Government Data Reveals Wild Disparity In Health Care Costs

Data released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts. Government officials said that some of the variation might reflect the fact that some patients were sicker or required longer hospitalization. These charges are not paid by the government or by insurers, who set rates and pay according to them regardless of charges set by hospitals.

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AUDIE CORNISH, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.

ROBERT SIEGEL, HOST:

I'm Robert Siegel. And we start this hour with health care - what it costs hospitals, what it costs the government, and how states are moving to expand coverage for the poor. We'll begin with the news that the Obama administration today released the first-ever national data on what hospitals actually charge for Medicare patients.

These amounts are not what Medicare or even people with private health insurance actually pay, but the numbers illustrate vividly that even hospitals in the same town can charge dramatically different prices for the very same health care. NPR's Julie Rovner joins us now to talk about what this might mean for people who want to do some comparison shopping of their own. Hi, Julie.

JULIE ROVNER, BYLINE: Hey, Robert.

SIEGEL: Exactly what are the numbers that we're talking about?

ROVNER: Well, these are the amounts that hospitals around the country charge Medicare for the 100 most common things that patients get hospitalized for. That includes everything from putting in pacemakers to replacing joints, like hips and knees, to taking out diseased gall bladders. And what the data show is that not only are there big differences around the country, which we already knew, but often there can be huge differences between hospitals only a mile or two from one another.

SIEGEL: Give us an example.

ROVNER: Well, here's one from right here in Washington, D.C. At Georgetown University Hospital, the average charge for a spinal fusion surgery case in 2011 was just over $115,000. Now, just a couple of miles away at Sibley Memorial Hospital, the average spinal fusion charge was less than half that, just under $52,000. And there are literally hundreds of examples like that in the data, often differences in multiples of five or ten or 20 or 40.

In a conference call this afternoon with Medicare officials, they said there is simply no business reason for such a wide variation.

SIEGEL: Who pays these prices? We've already said Medicare doesn't. Medicaid doesn't pay these prices, do they?

ROVNER: No. Medicaid pays the least of all payers. Medicare pays set prices. They do take into allowance whether a hospital's a teaching hospital, for example, whether it's in a big city with high labor costs, but not just whether it happens to charge more. Private insurance plans do negotiate what they'll pay hospitals. Sometimes it's based on these charges, mostly it's not.

SIEGEL: But if these charges aren't what Medicare and Medicaid or private insurers pay, it would just be people of no insurance who would have to worry about what hospitals say they charge.

ROVNER: That's right. And it used to be that the uninsured did pay these charges, but actually there's a provision in the Affordable Care Act that prohibits hospitals from charging most people without insurance these inflated rates. In order to maintain their tax-exempt status, hospitals now have to see if people qualify for financial aid. If they do, they have to charge them, quote, "no more than the amount generally billed to individuals who have insurance covering such care."

SIEGEL: So, I mean, it sounds like what you've got is a survey of the sticker prices in car lots all around America, but every deal is a special deal. I mean, who actually can worry or can use this information, if nobody's actually paying these prices?

ROVNER: That's right. There's really only a couple of situations where this might be useful. One is if you have insurance but you're going to get out-of-network hospital care. Another is if you're uninsured and well-to-do enough that you might not qualify for financial aid. But if you do have private insurance, you should be very careful with this data.

That's because even if hospital A may charge more than hospital B for a particular service, your insurance company may have negotiated a lower rate with the apparently more expensive hospital. So with elective procedures, in particular, you should always check with your insurance company first to see how much something is going to cost you.

SIEGEL: And will you get an answer?

ROVNER: Well, not always. I see a lot of complaints about things like that. You know, the administration is making a point that releasing this data is part of a much larger effort to bring more price transparency to the health care marketplace. That's something that's been sorely lacking. This may be a start, but it will be a long time before patients will truly be able to figure out how much things in health care really cost.

SIEGEL: That's NPR's Julie Rovner. Julie, thank you.

ROVNER: You're welcome.

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