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For the first time, the government has released data confirming what health care consumers have long suspected: from joint replacements to treatment for chest pain, hospitals charge shockingly different fees for the same medical services. Kojo finds out what’s behind these fee discrepancies and what this data means for consumers as they face new decisions about health plans and medical care under provisions of the Affordable Care Act.
- Jonathan Blum Deputy Administrator and Director for the Center of Medicare, Centers for Medicare & Medicaid Services
- Sarah Kliff Reporter, The Washington Post
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, Davy Crockett, myth meets reality with author Bob Thompson. But first, if you wake up tomorrow with chest pain, chances are you're not going to comparison shop for the lowest price hospital before you go in for treatment. In fact, most of us probably don't track how much hospital care costs. We pay our deductibles and let insurance take care of the rest.
MR. KOJO NNAMDIBut according to a trove of data released by the government yesterday, the fees for treating a heart attack at one hospital can vary by tens of thousands from a hospital just down the street. This unprecedented release of data sheds light on the once secret and wildly varied system of fees hospitals charge for care. But does a more expensive hospital equal higher quality care? What should a medical procedure really cost? And what does more transparency in hospital pricing mean for consumers and insurers, as the Affordable Care Act goes into full swing in 2014?
MR. KOJO NNAMDIJoining us in studio to discuss this is Sarah Kliff. She's a reporter for the Washington Post who covers health policy for the paper. Sarah Kliff, thank you for joining us.
MS. SARAH KLIFFYeah, thank you.
NNAMDIAnd joining us by phone is Jonathan Blum. He's the deputy administrator and director of the Center of Medicare at the Centers for Medicare and Medicaid Services. Jonathan Blum, thank you for joining us.
MR. JONATHAN BLUMHi, how are you? Thank you very much.
NNAMDII'll start with you, Jonathan. The data released by your department yesterday seems like a big step toward demystifying what medical care really costs in this country. What kinds of changes do you hope will come out of making this information public?
BLUMWell, we have two policy goals. The first goal is to help those patients who are uninsured that have to pay these sticker prices to better understand and better navigate a very complicated health care market. Our second goal, quite frankly, is to put more spotlight on a kind of market that doesn't appear to be transparent, doesn't appear to be rational. And by putting the data out for public consumption we're hoping that more conversation can be had, more data work can be done by the public, by researchers, by the press to help us understand why hospital charges vary so dramatically across the country, but within a given geographic area.
NNAMDIYou can join this conversation by calling 800-433-8850. Do you pay attention to how much it costs overall when you go to the hospital regardless of what you actually pay? 800-433-8850 or you can send email to email@example.com. Jonathan, how could the public availability of this data change the way Medicare and Medicaid do business with medical providers?
BLUMWell, our payments by the Medicare program aren't based upon these charges. Charge data is really the sticker price. And the Medicare program uses a much different methodology to establish its payment rates. We've also posted the average Medicare payment for these procedures so folks can compare and contrast. As you can see, the Medicare program pays substantially less than these charges. And I think it raises the question, why are hospitals charging so much than what appears to be the average cost for that care?
BLUMThere's clearly something happening that's causing these charges to be significantly higher than what the Medicare program pays than what appears to be the cost of care. And we're trying to understand what is driving these charges to be so much higher than what congress has deemed to be appropriate for the Medicare program.
NNAMDIThe number again, 800-433-8850. Jonathan, just for purposes of clarification, I think what we're talking about here is what people actually pay their -- what hospitals and -- we're not talking about what people actually pay. What we're talking about is what hospitals charge Medicare and Medicaid, correct?
BLUMWell, the data that we made public yesterday is the charges that a hospital would charge to a patient that doesn't have insurance.
BLUMSo for the patient that's walking into a hospital without Medicare, without insurance, these were the prices that could be charged for those individuals. And what our data shows is that for the uninsured patient, the cash-paying patient for a heart procedure or a hip replacement, they could be charged substantially more than what the Medicare program pays, then what private insurance pays. And it appears to be a market that's not based upon the cost of care. And the question we're trying to understand is, why is the patient who's uninsured being charged for care that is substantially higher than what the Medicare program would pay for that same care.
NNAMDISarah, from limb replacements to join replacements, this data showed huge discrepancies in the cost of medical care in our area. For example, here in Washington, D.C. the use of a ventilator at George Washington University Hospital cost $115,000, while that same service was about half that at Providence Hospital, which is just a few miles away. What explains these wild price differences, both locally and nationwide?
