Is This As Stupid And Worthless As It Looks?

There is a new federal rule requiring all hospitals to post a master list of prices online–enumerating the services they provide together with their prices, so that people can review them, and presumably “shop” for the best deal.

Think about that for a minute, then review the fine print on your health insurance, assuming you are fortunate enough to have health insurance. You will note that you have very little choice of what your insurer calls “provider networks.”

Think, too, about the last time you or someone in your family had a medical emergency. If you fell off a ladder, were in an auto accident, were having a heart attack or found yourself in any of a number of similar situations, your most urgent task was getting to the nearest hospital as soon as possible; I’m pretty confident you didn’t delay in order to review and compare hospitals’ charges.

There are other reasons to file this new requirement under “worthless.” Hospitals in America’s ridiculous healthcare industry don’t charge every patient the same price for the same service. Patients with insurance are actually charged less than those without, for one thing. For another, most hospitals don’t even have a good idea of what their services cost them to provide.

Some years ago, we had friends over for dinner; one of them was, at that time, vice-president of a local hospital, and I asked him to explain the infamous five-dollar aspirin. We’ve all seen those itemized bills after emergency room visits or hospital stays that include bizarre and frequently outrageous charges, including per pill pricing that vastly exceeds what the same pill would cost at the local drugstore.

Our friend’s response was honest, if not reassuring. Because hospitals must deal with multiple insurers as well as Medicare and Medicaid reimbursement rates and with uninsured patients, they engage in “innovative” and “creative” cost-accounting. In other words (although he didn’t put it quite this way), they play games with individual bills, depending upon the likely source and timing of payment.

The bottom line: unless things have changed rather dramatically since that dinner party, hospitals really don’t know what any given service actually costs them, and there is no “standard charge” for a given medical procedure.

As I have said many times, I am a believer in markets–in economic areas where markets can work. If I set out to buy a widget, I’ll shop around to see who makes the best widget for the best price. The market for widgets works, because it provides what is essential to a market transaction: a willing buyer and a willing seller, both of whom are in possession of all information relevant to the transaction.

I know what sort of widget I want, and pricing information–what widgets are going for–is easily available. The guy selling me that widget knows what his widget cost to manufacture, and how much he needs to get for it.

If I have a stomach ache, or measles, or a broken arm; if I am having a heart attack, all I know is that I need medical care. I don’t know what medical science has to say about appropriate medications and their dangers (I may not even know my diagnosis); I have no idea what my treatment options might be, which ones are least likely to manifest side effects, or what they should cost. I’m not even a “willing” buyer who can walk away if I think the price is too high. I lack the knowledge to evaluate the quality of the care I’m receiving, let alone the ability to walk away if I think that quality is substandard.

Markets simply don’t work in these situations, and knowing that a hospital has posted its “best guess” prices is irrelevant.

Every other advanced country has figured this out. I’m beginning to think that “American Exceptionalism” means “exceptionally dense.”


  1. While the supposed reasoning behind this new rule that hospitals post the cost of different procedures is full of holes, there may be some real benefits to the public with the new policy. I say that the more attention that is focused on the cost of medical care, the better. Let the discussions and debates begin!

  2. I have Medicare and IU Health Plans Medicare Select HMO; which I think is Medicare Part C. I received no list of providers (hospitals, primary physicians, specialists, pharmacies) for 2018 and so far, none for 2019; I will assume I am limited to IU/Methodist Hospital or Indiana University Hospital…and hope I don’t need to use either. I live about 8 blocks from Community Hospital East. The IU Health Plans Annual Notice of Changes 2019, which is 13 pages of basic information, primarily the cost of co-pay increases; 9 pages in English, the last 4 pages in foreign languages. I wonder if those speaking foreign languages have any idea which hospital facility they can expect to be accepted in.

    I receive copies of all full billing amounts from IU Health Plans; the cost of each treatment is itemized but the treatment is a code number, no idea what the code refers to so that list of hospital treatments and master list of prices is useless under that new federal ruling…and we get that information after the fact.

    “If I have a stomach ache, or measles, or a broken arm; if I am having a heart attack, all I know is that I need medical care. I don’t know what medical science has to say about appropriate medications and their dangers (I may not even know my diagnosis); I have no idea what my treatment options might be, which ones are least likely to manifest side effects, or what they should cost.”

    As Sheila states; we have no idea “going in” what our treatment might consist of and often have no idea of what our diagnosis will be. Apparently the new ruling doesn’t include the specialists, lab tests or radiology examinations to compare their costs which are required before we ever enter a hospital, other than the Emergency Room.

