Mr. Rogers For Grownups
INTERESTING STUFF – 23 February 2013

Why Medical Prices are Sky High

I had no intention of spending the entire morning yesterday reading a 24,000 word report on medical costs while filling 11 pages with notes. Come on, it's Time magazine, for god's sake. I stopped reading it years ago due to its terminal irrelevance.

The story, titled Bitter Pill: Why Medical Bills are Killing Us, is reported and written by Steve Brill, the founder of Court TV and American Lawyer - another black mark to me; I met Brill a couple of times many years ago, once in a job interview - he didn't hire me and he wasn't polite about it.

Nevertheless, “Bitter Pill” is the best damned report about the sorry state of the U.S. Health care industry I've ever seen (and I read a LOT about health care).

What makes it so good is its clarity. It is filled with case and interview details, comparisons among costs, charges and profits, and written not for lawyers, doctors or policy wonks with the intention to obfuscate, but for you and me, the average reader.

Plus, it reads like a good novel in the sense that you can't wait to get to the next paragraph, the next page. By the end, Brill shows what we old folks already know – that in health care delivery and in cost control, Medicare beats private coverage every time.

Brill's conclusions about what to do to rein in health care costs appear to me to be weak but I want to spend more time considering them. What's important, however, is that he gives us plenty of information to use as a basis for an honest, public conversation about how to change American health care.

Not that I'm holding my breath given the power of the medical industry lobby.

Since it can't be summarized, I'm going to quote a handful of passages to pique your interest and hope you will go brew a cup of tea or coffee, sit back and absorb the whole thing. You may not be surprised – you probably suspected this all along – but now you have the facts and figures.


”According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we 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.

“We may be shocked at the $60 billion price tag for cleaning up after Hurricane Sandy. We spent almost that much last week on health care.

“We spend more every year on artificial knees and hips than what Hollywood collects at the box office.

“We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at Walmart.

(Note: “Chargemaster” is each hospital's internal price list which, according to Brill, has no rationale nor is anyone willing to explain it.)

”Because she was 64, not 65, Janice S. was not on Medicare. But seeing what Medicare would have paid Stamford Hospital for the troponin test if she had been a year older shines a bright light on the role the chargemaster plays in our national medical crisis — and helps us understand the illegitimacy of that $199.50 charge.

“That’s because Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver. Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation.

“Thus, under the law, Medicare is supposed to reimburse hospitals for any given service, factoring in not only direct costs but also allocated expenses such as overhead, capital expenses, executive salaries, insurance, differences in regional costs of living and even the education of medical students.

“It turns out that Medicare would have paid Stamford $13.94 for each troponin test rather than the $199.50 Janice S. was charged.”


Medicare pays $11.02 for a CBC [complete blood count] in Connecticut. Hospital finance people argue vehemently that Medicare doesn’t pay enough and that they lose as much as 10% on an average Medicare patient.

“But even if the Medicare price should be, say, 10% higher, it’s a long way from $11.02 plus 10% to $157.61.”

The United States has more hospital beds that it can fill. And...

“In 2008, Gregory Demske, an assistant inspector general at the Department of Health and Human Services, told a Senate committee that 'physicians routinely receive substantial compensation from medical-device companies through stock options, royalty agreements, consulting agreements, research grants and fellowships.'”
“MD Anderson’s charge of $7 each for “ALCOHOL PREP PAD.” This is a little square of cotton used to apply alcohol to an injection. A box of 200 can be bought online for $1.91.”


”Medicare made quick work of the $268,227 in bills from the two hospitals, paying just $43,320. Except for $100 in incidental expenses, Alan A. paid nothing because 100% of inpatient hospital care is covered by Medicare.

“The ManorCare convalescent center, which Alan A. says gave him 'good care' in an 'O.K. but not luxurious room,' got paid $11,982 by Medicare for his three-week stay. That is about $571 a day for all the physical therapy, tests and other services.

“As with all hospitals in nonemergency situations, ManorCare does not have to accept Medicare patients and their discounted rates. But it does accept them. In fact, it welcomes them and encourages doctors to refer them.

“Health care providers may grouse about Medicare’s fee schedules, but Medicare’s payments must be producing profits for ManorCare. It is part of a for-profit chain owned by Carlyle Group, a blue-chip private-equity firm.”


”More than $280 billion will be spent this year on prescription drugs in the U.S. If we paid what other countries did for the same products, we would save about $94 billion a year.”


The process is fast, accurate, customer-friendly and impressively high-tech. And it’s all done quietly by a team of nonpolitical civil servants in close partnership with the private sector.