KLIFFRight. One of the most striking things about this dataset is that you can literally have hospitals on the same street that vary in thousands and tens of thousands of dollars in what they're charging. And try and understand why there are such big changes. A lot of it comes down to, as you mentioned at the start of this show, that a lot of us aren't paying our own health care bills, that our insurance companies or Medicare or Medicaid typically negotiate a lower rate for us. And, you know, most of us aren't even paying that entire lower rate. We're paying some co-insurance or a co-pay.
KLIFFSo a lot of it has to do with the fact that most of us aren't paying for our health insurance, so we're not really seeing those prices. We don't see the wild variations when we turn up at the doctor.
NNAMDIJonathan, Medicare has -- and Medicaid have standard payment structures for specific medical treatments. Is that what the hospitals charge Medicare, or do they charge Medicare more even though they know they can only get the limited amount that the Medicare system determines?
BLUMWell, the practice, as we understand, is the hospitals set their charge masters. There's a list of the prices that a cash-paying patient would pay. The Medicare program works very differently. We set a schedule and we determine what the payment rate should be. So hospitals don't charge us their charges. They receive payment that's established by the Medicare program. And so, in general, hospitals receive the same payment for the same service throughout the country. There's various factors to reflect higher costs of living, but they in no way reflect the wide variation that's shown in this data for the cash-paying patient.
BLUMSo the Medicare program works very differently. We set a fee schedule. We determine what the payment rate is based upon the laws that are set by the congress. And this charge data really has no influence to our payments. And what we are trying to foster is a public conversation, why the cash-paying patient is charged substantially more than what the Medicare program would pay for that same service.
NNAMDILet us assume for one second, Sarah, that these charges that Medicare applies to these services have some relationship to the actual cost of the services. What do hospitals do when they can't get that kind of money from Medicare? Do they eat the cost? Do they somehow pass it on to uninsured patients? What happens?
KLIFFThere's a bit of a debate about this in health policy literature, but generally there's an idea of cost shifting that if Medicare is paying a rate that hospitals believe doesn't cover their costs that it'll drive up insurance rates for the privately insured who tend to pay a higher rate to the hospital. So it's a bit of -- cost shifting, you know, it is a little bit debated in health care literature, but you generally do see private insurance companies, and especially the uninsured, paying higher rates than Medicare or Medicaid typically does.
NNAMDIJonathan, can we make any assumptions at all from this data about what doctors in the hospitals are getting for their services, whether or not they're being short-changed for their services?
BLUMNo, I don't believe so. I mean, what we're told is -- and what we know is very few patients are charged these amounts that was published yesterday. So if you have public insurance like Medicare, Medicaid, the payment rate is substantially different. If you have private insurance, private insurers don't base their payments to hospitals based upon this charge data. But if you're uninsured or under-insured, this is going to be the charges that you're potentially subject to.
BLUMSo this data, to me, has no relationship to what the overall income per hospital represents. It has no relationship to what the cost of care is for all their patients. And we were tremendously surprised by the extent of the variation that does not appear to be related to the cost of care, to the income the hospital receives -- the total income the hospital receives or even the quality of the care.
NNAMDIJonathan Blum is the deputy administrator and director for the Center of Medicare at the Centers for Medicare and Medicaid Services. He joins us by phone. In our studio is Sarah Kliff. She's a reporter for the Washington Post who covers health policy for the newspaper. You can call us at 800-433-8850. Do you think that the price of medical care reflects the quality of that care, 800-433-8850? Or you can send email to firstname.lastname@example.org or send us a Tweet at kojoshow.
NNAMDIBefore we go to the phones, Sarah Kliff, one exception to this pricing puzzle seems to be the state of Maryland, which has a unique system for hospital charges. What makes Maryland's system different?
KLIFFSo Maryland, ever since the 1970s, has set the rates that their hospitals are allowed to charge. And they have to be the same for Medicare, for Medicaid, for all the private insurance companies. So you tend to see way less variation in their costs. This is the only state that does this right now. There are a few others that used to have similar laws but repealed them. And what you end up seeing in Maryland is really very little variation in cost. They tend to have some of the low -- actually the lowest charges for each of the 100 procedures in this dataset. Maryland has the lowest charges submitted to the Medicare system.
NNAMDIWell, I'll ask you the same question I put to members of the audience. Does this data tell us anything about whether the more expensive hospitals are giving better quality care?
KLIFFIt doesn't. And one of the things researchers might look at in the future, or even, you know, newspapers is paring this cost data with a lot of the quality metrics that area publicly available. What we know right now is there isn't really a strong relationship between cost and quality that we don't see, you know, much. Like if you're buying a car, or if you're buying a house you can expect the better thing to also be more expensive. It's not really true in medicine. We don't see that kind of relationship.
