Beating the Chargemonster: Thoughts on Steven Brill’s Brilliant Assessment of the Health System

Have you read Steven Brill’s brilliant exposé “Why Medical Bills Are Killing Us?” that appeared in last week’s Time magazine? Brill shines a particularly harsh light on the modus operandi of hospitals (those con artists). The article is an eye-opener and I urge you to read the whole thing (link to the article is at the end of this blog). Brill’s article could save you a lot of money. It could save you your house. Or your life. I want to share a few crucial things from Brill’s article that made me shout.

One of the most important things that Brill discussed is the way that hospitals calculate patient fees. Hospitals use an enormous computer-operated system called the chargemaster, which sets the costs for everything from doctor services to gauze pads. Apparently no one in the health industry has a clue how the chargemaster actually works or even exactly what it is. I think of it as an extra-terrestrial beast that lives in a giant computer and absconds with the life’s savings of 70% of the American middle class. I have renamed it in my head the “chargemonster.” Hospitals feed like leeches off patients by over-ordering tests, such as X-rays, blood and urine work, CT Scans, MRIs, etc. Doctors order these like crazy all day every day for patients during their stay in the hospital and they also over-order them for patients receiving outpatient care and ER services. Brill mentions a person who was charged more than $4,000 per day for blood tests during his hospital stay. That $4,000 was calculated by the chargemaster. The chargemaster puts a price on everything a patient uses or accesses while in the hospital. For instance, the chargemaster at Seton Medical Center in Daly City, California charges diabetic patients $18 each for blood sugar test strips when a box of 50 test strips costs less than $30 at the pharmacy. Hospitals charge patients (at arbitrary overblown chargemaster rates) the purchase price for gowns worn by the operating room staff, even though these gowns are laundered and reused. Beware:  the chargemaster is likely to charge you $5 for one ibuprofen.

Brill explains that a hospital bill is simply a starting point for negotiation, and most people don’t realize this. The bill is based on the crazy chargemaster rates. Insurance companies negotiate with hospitals about what they will actually pay based on real costs for things; and hospitals compromise. Medicare negotiates best of all because (after researching the real price) they have the ability to state the real cost and then tell the hospital that’s what they will pay. Medicare pays much less than the chargemaster rates for everything, except for pharmaceuticals, because federal law prohibits Medicare from negotiating the cost of drugs (and that’s a problem that needs to be fixed, according to Brill). Ordinary people can also negotiate. I have always done this. I call a health care provider when I get the bill for my portion of the cost after the insurance has paid their portion. I say that I have to pay this out of pocket and I ask if they can reduce it. Usually they do. And if it’s for more than $100, I set up a payment plan because they don’t charge interest so it’s cheaper for me to make payments directly to the health care provider than to my credit card. Just last year I negotiated an emergency room bill down by $1,200 and negotiated the separate doctor bill down by $600. Brill reveals in his article that people with seriously outrageous hospital bills are now hiring “medical billing advocates” at $100/hour to bargain their bills down. Wow, I could probably start a new career as a medical billing advocate. This whole scenario reminds me of that Monty Python routine where the merchant has a fit because the buyer hands him money while the merchant wants to bargain. “No, no, no, you’re supposed to haggle,” the merchant tells the buyer, refusing the money.

Maybe the most important part of Brill’s article is when he talks about the fact that hospitals don’t lose money on Medicare patients. Jonathan Blum, deputy administrator of the Centers for Medicare and Medicaid Services, provides proof that hospitals make enough money to cover the cost of serving Medicare patients (in fact they make a profit) and he says that hospitals actively recruit Medicare patients. Blum says that if you doubt him, you should drive through central Florida and notice how many hospitals post ads on billboards in their effort to recruit more Medicare patients. So Brill suggests, if this is the case, why not extend Medicare to everyone and pay for it all by charging people under 65 equivalent premiums to what they would pay to private insurance companies? (Duh, ya think?) Brill lays out a compelling argument for the single-payer approach to health care, which is used by most developed countries. How long do I have to wait for people to stop watching Fox News long enough to read Brill’s article and evolve a basic ability to comprehend how the health system works (or doesn’t) so they quit freaking out over the perceived “socialism” of a single-payer system? Argh.

