Brill on Medical Pricing

I am in the middle of reading what looks to be a very important piece by Steven Brill in Time Magazine entitled Bitter Pill: Why Medical Bills Are Killing Us. I’ll be keeping an eye out at my new favorite medical policy blog, the Incidental Economist to see if they have any thoughts on it.

Early on in the piece, he talks about the chargemaster and how the hospital administrators would try to steer discussions away from it:

However, I quickly found that although every hospital has a chargemaster, officials treat it as if it were an eccentric uncle living in the attic. Whenever I asked, they deflected all conversation away from it. They even argued that it is irrelevant.

People rarely pay those prices, was usually the reason for being dismissive about it. One problem with that rationale in Indiana, however, is that our state Supreme Court has told Hoosiers that, in the absence of contractual language to the contrary, they’re bound by the prices in that chargemaster. By virtue of Indiana Rule of Evidence 413, the chargemaster rates also effectively set the default amount you’ll have to pay for someone’s medical expenses if you get in an accident with them — regardless of how much that person actually paid.

Brill’s article shows that this chargemaster rate can be on the order of 1,000% of the market value of the service. I expect this article is going to make me very angry by the time I get to the end. “[W]e spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia.” In return we get outcomes that are no better and often worse.


  1. Kilroy says

    Read the first half of that yesterday. Pretty fair in placing the blame around to just about everybody. Not sure if I can stand to read the second half.

  2. gizmomathboy says

    But Doug, the free market fixes everything don’t you know?

    So, can I “force” a hospital to give me their chargemaster rates? Do I have to be involved with some litigation before I can?

    When did things become so much the Red Queen’s Court?

    Also, after reading one of your previous posts about the Incidental Economist, he just might make it onto my RSS reader.

    • Doug says

      Standard response is that the medical industry is too heavily regulated and that’s why prices are so jacked up.

      I agree that it’s not an example of a free market; but I don’t agree that limiting regulation is a good solution. It’s just not a good industry to let market forces run wild. In most cases, participants don’t have the luxury of walking away from the transactions. Information is opaque and, even if it were readily available, most market participants aren’t in a good position to evaluate it. And, finally, we generally attach more moral weight to the question of whether someone lives or dies than whether they are able to buy a TV or other widget.

    • jharp says


      Somehow someway your handle shows up in the sign in box on my computer. Not your e mail though.

      I have no idea why. And I am pretty sure I once posted something that using your handle because of it.

      Anyone? Thanks in advance.

  3. Carlito Brigante says

    The Incidental Economist is a good site and frequently updated.

    In the 1990s, I represented mostly managed care companies, but also some LTC-SIR companies. I never represented hospitals, but I know their world from the managed care side.

    The Chargemaster is not usually a credible document. Profitable tax-exempt hospitals like St. V’s, Community, have no clue what their costs are. They don’t need to. Medicaid and Medicare gets the best deals. Managed care companies, if they can steer volume, get good rates. Indemnity Insurers pay off their R & C screens and figure the hospitals will take that. If not, they balance bill the patient. The poor uninsured SOBs get the sucker prices.

    Republicans argue that transparency in pricing will empower consumers. The healthcare industry defies transparency. Chargemasters, Managed care rates are proprietary and are purchased from large data aggregagtors. We could not even share all our rates with our contracted physicians. We would ask them for their top five CPTs and tell them what they would earn on those. That was enough.

    The only solution to rising costs is universal payor. Medicare and Medicaid can crush prices. But the diffuse private payor cannot generate enough market prices to hammer the providers. But if we give the government monopsony power, providers will due what they have never really had to do. Cut costs, gain efficiencies, and freakin’ deal with it.

    Brill’s last statement is true and has been repeated a million times. It is just that congress does not listen over the fluttering of dollar bills that the lobbyists stuff into their pockets. It is an inconvenient truth that is not even arguable.

    • Freedom says

      “Republicans argue that transparency in pricing will empower consumers.”

      I don’t know how they can make this argument with a straight face. When you fall off the ladder cleaning the gutter and break/strain/tear/pull something and can’t see anything beyond writhing agony, you’re not in a position to Google shop St. Vincent vs. Clarian.

      Further, say you wanted to plan in the event of unfortunate gutter-cleaning accidents, try calling the local hospitals to comparison shop. I put the over/under of call transfers at six, with a teaser of no definitive answer being received. Those calls might make for a good Stossel bit.

      • says

        I tried comparison shopping for an elective surgery one time. It works wonderfully as long as you keep extremely accurate written records of your fact-finding. The hospital tried to gouge me for an extra $1,200 for the procedure (for which I was quoted $840 total…not out of pocket). They ended up dropping the extra $1,200 when I presented them with log that I had compiled of all of the quotes that I had solicited. It’s not something you want to try if you are a pushover or get squirrelly about your credit score, though. I took some bruises before they relented. The Medical Industry (and note, I don’t call it a “Health Care System”) is a well-oiled machine that will chew you up if you are unprepared.

  4. Mary says

    Well, I perhaps discovered something about how Medicare, as you say, “crushes” prices. Just about the time a woman signs up for Medicare, she also enters the high risk age group for developing ovarian cancer, which is screened for by pelvic exam. But, counterintuitively, Medicare declares that they will only pay for a pelvic exam every two years instead of the once a year women are advised to have and used to getting. That is, if I am understanding everything that was told to me by doctors’ offices and insurance people.

  5. says

    I believe the Indiana Supreme Court also held that, since those rates are proprietary, the “consumer”—patient—has no right to access to those prices before treatment.
    I blogged on this a couple of months back. I was hospitalized in 1994. We did not have health insurance. In the blank on the admissions form I wrote “lawyer.” I could not walk and was told I possibly had a tumor or MS. (I was diagnosed with MS—get it? Acronym and initials, how personal.) I was given an MRI. My wife went home for the night (after she was told she could not stay w/me in the room). In the middle of the night, three times, I was wheeled out for another, unnecessary MRI. The machine was not in use and the hospital had a chance to run up the bill on someone whom, they probably presumed, could eat the bill. A person from billing demanded I sign a promissory note to the hospital or they would “ship” me to “Wishard.” I refused. I was released the day before they were to “ship” me, I guess like goods, over to West 10th Street. We challenged the unnecessary MRIs and they were dropped, after some arm-twisting. Since the Indiana Supreme Court handed down its recent decision, those charges probably would stick. We were able to cut other charges by pointing out an insurance company would not have approved them. Single payor is the only rational answer.

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