NNAMDIHere now is David in Snow Hill, Md. David, you're on the air. Go ahead, please.
DAVIDWell, it's interesting to me you would mention Maryland, but first I want to remind everyone that -- and I'm no fan of the medical business -- but you have to understand that this -- they are not angels of mercy providing you with lifesaving measures and then begging for a pittance. They are a business. In order to make money they sell medicine. That's their primary goal is to make money. It's not to sell medicine.
NNAMDIOkay. But we're still trying to find out why they sell that medicine at different prices to different people.
DAVIDWell, the other point I wanted to make is 11 years ago -- 13 years ago now, I had to have an emergency pacemaker put in. That cost me $40,000 and I was uninsured. Five years later it was recalled. I had to go to the same hospital and have the same procedure done. And they charged -- (word?) Technologies who provided the pacemaker $4,000. Now why we would they charge me $40,000 when they knew I was uninsured and they would charge a multinational corporation $4,000? Because I have no representation. I have no power to negotiate.
DAVIDThe price is the price.
NNAMDIYou answered it because I couldn't answer that question, David. Thank you very much for your call. You too can call us. If the lines are busy, shoot us an email to email@example.com. Would you be willing to comparison shop for medical services if you could see their actual costs? Diane in Laurel, Md. feels she may have an answer here. Diane, you're turn.
DIANEThank you, Kojo. I don't know that I have the answer but one of the things that I have noticed over the years since I've lived in Maryland was a lot of the -- to give you an example, a lot of the contractors that provide services to the various counties, they will charge someone a higher price for the same service say in Montgomery County as they would versus Prince George's County. And it seems to me that the medical profession is doing kind of, sort of the same thing (unintelligible) ...
NNAMDIYou're thinking it might be market-driven?
DIANEYeah, yeah, because I've gotten, over the years, better service, better doctor care say in Montgomery County than I would say in Prince George's County.
NNAMDIJonathan Blum, any indication at all looking at this data that this could be market-driven?
BLUMWell, I'd say one of the things that we noticed in t he data is that the variation's not 10 percent higher or 20 percent higher, but it can be five times higher, 20 times higher than the other hospital, 40 times higher. So while we tried to find some rational theory that was driving the differences, we speculated whether it was purchasing power. We speculated whether it was that some hospitals treat sicker patients. That might explain some of the variation.
BLUMBut when we saw variations that differed 10 to 1, 20 to 1, 40 to 1 within the same geographic area, it really led us to believe there is no logical reason for the vast differences that we see in the data.
NNAMDIWe recently spoke with Bryan Sivak who gave a personal spin to this hospital cost confusion. He, Bryan Sivak, is the chief technology officer at the Department of Health and Human Services overseeing the government's effort to make health data more open to the public. And he shared with us a personal story about the frustration that he felt trying to be a smart health care consumer himself when his wife had a baby. Here's what he had to say.
BRYAN SIVAKSo we just had another child and we were trying to figure out within the context of which health insurance plan to sign up for, which one would be the most cost effective given that we were going to have this big medical cost coming up in the near future. And I couldn't, for the life of me, figure out how much this was going to cost, right, based on -- and we knew the hospital, and we even knew the doctor. But there's so much ambiguity in the system that I basically had to make a guess as to which insurance plan would be the right one.
NNAMDIIs that, Jonathan Blum, where most consumers are left today, making a guess?
BLUMWell, there are differences. For the Medicare program our payments are predictable. They're set within established fee schedules. And so it is possible for the consumer to understand, with relative degrees of certainty, what the relative costs are, what the relative co-payments will be. And because we have this national fee schedule, that there is predictability and certainty.
BLUMWith private insurance that data is held proprietary. And as our data show for the cash-paying patient that has no purchaser behind him or her, as the first caller talked about, they have to navigate this complicated market on their own. And our take away from the data is there's no relationship between the variation and the quality of care. There's no relationship based upon whether a hospital might be a world-class teaching hospital, for example.
BLUMSo the Medicare program really has this notion of predictability. But it is true, in the private insurance market and for those that don't have Medicare, it is very, very difficult to understand the relationship between the cost of care and the quality of the care that they would receive.
NNAMDISarah Kliff, let me ask you what I hope is not a rhetorical question. How is the average consumer who, let's face it, is not used to comparison shopping for medical treatment supposed to pars this new data that's been made available?
