OCPA column: Medicaid won't reduce inflated hospital bills

Medicaid won’t reduce inflated hospital bills

By Jonathan Small

Most of us have heard of someone who received a wildly implausible bill from a hospital. Among the examples compiled by the website, thehealthy.com, were hospitals that charged $15 per Tylenol tablet, $8 for a “mucus recovery system” (better known as a box of tissues), $53 per non-sterile pair of gloves, $10 for the little plastic cup that holds a patient’s pills, and $23 per alcohol swab.

The retail cost of a Tylenol tablet runs less than 30 cents, meaning the $15 price is a markup of more than 5000 percent. If hospitals are overcharging that much on small items, one wonders how much the markup is on the big-ticket items.

Those prices are the result of a medical system with no price transparency and, therefore, little direct competition. And the lack of transparency leads to “surprise” medical bills that people struggle to pay, and then to lawsuits.

Oklahoma Watch recently reported that Oklahoma hospitals have filed at least 22,250 lawsuits against former patients over unpaid medical bills since 2016.

How did some hospital officials’ respond to that report? Just expand Medicaid.

But experts familiar with the lawsuit issue note that many people being sued are already insured, including some on Medicaid. This problem isn’t caused by lack of coverage; it’s caused by a lack of transparency. Even for routine procedures, it is extremely difficult to get an up-front estimate, and hidden costs are the norm.

However, where price transparency exists at places like the Surgery Center of Oklahoma, it demonstrates conclusively that many other hospitals are dramatically overcharging patients. Comparisons have shown the Surgery Center’s prices are often one-sixth to one-eighth the amount charged elsewhere.

So why is it that the facilities charging the far-higher prices are the ones claiming to be on the verge of insolvency, and not the Surgery Center? One answer is that many of the figures touted by supposedly “broke” hospitals are as bogus as a $15 aspirin pill. Martin Makary, a professor of surgery with the Johns Hopkins University School of Medicine, recently noted that one hospital was caught charging $70,000 for a hip replacement when the commercial reference-based price was $29,000 and the Medicare-allowable amount was $20,000. That means that hospital could claim to have provided $30,000 in “uncompensated” care if it collected “just” $40,000 on a hip replacement, even though that price may represent $10,000 to $20,000 in pure profit.

Expanding Medicaid won’t suddenly cause hospitals to stop inflating bills. In fact, knowing that taxpayers are on the hook may encourage some providers to further boost their charges, and patients will continue to be sued.

If policymakers are serious about reducing health costs and protecting consumers, they need to focus on increasing up-front price transparency and competition in medicine, not expanding government welfare.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.