Ask Cheasty: New CMS Database Means Better Informed Consumers

Hello, Texans! And for that matter, hello Americans! I’ve got some news to tell you about, but you’ve got to bear with me for a second here. First I’m going to use a bunch of jargony health care language that will make your eyes weep with boredom. But then I will explain what it means in such clear and precise terms you will be glad you stuck with me, because when I’m done, you will have information that gives you, the consumer, a first taste of what buying-power might feel like in the health care marketplace. (You know, eventually. Let’s not get crazy here.) So here’s the boring part. The Centers for Medicaid and Medicare Studies (CMS) just released a huge – and I do mean HUGE – database of billing data for hospitals that accept Medicare patients around the country. Basically, it’s a giant spreadsheet that itemizes the top 100 most frequently billed items for Medicare. Then, (drum roll) in two pretty side-by-side columns, the database tells us:  1) how much the hospital bills private patients (that means non-Medicaid and non-Medicare patients, either with or without insurance); and 2) what they accept in payment from Medicare.

The differences (and there are many) are staggering on a number of levels. If you take the time to make sense of the data, you will see that you can compare procedures from hospital to hospital anywhere in the country. So let’s pick a city and a random illness from the list. If you live in Austin, TX, (which I do, so let’s go with that), you can compare the average cost of hospitalization at competing Austin hospitals for simple pneumonia. Or if you want to see how much the same hospital treatment would cost you if you lived in New York City or Louisville, KY, you could also look up the prices at hospitals in those cities. So this is good. An Austinite might call Seton Hospital and ask why they charge $61,099 for pneumonia when Brackenridge, a half mile away, charges $42,252. A $19,000 difference. My brand new car didn’t cost that much.

So this is good. You as a consumer (in theory at least), could look at this hospital billing database when pondering your upcoming need to, have a limb amputated, for example, and decide to go with the hospital in your area that charges less. Or more, I guess, it’s your choice. But either way, you have access to INFORMED decision-making, which you currently do not have. This is an important first step, and one we should have taken long ago.

Hospital representatives will protest that these prices are a non-issue because, as they say, “nobody actually pays that price.” Unless, of course, you’re one of the almost 50 million Americans without health insurance. In that case, that’s exactly what you get billed. You may not end up paying that much (honestly, who among us actually could?), but that is what your bill will say. If you have cash in the bank or assets to claim, you may lose everything you have before the hospital bill is settled. Sixty percent of bankruptcies in this country are the direct result of medical bills, and these price lists are where those medical bills come from. It is outrageous.

But back to what the hospitals say. These prices, they protest, are just a place for starting negotiations with insurance companies, Medicaid, and Medicare, all of which get a heavily “discounted” rate. I fail to see how such an obviously random and ludicrously inflated price list could be an effective tool in negotiation, and now that we are all getting to take a good look at these price lists, I’m hoping the exposure to daylight will help remedy some of the worst excesses.

But that’s not all! Don’t forget that second column of data that tells us how much Medicare pays for those same procedures. Hang on a second while I look it up in the database… Aha. Brackenridge might charge an average patient $42,252 for simple pneumonia, but from Medicare, they accept an average payment of only $11,859. That is more than THIRTY THOUSAND DOLLARS LESS. The down payment on my house wasn’t even close to that much.

And at Seton, where patients are billed $61,000, they accept a payment of $9,730 from Medicare. Which is less than Brackenridge gets, even though they charge private patients more (why? That makes no sense!), but it is $51,369 less than what they charge non-Medicare patients. FIFTY-ONE THOUSAND DOLLARS. I don’t even have any “real world corollary” comparisons for that kind of money, but it’s more than most Americans earn in a year.

The take-away message here is in two parts. As I mentioned earlier, we consumers are now armed with information we never had access to before, and that can only accrue to our benefit, especially for the uninsured among us. Even in emergency situations, having done this research you could know which hospital in your area typically charges less and go there. So that’s the small win. The bigger, longer-term triumph for consumers is that the secret’s out. There is no rhyme or reason to these hospital charges, and the fact that Medicare payments are so much lower, much more consistent from one hospital to another, and (get ready for the big finish) that hospitals still profit at Medicare rates will empower consumer advocacy groups to fight for greater transparency, upfront billing estimates, and lower costs for private patients. It won’t be quick, and it will be a tough fight, but it will happen.

Now if somebody could just turn all that data into a smart phone app.

For more information about out-of-control health care costs, please read Stephen Brill’s fantastic article, “Bitter Pill,” published this year in Time. You can also see his interview with Jon Stewart here.

Written by Cheasty Anderson, Center for Public Policy Priorities