KLIFFRight. It could be challenging. What we're talking about is a 163,000-line spreadsheet that has all of these prices, which is great for us reporters and researchers. I can't imagine, you know, sending my mother to it though and asking her to figure out which hospital to go to. One of the things -- and, you know, Jonathan might be able to talk a little bit more about this -- is, you know, the administration has announced $87 million in grants to researchers who can help organize and pars this information much in the way that our data team at the Washington Post did. So it might not be this specific spreadsheet that's what consumers are using, but this might drive some of the comparison shopping.
NNAMDIJonathan, are there any plans to make this data more consumer friendly? Should I be looking out for an app that can help me to understand this?
BLUMWell, part of our strategy is to make the data free, to be it in a format that others can use and develop applications. And so we're hopeful in the very near future that a patient with an iPhone could have this data at their fingertips. So we believe that when data is made public, when it's free, when it's transparent, when it's accurate, that we are trying to encourage the private sector, other partners to develop those consumer-based tools that can enable beneficiaries, patients to comparison shop, to understand these relationships.
BLUMAnd that is a distinct part of our strategy of making the data free, making the data public that can be used by others for these kinds of consumer tools.
NNAMDISo if not you, somebody's probably coming out with an app. Here is Jeri in Chevy Chase, Md. Hi, Jeri.
NNAMDIYou're on the air, Jeri. Go ahead, please.
JERIHi. I have a comment based on my son's experience. He had an emergency appendectomy in Vermont. And luckily we are insured but when I received the bill I started having discussions with our insurance company, because they wanted me to pay the 20 percent co-payment. And so I -- I'm an educated consumer. I looked at the hospital bill. My son ended up having two procedures. The total bill was over $47,000.
JERIAnd what really was striking to me was from each of the procedures -- surgical procedures he needed support hose following the procedure. And they charged over $700 for a pair of support hose that I can buy at CVS for $26. And when I inquired about the cost -- each of which was a different cost. It wasn't 700 for each procedure. It was 720 for one and 747 for the other -- the person told me it was a question of cost shifting to compensate for the costs associated with providing care to the uninsured.
JERINow if this is an emergency...
NNAMDIIn other words, something that made no sense at all.
JERIYes. Well, also there was no opportunity to have choice that Mr. -- the CMS guest is talking about. When you're in an emergency situation you cannot comparison shop. He was at a summer camp. He was sent to this hospital without even my, you know, authorization because it was an emergency situation. So it...
NNAMDIWell, your practical experience underscores the very issue that we're talking about, so thanks for sharing that story with us, Jeri. Jonathan Blum, starting in 2014 under the Affordable Care Act, every American will be required to have health insurance, whether through that person's employer or individually. Theoretically individual coverage will have the same benefits and guarantees as group coverage. So what do you think this will mean for how hospitals will charge for their services?
BLUMWell, we're hopeful that when more patients have group coverage and have better sources for coverage that they will have a strong purchaser negotiating on their behalf. But I think what this data highlights is that the market for how services are paid and how payment rates are negotiated between hospitals and private insurers is not transparent. And we believe that the more this information can be made public, the more the information on the relative costs of care, the relative charges of care, that it's not only going to help those patients who are uninsured, but it's going to bring down overall health care costs.
BLUMNow the Medicare program, by and large, pays on a fixed-fee schedule. So we have other mechanisms being put in place to reduce Medicare costs without compromising quality or access. But our belief is that the more this information is made public, the more that researchers and the press and the public can dig into it and understand it, that it's going to reform a dysfunctional market. And to make it work better for patients and those that pay for their care.
NNAMDISarah, for those of us who have employer-sponsored health insurance, why should the release of this pricing data even matter? I mean, the insurer will handle all the sticky pricing stuff anyway, right?
KLIFFIn most situations, yes. But I think the example of the appendectomy was actually a very helpful one because they were talking about an idea of co-insurance where you're paying a percent of the price. And then you care. Granted you're probably going to have a negotiated rate through your insurance company. The situation in which it might be most applicable is if you go outside of your insurance company's network, let's say. You know, you have an emergency somewhere or, you know, for some reason you're not at a hospital that you have a contract with, then you could end up with this sticker price. So there is a situation where someone who is insured could see these kind of prices.
NNAMDII'm afraid that's all the time we have. Sarah Kliff is a reporter for the Washington Post who covers health policy. Sarah Kliff, thank you for joining us.
NNAMDIJonathan Blum is the deputy administration and director for the Center of Medicare at the Centers for Medicare and Medicaid Services. Jonathan Blum, thank you for joining us.
BLUMThank you very much.
NNAMDIWe're going to take a short break. When we come back, Davy Crockett, myth meets reality. We'll be talking with author Bob Thompson. I'm Kojo Nnamdi.
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