rates” on our insurance billing records. It leaves the question: Why does “free market” competition not work in the healthcare industry? The answer is actually there in the idea that Capitol Hill has subverted “free market” competition in this industry, undoubtly as a result of the massive lobbying money expended to achieve that result. Adding lobbying and spending in our war-making industry (euphemistically called “Defense Spending”), a trillion dollar a year deficit, sixteen trillion dollars of debt, and ninety trillion dollars in unfunded entitlement programs, our Congress and the last couple of Administrations from both parties have achieved a level of damage to the United States of America that none of our enemies over the last century could even comprehend.

PattyMurray
PattyMurray

Thank you so much for this article. The main street guy gets to pay for it. You are a saint for doing this, Steve Brill.

 Did you know when you are self-employed you can deduct 100% of your health insurance premiums? FREE health insurance. That really irked me; when I found out that all of my brothers did not have to pay for health insurance.

DennisStGermain
DennisStGermain

soooooo............I guess it ain't those big bad insurance companies after all...........gee what a surprise......

michael7177
michael7177

This Time Magazine cover story confirms everything I've written about the healthcare industry in the past. Like this:

A local hospital has award display in their cafeteria on reducing bed sores. The hospital has huge award displays throughout the hospital. Imagine what kind of detached person would put a 10' x15' exhibit displaying bedsore statistical graphs in the cafeteria. Creative people who haven't prostituted themselves would never dream of this juxtaposition.

I learned Merck Pharmaceutical has 20k in their budget for making up a campaign for themselves to say they have won a award of distinction. They basically have an outside firm create an award category and they buy back into it.

It's money laundering.

I work in advertising. I can tell from listening to you or reading what you write whether you're being manipulated by primitive mammalian or reptilian impulses. When you are, you're very likely to have your wallet emptied.

That's what we see in healthcare when statistics show double the costs since 1980 and and a higher mortality rate. If you want to see second hand the extent of the moral crimes that profit extraction can exact without getting sick and finding out first hand, just look at the amount of frivolous advertising.

Public advertising, for sure, should be eliminated from health care. When's the last time you heard someone say take to me that hospital with the great TV commercials and excellent billboards?

The opposite argument, "No, that doesn't happen in an ambulance (although sometimes it does in major markets like New York), but it actually happens all the time in non-emergency care.

In order to compete, hospitals develop specialties, like cancer or pediatric care, and advertise directly to consumers. Then when someone develops cancer or their child gets sick the hospital already has a reputation in their mind."

My response? So what, hospitals specialize. This is the same in Europe and the emergency responders know where to take them without the wasted advertising expense. Public advertising is both overkill and a clear sign that executives would rather glamorize their work-day spending money in the media. I saw this happen when television news cut their coverage domestically and with bureaus overseas. Instead they did branding makeovers every season. It was a way for executives to build their own portfolio rather than cover the news. Cronkite talked about this loss of quality often and when he died we heard this reiterated.

My first inkling came decades ago when my relative talked about how they went on a trip to Disneyland where the entire park was open only to their group as a reward for her husband's sales in pharmaceuticals.

Another example is my former co-workers wife, also in pharmaceutical sales. I lived and worked at their gated house for three months. She works about 4 days a week and makes six figures. She books four star hotels on the San Diego waterfront to entertain doctors who might specify the drugs she represents.

These are health care dollars being squandered rather than used to treat illness. Doctors and pharmaceutical sales people seem to think they are entitled or just accept this scenario without question.

Most of these people think of themselves as honest and hard-working. To put a number on it, I think making an income up to 50k is legitimate. Beyond that, I see them as just grasping at opportunity that sits downstream from fraud. So what can they do without losing their job in the healthcare industry? Perhaps they can blow the whistle anonymously by writing about similar examples and distributing those stories on the web. Healthcare Head of Corp Communications & Chief Spokesman at Cigna, Wendell Potter spoke out. Not everyone is in a position to blow the whistle or has the courage Wendell Potter has. Google: Wendell Potter Speaks Out Against Health Care Industry.

