|Hospitals do not charge every patient the same price for medical care. Uninsured patients and those who pay with their own funds are charged 2.5 times more for hospital care than those covered by health insurance and more than three times the allowable amount paid by Medicare, according to a study by Gerard F. Anderson, PhD, a health economist at the Johns Hopkins Bloomberg School of Public Health.
Anderson's analysis of 2004 hospital data for the United States also concluded that the gap between the rates charged to patients who "self-pay" and those with health insurance coverage has grown substantially since the mid-1980s. His study is published in the May-June 2007 issue of the journal Health Affairs.
According to Anderson, patients who self-pay for hospital care, such as the uninsured and foreign visitors, do not benefit from discounted rates negotiated on the patient's behalf by insurance companies and Medicare. Instead, they are charged the full, undiscounted rate for ervices set in the hospital. This practice has triggered numerous lawsuits by consumers and some government efforts to level prices charged by hospitals.
"In the 1950s, the uninsured and poor were charged the lowest prices for medical service. Today they pay the highest prices, often two to three times more than what a person with health insurance would pay for hospital care," said Anderson, a professor in the Department of Health Policy and Management at the Bloomberg School of Public Health.
Anderson's analysis determined the ratio between the prices hospitals charged self-pay patients and Medicare-allowable costs, which are the costs that Medicare has determined to be what it costs to provide care to all patients. In 2004, the ratio was 3.07, which means that for every $100 in Medicare-allowable costs, the average hospital charged a self-pay patient $307. The charge-to-cost ratio was greatest at for-profit hospitals-4.10 compared to a 2.49 ratio at public hospitals.
The study also shows that the gap between the amount self-pay patients are charged and what Medicare pays for hospital services more than doubled over the past 20 years. Anderson argues that the widening gap in prices makes it increasingly difficult for the uninsured to pay their medical bills. The ratio between the amount hospitals charged self-pay patients (gross revenue) and the amount the hospitals actually collected (net revenue) was 2.57 in 2004. This means that hospitals collected only $0.39 for every dollar charged. Anderson estimated that if hospitals had actually collected the full amount charged to every patient, the profit margin per hospital would average more than 200 percent.
Anderson's analysis found that hospitals in California, New Jersey and Pennsylvania had the highest markups for self-pay patients, which were four times the Medicare-allowable costs. Idaho, Maryland, Montana, Vermont and Wyoming had the lowest markups, at less than two times Medicare-allowable costs. The price markup was the lowest in Maryland, where hospital charges are set by a state regulatory commission.
Anderson suggests that providing health insurance for the uninsured could reduce the hospital markup for self-pay patients. Other solutions to address the issue, according to Anderson, include charging a single, flat rate to all hospital patients, or for hospitals to voluntarily or through government intervention establish a maximum rate.
The study was supported by Harry J. Kaiser Family Foundation. Anderson has participated in numerous lawsuits on behalf of the uninsured and other self-pay patients.