Marty: Almost no one pays the list price

Pen and paper

As the fight over the mandatory insurance – actually the tax provisions – of the healthcare act prepares to move to the Supreme Court, the Congressional Budget Office released a new estimate of the act’s costs and coverage. The forecast is that the legislation will cost a lot more or a lot less and will cover either, two million, three million, or four million fewer people all depending on your political persuasion. It’s all about the future and in this case, more than most, the future is just a guess.

When numbers are iffy, and these are the iffiest ever, people tend to let their political preferences do the predicting for them. Another issue is where to start the arithmetic. There were original estimates and then original revised estimates; now there is a current revised estimate, but it’s not as low as the original estimate, and it covers millions fewer people. If you’re a Democrat, the cost just went down. But if you’re a Republican, it just went up – actually, it did both.

Other than the hazards of forecasting, which is difficult enough, a major problem is that the nation’s entire healthcare payment system runs on funny money – list prices that have little relationship to actual charges. Hazel Hawkins Memorial Hospital recently sent around “facts and figures” for the fiscal year ending June 2011. It showed gross patient revenues of $217 million, but contractual adjustment discounted $142 million, resulting in net revenues of $75 million. I wish I could get the same 65 percent discount on a new car.

I have Medicare and my bills always show claims for high charges and a reduced contract value for much less. Let’s agree on a basic premise: When it comes to non-discretionary healthcare, almost no one pays list price although they all get the same primary service. I’m still naive enough to believe neither the hospital nor the surgeon looks at your credit score prior to emergency removal your gallbladder. Self-pay patients at Hazel Hawkins made up less than 4 percent of original billing totals and even those charges were probably discounted at the end. If no one is paying the list prices, what purpose do they serve?

The hospital paid about $54 million in wages, benefits and professional fees and some patient services bill directly. If I were evaluating the hospital as going concern, the meaningless list price would just be another item to look past. I would also ignore their more than $7 million in non-operating credits – depreciation, interest and non-operating revenue, for me they had “sales” of $75 million and an operating loss of $7.5 million, or 10 percent. Hospitals have to balance the books or they run out of funds. I do not believe healthcare is a right because it’s not free and can’t be unless one intends to enslave the professionals and employees.

If Medicare or Medi-Cal pays less than the cost for a service the deficit must be shifted to some other entity, which usually means private insurers, including private insurers of private and public employees – thus back to the general public.

To fix any system financially, one has to be precise as to the income and costs. The national model of having list prices for services that are designed to be negotiated lower by private insurers or dictated down by government insurers is just complex cost shifting that hides the true expense. Combine that with the incomprehensible tax code, and it’s literally impossible to find a basis for making rational healthcare funding decisions.

Marty Richman is a Hollister resident. His column runs Tuesdays.

Leave your comments