Get this:  there are nearly 3,000 nonprofit hospitals in the country and they don’t pay taxes. They are making money hand over fist while sending patients to financial ruin. What do they do with their profits? They pay their upper echelon executives and administrators obscene salaries, they buy more equipment, they build more buildings for their medical complex, they buy rival hospitals (to create a regional monopoly on services), and more. When the New York Times ran a story about how a federal deficit deal could reduce hospital payments, Steven Sayfer (chief executive of a nonprofit medical center) angrily told the media that reductions in hospital payments would result in reductions in services to patients. Sayfer earns $4,065,000 a year, his CFO earns $3,243,000, his executive VP earns $2,220,000, and the head of his dental services earns $1,798,000. I would say that they could make up the difference in any reductions in hospital payments by scaling back some of their administrative costs, wouldn’t you? For a nonprofit, Sayfer’s hospital is making an awful lot of profit.

It really pissed me off to read about nonprofit hospitals asking for charity. They hold fancy fundraisers and mount direct mail campaigns to solicit donations. But actually, the amount of income these nonprofit hospitals make from charitable donations is less than 1% of their income. They go begging because they can make money at it and because they like to maintain their image as charitable organizations. Furthermore, hospitals boast about how much charitable care they provide (and talk about how federal hand-outs to hospitals will impact this charitable work), but the actual dollar amounts they come up with for their charity work are far beyond what it really costs them to provide services for free to impoverished individuals because they use the inflated chargemaster prices to calculate how much charity they provide. While in truth, the actual cost to them of serving charity patients is a fraction of what they say it is. A hospital lobbyist in Washington recently declared that hospitals provided nearly $40 million in charitable care for the poor last year. But the actual cost of that care was more like $5 million when recalculated at real costs (by Medicare) as opposed to chargemaster-calculated costs.

I could go on, but this blog post is getting long. Brill offers his suggestions for beginning to fix the broken system, and they are very, very good suggestions. My favorite is extending Medicare to everyone in a single-payer system. But check out his article to see what he says. Here is the link to the full articleonline. It’s long. Take your time. I predict that this will be considered the most important piece of journalism this year. Brill should win a Pulitzer for it.

Heavy blog this week. Here's some bonus material. This will give you a laugh!

The Washington Post's Mensa Invitational once again invited readers to take any word from the dictionary, alter it by adding, subtracting, or changing one letter, and supply a new definition. 
Here are the winners: 
1. Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period of time.
2. Ignoranus: A person who's both stupid and an asshole.
3. Intaxication: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.
4. Reintarnation: Coming back to life as a hillbilly.
5. Bozone ( n.): The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future.
6. Giraffiti: Vandalism spray-painted very, very high
7. Sarchasm: The gulf between the author of sarcastic wit and the person who doesn't get it.
8. Inoculatte: To take coffee intravenously when you are running late.
9. Osteopornosis: A degenerate disease. (This one got extra credit.)
10. Karmageddon: It's like, when everybody is sending off all these really bad vibes, right? And then, like, the Earth explodes and it's like, a serious bummer.
11. Decafalon (n.): The grueling event of getting through the day consuming only things that are good for you.
12. Glibido: All talk and no action.
13. Dopeler Effect: The tendency of stupid ideas to seem smarter when they come at you rapidly.
14. Arachnoleptic Fit (n.): The frantic dance performed just after you've accidentally walked through a spider web.
15. Beelzebug (n.): Satan in the form of a mosquito, that gets into your bedroom at three in the morning and cannot be cast out.
16. Caterpallor ( n.): The color you turn after finding half a worm in the fruit you're eating.