I was warned to back off by a friend and former retired hospital CEO for a well known hospital group in another state. He told me there are people in healthcare that would hire someone to actually kill me if I kept this up.

elldee
elldee

I do not dispute the information about the charges to various patients or the experiences that are being reported. There is more that needs to be said about the cost of care and how people are charged for and pay for it. I can speak to the issue as a healthcare employee.

 Most hospitals are not making any profit at all. The payments from Medicare, Medicaid and insurance companies do not cover the cost of the care patients are receiving. While bills are presented to patients, in non-profit and public hospitals the charges are negotiated and adjusted to the patient's ability to pay. And there is charity care . . . where I work 10% of our $750M budget last year covered the cost of care for patients who could not pay.

The regulatory changes require electronic medical records. This expensive technology has been paid for by hospitals with no grants and no borrowed funds. About $70M over 3 years were the cost to my employer. Those funds might otherwise have been invested in new equipment, renovation of facilities or training for our staff. Instead, we have laid off staff and across the board pay increases have been 2% for several years. 

This is a multidimensional issue in which there are many victims. Please don't accuse your local hospital or the physicians who care for you of overcharging you or greed. That is hardly the case.

elizablest
elizablest

I have medicare, and because of my low income and no other sources of income, I have medicaid. My chemotherapy pills are completely covered at the rate of $4,000 a month. That's forty eight thousand dollars a year. Given that I need to take them for the next twenty years that's a lot of money bleeding the economy. Every time I pop that daily pill, I ask myself if I am worth it. 

CBMcKnight
CBMcKnight

The Article by Steven Brill, " Why Medical Bills Are Killing Us", was indeed shocking, yet not surprising, especially after having an ER experience 2 days after Christmas. Short story, I left the ER with a bill amount of $7,715.04, (after a self-pay contractual discount of $4,474.72) 1,143.00 for the ER Dept Visit DR & ECG Routine ECG, a CT ABD & Pelvis/W/Contrast for 305.00 & a Pathology service Provider bill for 101.41. I spent 12 hours in ER mainly because there was only one  doctor on staff (we had a severe snow storm), I was told by the nurse, that only one doctor was attending.

For the first time in my life, in 2010,  I am without health insurance, I turn 65 in April, when Medicare kicks in. Reading the salaries of top executives & outrageous profits in this article, demands change; it is past time to slay the GIANTS, not just in the healthcare industry, but all throughout our government.  

CB McKnight

CerebralSmartie
CerebralSmartie

"They are powerless buyers in a sellers’ market where the only consistent fact is the profit of the sellers."

The timing of this article is uncanny .Someone we know is reading this article on  the plane today-flying across the USA, to seek superior and ungodly priced medical consultation for a rare medical challenge...For all the people in that same position, Steven Brill, we thank you for this article and your call for reform. Your plea could not happen at a more fortuitous time.

KenLiedtke
KenLiedtke

If you have Health Insurance ask the Pharmacy how much the total cost of the prescription is and they say they cannot tell you, so there is no way to shop for the best price that way. However, once i purchased the same expensive name brand prescription from different pharmacies i learned that the cost varied by hundreds of dollars annually and the Health Insurance Company's Mail order pharmacy was not the cheapest. Bottom line the health insurance industry is not attempting to save American's hard earned income, they are in business with pharmaceutical manufactures to rip us off with higher premiums. (FYI some generic meds do not have effective time release or consistent levels of active medication, talk to your Dr.)

1058
1058

Thanks for pointing out the racism and misogyny in health care Mr Brill. Doctors used to be in charge, no more, now that the vast majority are Asian and minority. A 35 year old Caucasian CEO without medical background trumps the 50 year old Asian/minority doctor in terms of power in the hospital at any time. CEOS promote older nurses to administration but not older female doctors. Thats the real problem. No different from the problem in Ivy Laague admissions. http://www.nytimes.com/2012/12/25/opinion/brooks-t...
Until America once more becomes the land of true opportunity for its hardworking immigrants and women, the power and wealth will continue to shift to the East and Latin America.