Hospitals Profit By Price Gouging, and It Must Be Stopped

One of the greatest challenges of the current decade will be controlling health care costs. Every aspect of our dysfunctional health care system must come under review. The U.S. leads the world in per capita and GDP expenditures on health care, yet for poor and lower income citizens, our health care outcomes are disastrous. Hospitals have been identified as one of the primary sources of our outrageous health care cost model, and we as a country must take action.

Love it or hate it, the Affordable Care Act, otherwise known as Obamacare, has forced the country to evaluate the costs behind medical treatment. In particular, medical billing has come under recent scrutiny, revealing a tremendous amount of price gouging and absurd billing by hospitals. Articles in TIME and stories in CNN are exposing how bad things have gotten. Insurance companies negotiate prices, and help to keep some costs in check, while Medicare and Medicaid regularly keep prices on the extremely low end for recipients. However, for the unfortunate millions who have no insurance, prices can be four to ten times higher than what insurers regularly pay for the same service. As many self-employed people have also discovered, so called “discount” insurance plans are often just as bad as no insurance at all.

The ACA is intended to require coverage for everyone in the country. For many, this will mean going under big insurers such as Blue Cross, who regularly negotiate prices with providers to keep costs down. However, there are no universal regulations over medical costs, which is a gaping hole in Obamacare. The only way the U.S. will manage health care cost issues is by dealing with pricing controls.

Hospitals are the primary beneficiaries of outrageous billing. From $10 paper cups for dispensing medicine to chemotherapy drugs at 10 times regular costs, supposed “nonprofit” hospitals are failing in their missions to serve the public. Hospital administrators have a median salary of $96,000. However, stories of outrageous pay and bonuses for administrators have been popping all over the country with some administrator making salaries of $500,000 or more. The problem is that hospital administrators are being incentivized to increase revenues, which means “creative billing.” When hospital revenues go up, administrators get more in bonuses and the cycle continues with those without good insurance losing in the end.

What is the impact of enormous medical bills? The simple fact is that almost 50 million Americans are dealing with unpaid medical bills, and nearly one in five US families is struggling with medical related debt. One of the justifications behind Obamacare was the supposed plague of medical bankruptcies. This claim has been disputed vigorously on some blogs such as The Hill. However, even on this much touted counter to the ACA, medical bills were cited in approximately 13% of U.S. bankruptcies. Other studies have put medical bills as a key component of up to 62% of bankruptcies. One of the disturbing facts about this number is that nearly three quarters of the people who pursued medical bankruptcies had health insurance. Many health insurance plans have significant gaps in coverage, and the ACA will at least help establish better minimums for coverage.

Price gouging by hospitals, including treatment and services, is the largest culprit in inflating health care costs. If hospitals do not take on this problem head on, they will be forced by legislative action.