    “Is This As Stupid And Worthless As It Looks?

    The only answer possible is…YES! I recommend we all carry a large jar of Vaseline with us to every medical appointment; we are going to “get it in the end” whatever our physical problem may be.

  3. That’s an interesting take on that issue. I’m not sure I agree with it but appreciate the effort. Thanks Professor.

    I’m a little skeptical about the whole thing.

  4. Hospitals aren’t posting “best prices.” They’re required to post their “charge master,” a document created with eyes toward Medicare, their two largest private payers (e.g. Anthem and United Health), the contracts with those payers, how rates are discounted, priced, and paid. And lest you feel the hospital is the bad guy here, remember that the 800 lb gorillas are always Medicare and the biggest insurer. Anthem dictates what the contract will say in Indiana, and the hospital creates a pricing “menu” around that, knowing they need to generate enough revenue from the private payers to absorb the losses from Medicaid and the uninsured. And of course, the charge master bears no relationship to actual bills- it is really an exercise in working with, through, and around the big insurers. If you really want to see where the big money is going in health care, by the way, don’t look at the providers – look at the insurers.

  5. Yes, it is as stupid as it looks. No one pays “list prices”. If you have insurance (and is covered) the insurance company pays the contact price. If you don’t have insurance you either negotiate the price, request financial assistance from the hospital, or get hounded by creditors. I am an MD and help patients through this all the time. Insurance companies created this mess and apparently it works for them.

  6. my wife recently wants to drive a truck,after 35 years being together,she finally wants to drive with me. her issue,high BP, its has to be under 140/ her snoring,has been getting worse,and at 57 still has her tonsils, after calling many,(north dakota only has four license insurance companies)( gee no compitition here,and with out any sort of state funded ACA) so asking,and getting some input,alls they seem to care about is a bandage approach,the mask,and live with it,though,there is a fix,and its specialized,and guesss what,in nodak, they would rather refer you to somehere elae for that,at our costs. fine, since we barely could afford it at 63/57 we met a independant Dr, who likes imdependant ideas. we called Mayo Clinic Rochester Mn. a friend also just had such a correction,and guess what,she actully worked full time at one of bismarcks hall of care.. (o.k. hospital,but ya gotta understand,the doc is god,and will allow you to die,at his own judgement) hense my wife and friend spent two days at Mayo. very impressive,very well thought out,very well done. its says repeatedly,in the text,we are NON-PROFIT, and they mean it. we are in the process of securing $5000 upfront, o.k. we have the referal,but i dont think you need one. they start with checks,and tests,and have review of a council on proceedure,then inform. if any of that money is unused,it given back. if theres more costs,sit down,and talk with a accountant there,be honest,and secure a payment that will fit.seriously,they take you one on one and dont screw you around. Mayo is world class,and from what i gather,they as a whole,make the decisions,ask you for input,and then proceed. what a concept. i will take some time off next month to drive my wife there,and hopefully she can enjoy what maybe some of the best care and upfront medical treatment,up to date. now for a bismarck moment.. we had a friend here who supported motorcycling here in nodak. he was a stand up person,who many liked,and he took his life to making motorcycling safer through a nationwide org,and was man to see when issues care up. he suffered a liver failure.he was at the local care unit,(hospital) i had a chance to see him,and its something to want to forget. he was next to death,we chat,and we didnt say goodbye,he was expected to live. no,wait, the local doc in charge was actully going to let him lay there and die. something as i found out,was the god attitude here. our friend was litteraly saved by a close associate, she called Mayo, and in the short time,he was flown to Rochester,mn. and lived. We all here in nodak can never say enough,for the help,and he live a decade longer. the work he did to help others and keep a sanity among law makers and others,could never be said in enough terms to say what a man he was. thanks,names are witheld,but we know who,they are,and we also know the care units here to,we avoid the profit club,sanford started,and rules here.along with zero competion in the health care buisness. suck the republican govenors ass,and your insurance co. can be here too.

  7. I’m afraid your hospital vp wasn’t being honest with you about the $5 aspirin. In fact, every successful organization in this country knows exactly what everything costs. How do we get a $5 aspirin? The answer is cost allocation. First you take the price of an aspirin. Then you add the cost of the space and utilities for the storage of that aspirin. Then you add the cost of the pharmacy tech that fills the order for the aspirin. Then you add the cost of the delivery system from the hospital pharmacy to the floor where the patient is staying. Then you add the cost of the nurse who passes meds to that patient. Then you add the cost of the supervisors of all of those people. Then you add the costs of management. Voila – a $5 aspirin.