“In fact, despite calls to privatize Medicare by creating a voucher system under which the Medicare population would get money from the government to buy insurance from private companies, the current Medicare system is staffed with more people employed by private contractors (8,500) than government workers (700).”
“'I was driving through central Florida a year or two ago,' says Medicare's [deputy administrator Jonathan] Blum. 'And it seemed like every billboard I saw advertised some hospital with these big shiny buildings or showed some new wing of a hospital being constructed…

“'So when you tell me that the hospitals say they are losing money on Medicare and shifting costs from Medicare patients to other patients, my reaction is that Central Florida is overflowing with Medicare patients and all those hospitals are expanding and advertising for Medicare patients.

“'So you can’t tell me they’re losing money…Hospitals don’t lose money when they serve Medicare patients.'”

For the next few months, the Republicans and some Democrats along with such privatizers as Alan Simpson and Erskine Bowles and the insurance industry will be pressuring Congress to turn Medicare into some kind of voucher program and gut Obamacare.

Brill's report reinforces more vividly what others before him have shown many times over – that what is wrong with our health care system is not Medicare, it's the private sector.

Go read this story and be armed for the coming fight.

At The Elder Storytelling Place today, Marc Leavitt: On Driving in Retirement


Thanks Ronni for spending the time to summarize this report. To me it comes down to one thing : Single Payer System or universal healthcare. Of course Medicare is included in that category. The rest of the world figured this out years ago and are therefore not struggling with inflated medical costs as we are.

Just read that TIME's article today. It is instructive and well-written. I highly recommend it to anyone and everyone.

I stayed up WAY too late last night and saw Brill interviewed on Charlie Rose. Immediately located the article and bookmarked it to read today. It's about time someone did the legwork to decipher the myriad ways in which our healthcare system just doesn't work. I agree that most of the rhetoric coming out of any political healthcare debate is more obfuscation than anything else.

Thanks for publicizing the issue and Brill's work. It is a must-read for everyone.

Will read later today. Like you, I have very mixed feelings about Brill, but when he's on, he's smart.

@Peg. If you don't mind waiting a few days after Charlie Rose's guests appear live, you can catch the interviews at his site:

Thanks, Ronni. I must read this.

Except that when I turned 65, I received a polite letter from my doctor telling me that he doesn't accept Medicare. He said that he would help me find another doctor though.

I don't know what Manor Care's reasons are for wanting Medicare patients, but I do know from doctors who I have talked to that other patients are subsidizing the Medicare patients.

In other words, no doctor or hospital could afford to handle nothing but Medicare patients. When Medicare pays only $11 for a procedure that another person pays $200 for, all that means is that the person paying the $200 is subsidizing some of the Medicare patient's costs.

Let's say the real costs are $100. Then the doctor needs one patient paying $190 to balance out the one Medicare patient who's paying only $10.

If everybody paid the true costs of medical care, then the Medicare patient would be paying more and the uninsured patient would be paying less. But as it is, because of Medicare and because of contracts negotiated with insurance companies, uninsured people really end up taking it on the chin. That's the only place that doctors and hospitals have for making up the difference.

Quite an amazing read. I downloaded, printed, and read the entire article. Thank for calling it to our attention and for offering the highlights here. Lots of us should link to your post from our own blogs.

I should add that the doctor who would no longer see me because I was on Medicare is a doctor who makes it a point to take care of poor people who are uninsured or don't have good insurance. I always liked that about him too.

His decision to not take Medicare patients was based on the fact that taking Medicare patients would drive up the prices that he would have to charge for his poorer patients. And he didn't want to do that.

I commend him for that, even though I was disappointed that he stopped seeing me.

Thanks for the alert, your observations and the link.

I too saw this article yesterday, but just read part of it (it is long!). I intend to read it all. I am so glad you are posting about it, and to have your take on it.

It's an issue that infuriates me. Who among us has not been billed for medical services or equipment that are way over priced or that we didn't actually receive! This profiteering doesn't' only increase insurance rates.

For instance, following a hospital stay my group insurance (through my job) sent me a claim notice stating what they paid. I had to fight to get an itemized copy of the hospital bill after the fact. I was charged for many services I did not receive. I spoke with the hospital about it. They said "it's already paid, don't worry." I contacted the insurance company and they said the same thing! Not only is that attitude wrong, those payments reduce the amount of my remaining benefit should I have needed similar services that year.

On another note, my docs all will happily take Medicare. They do not all take Medicare Advantage Plans which are affordable, but so limiting.

Matthew Yglesias has a very brief summary of the Time article today in Slate. He has come to two conclusions - Medicare for all or all-payer rate setting.

I can't wait to read the article. The US health-care system is so complex and convoluted. I've read more than one article in the Washington Post about the impossibility of doing cost comparisons for the same procedure at different hospitals.

Thank you for summarizing, Ronni. I saw Brill on Jon Stewart's show last night. Between the two of you, I don't feel any pressing need to read the article, but I'm delighted it's out there enlightening those who need it. Well-timed too, as we continue to fight for the preservation of Medicare.

Thanks, Ronni. Excellent article. The word is getting out. I wanted to buy the magazine and the bookstore said it would be out next week. Several people had already come in about it.

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