    I personally suspect that, if management were being paid based on their value to an organization, the cost would come down, maybe significantly.

  8. I thought Sheila’s reference to a willing buyer and willing seller where all parties have relevant information in order to make informed decisions was salient. One of my favorite economists (and a Hoosier born and raised in Gary), Joseph E. Stiglitz, earned a Nobel for his work in relevant information of all parties to such contracts.
    So how can there ever be equality in understanding relevant information as between patients and the medical universe? The vast majority of such patients, including me, and though I have three nephews who are M.D.s, do not have the background to understand medical jargon and associated costs. I don’t think putting such information on the internet will help; I think rather that those with the necessary expertise in our government should work out cost schedules and turn them into rules and regs so that we the people are not at the mercy of these medical providers.
    Medical care and associated costs are not widgets; they’re complicated. The ultimate answer, of course, is single payer healthcare, a system virtually all Western countries have long since adopted and one where looking at undecipherable medical costs for procedures, room rent etc. are unnecessary.

  9. Peggy, I doubt that the hospital ever did any real research on the cost to them giving a patient an aspirin. More likely it was a decision based on “what can we get away with”.

  10. im going off a rail here,sorry, as far as trumps shut down goes, seems only the working class again can be the only fall person for his needs. some republicans again like the idea,hold the working class hostage,for a bigot wall.(or they maybe sending a massage,to us about how it will be in the new congress,pay attention stupid) now,lets go over this, he plays a game with thise who,do the work,try and stay above water with staganted wages for 40 years,many live day to day, in a world of greed rents,and daily needs,all meted out by wall streets finest. heres trump and his mob,now ordering no wage increase in an executive order,( per,12/29/18)
    again,a game congress plays because we are never going to rise up and say no. a game they have won,putting us next to,poverty,as the gleefully march on in song,some will retire now and keep thier nest egg safe,with the next league of greed to command congress. we the working class just sit here and enjoy the screwing,and do little to notning. instead,with a divieded highway working class,it gets headline news,and never sees the problem.we only self serving intrests. as we further become economic slaves to the new WORLD order of economic greed. carry on, with pelosi and schumers going to save us all, were in for a total collapse of any power we have left. the working class has failed itself,by sitting down and taking it.. better invest in more profit to wage robbing corps now, while,the going is good.

  11. Yes, it is stupid, but more than that it is a false reading. Each person is different and will require different attention. I find the drumpf people totally incapable of thinking anything out in a rational and sane way. I think it is just so they can say they ‘did something’… yeah, they will sure have a fine legacy: like trying to destroy our economy and nation.

  12. Ralph Nader: Canada’s Health Care System Puts America’s to Shame.

    In Canada, everyone is covered automatically at birth – everybody in, nobody out. In Canada, coverage is not tied to a job or dependent on your income – rich and poor are in the same system, the best guaranty of quality.

    In the United States, under Obamacare, much still depends on your job or income. Lose your job or lose your income, and you might lose your existing health insurance or have to settle for lesser coverage.
    The Republicans have no plan for Health Care.

    Our wretched disgusting excuse for a Democratic Senator Joe Donnelly had this to say on CNN.
    “”But when you talk ‘Medicare-for-all’ …you start losing the people in my state,” Donnelly added. “When we start talking about, ‘Hey, we’re going to work together with the insurance companies to lower premiums,’ that’s what connects.”

    Donnelly, just repeats a Corporate Right Wing Myth that the For Profit Insurance Industry is the best solution. The Republicans like I said have no plan for Universal Heath Care and Corporate Democrats like Donnelly want to continue feeding the beast of Insurance Companies. Item: In 2017, the CEO of Aetna alone made a whopping $59 million.

  13. Unlike Sheila, I don’t see anyplace where the “markets” are beneficial. For one, they assume two rational actors. Very rarely does that ever occur.

    Here is my favorite market — labor market. LOL

    “No thank you, but I wouldn’t work here unless you pay me $45,000.00. Do we have a deal?”

    Then, go tell your landlord, bank, utility companies, etc., that you cannot pay them because nobody will pay you the $45,000 you deserve. I’m sure they will all work with you while you negotiate the labor market.

    As for the healthcare market, there is no market for consumers. I get to see how the hospitals and other healthcare “providers” serve their clients depending on the insurance they have. If you break a hip, why does it take two days of recovery if you’re on Medicaid, but it’s four days if you’re on Medicare?

    I had an acquaintance who worked for the County Health Department. Apparently, in Indiana, the healthcare providers all report to the county government because the government is responsible for public health?!?

    The county health department actually had responsibility for the public health but Pence had the authorities switched around and gave more power to IDEM which is run by the Koch brothers. That’s when my friend quit and moved westward. Pence basically stripped them of their power because the health departments were taking a stand against the polluters.

    The intent behind markets was the government is supposed to regulate them and hold the abuser’s accountable. The free press was then tasked with holding the government accountable. This is how markets were intended to work with closely monitored power structures — checks and balances.

    We haven’t had checks and balances for decades. Without them, there is no market. One look at Indiana’s laws governing labor is more than enough to reveal that markets are dictated by the Donor Class to the Political Class. It’s good old-fashioned OPPRESSION.

    #RightToWork means #RightToFire without recourse. 😉

  14. Some interesting facts. Recent research has discovered that the hospitals that are most likely to lose money on their Medicare patients are those that receive the highest reimbursement for non-governmental patients from insurance companies. Translation: If you pay hospitals a lot of money, they will spend this extra money and that will show up as a loss when costs are allocated to Medicare patients. Another fact: when looking at the amounts the five largest hospital systems in Indiana are paid by insurers, for commercial members, we find that they all average over 350% of what Medicare would have paid for the same services. So, they report losses on Medicare patients. They also “earn” profits that are three times the national average.

  15. So, one of the things we’re trying to do is to have the carriers negotiate prices as a % of Medicare. This does a number of things. First, for inpatient stays, Medicare pays a lump sum depending upon the illness. This reduces the 20,000 to 30,000 charges in a charge master to one number that depends upon why the person is being treated. It also allows easy comparison of prices among the hospitals.

    I say “trying to do” above because Indiana hospital systems are powerful, relative to the carriers. They each have monopolies in some communities and they use these monopolies to raise prices by requiring that all of their hospitals are included in any network (called tying). The hospitals also know that true price transparency would lead to price competition, which might force them to lower their prices.

  16. David, So if the hospital is paid one set price depending on the illness what is to keep them from backing off of care (early discharge, just a bit less pain medication, a little less janitorial work) in order to make sure there is a profit.
    Fiddling with the current system is folly. Time for a medical care revolution.

  17. In 2014, CBS “60 Minutes” reported that emergency room staff at many hospitals were being trained to order as many expensive tests for ER patients as possible; to admit 20% of all ER patients to in-patient and 50% of all senior ER patients to in-patient. One ER doctor, who came in alone for one unscheduled exam when I had been admitted from the ER, gave me my actual diagnosis of a viral flu, severe dehydration and bladder infection. It was an Hispanic woman doctor; I believe she was concerned because the refusal to release me was so upsetting. The little pissant ER doctor refused to listen to my denials of ever having chest pains or difficulty breathing; decided I had heart disease and I spent almost 3 days undergoing expensive cardiac tests. My daughter-in-law a former Certified Nursing Assistant and my granddaughter a Registered Nurse in the Riley pediatric heart department kept telling him how active I was and that I had no health problems related to his diagnosis. Each time the cardiac specialist came in, he said my tests were normal; on the 3rd day he got fed up and released me. He diagnosed all of my problems were caused by the severe dehydration from the viral flu and my heart was healthy. It was a frightening time because both parents died with heart problems.

    Don’t hesitate to ask questions or have family members find other doctors to question a questionable diagnosis.

  18. The Charleston Post & Courier carried this as their lead story this morning. They noted that even if the hospital does its best to list its prices, the patient will have no useful information about what his medical encounter will cost him. That is, in part, because the new rules do not require posting of physicians’ fees. In addition, the number of variables and the number of unanticipated but necessary procedures that arise cannot be known in advance. They went on to enumerate such a long list of unknowns and unknowables that there are only two possible explanations for such a rule: first, the rule writer was trying to pull the wool over the public’s eyes; second, he/she had no clue about what a complex area of billing they had taken on. Reason #2 could not possibly apply to anyone who has ever wrestled with the challenge of paying a medical bill, parts of which show up six months or more after the fact and parts of which are resolved only after long and often rancorous debate.

  19. If we had a Universal-Single Payer Heath Care System like Expanded & Improved Medicare For All Act – HR 676, all Americans would be covered from birth to death. No Co-Pays or deductibles, etc., would be on your bill – because you would not receive a bill.

    The Corporate McMega-Media does not want Single Payer to receive any publicity concerning it’s advantages over our current Frankenstein Heath Care System of Medicare, Medicaid, V.A., private insurance or employer provided insurance. Why, because the Steroid Capitalist system views an attack on one as an attack on all. Also, the McMega-Media makes millions if not billions in advertising revenue from Big Pharma.

    The current Frankenstein Heath Care System is immensely rewarding to Elected Politicians as they scoop up campaign donations from the For Profit Health Care System.

  20. We have created a huge problem for ourselves by waiting this long for socialized medicine, the only kind we can afford. Now the transition from the mess that we have allowed, to government ownership of all of the means of production of health care is almost prohibitively complicated, way beyond the capabilities of most politicians to even imagine much less manage. We can’t afford what we have, we aren’t smart enough to change to what we can afford.

    It’s the same problem that we’ve allowed with organic fuel, we can’t afford to get our energy from them when all costs are considered, and we aren’t collectively smart enough to manage the transition.

    We also can’t afford the President that we have and we weren’t collectively smart enough to avoid it.

    See the trend here?

  21. Another proof of this stupidity is the amount that “informed” consumers spend each year on unregulated, worthless “supplements”. The figure is in the billions.

    Want to get rich? Create a pill for weight loss or impotence. Extra bucks for calling it “natural”. [I always note the cyanide (found in bitter almonds) and ricin (found in castor beans) are both “all natural”.]

    Given that, can we really expect the vast majority of Americans to rationally compare, even in a non-emergency situations. Sheila has already covered the stupidity of this in emergency situations.

    A note on capitalism and the Trump administration. Medicare had decided to try to reduce costs by incentivizing preventative medicine. Doctors (usually groups) who spent the time and money keeping patients out of hospitals were able to receive a share of the money saved if they reached a certain threshold of savings. This year, the threshold was raised and the percentage returned to the doctors was reduced. This was a “capitalist” approach to cost savings, but Trump and his cronies would prefer to make Medicare seem like an expensive “waste” of taxpayers’ dollars, if not end it completely.

    As for all of the national healthcare fans, it will increasingly become an easier sell, but once it hits, it may not be as popular. People don’t like to lose what they have. In Canada, you will stay healthier for less, but you won’t be able to just see a doctor when you want just for a sniffle or a hangnail. We are used to medical care on demand for any and all issues. National healthcare needs to use their resources with an eye to improving health for everyone. (I still prefer that idea, though).

  22. Theresa, Medicare penalizes hospitals if they discharge so early that the patient is re-admitted. But the broader point is that, regardless of the payment mechanism, we need to measure those aspects of quality that we can (including patients’ experience) if we are to promote high value care.

  23. Monotonous L. wrote:
    “Our wretched disgusting excuse for a Democratic Senator Joe Donnelly had this to say on CNN:
    “”But when you talk ‘Medicare-for-all’ …you start losing the people in Indiana,” Donnelly added. “When we start talking about, ‘Hey, we’re going to work together with the insurance companies to lower premiums,’ that’s what connects.”
    “Donnelly, just repeats a Corporate Right Wing Myth that the For Profit Insurance Industry is the best solution. The Republicans like I said have no plan for Universal Heath Care and Corporate Democrats like Donnelly want to continue feeding the beast of Insurance Companies. Item: In 2017, the CEO of Aetna alone made a whopping $59 million.”

    Anybody know where Donnelly (GOP-Lite) will be ‘working’ in 2019?

  24. Peggy was right about how hospitals calculate the cost of an aspirin, but that doesn’t explain why aspirin costs one patient $13, another $5, and another at $8.50. Sheila is right that there is no standard charge. So much administrative time is consumed just trying to figure out who is charged what according to which insurance company and plan and provider network. And then private, for-profit insurance companies must collect enough in premiums to pay top administrators multi-millions in salaries, perks, benefits, a private jet or two, and significant lobbying costs. It’s no wonder the administrative costs of the insurance companies alone are 8 times those of Medicare.

    Our record of the highest costs in the world for worse care is intact and will remain so until some form of universal care eliminates the inefficiencies and unnecessary costs of our current system. Better yet, more people will be healthier and live longer.

  25. I recently was in ER for loosing my sight & balance, dizziness. My anxiety about what was wrong was compounded by the environs of the department, and knowing that my care was expensive. I was placed in a hallway, along with other pts. due to overcrowding. The overhead bright lights & blaring speaker system added to my misery. The personnel were attentive & kind and seemed competent. I was glad they ordered a MRI of my brain to rule out stroke, but at the same time fearing that my Medicare & supplemental insurance wouldn’t cover the entire cost of that expensive test. After about 10 hrs. in ER I was admitted to a room with dim lights and where it was quiet. After more tests were run & no definitive diagnosis I ask to be sent home. I still have the dizziness, and have to be careful when standing as I await my bills from the hospital.

  26. Great article although it’s illegal to charge separate prices at one institution to different people. Discounts are another thing

  27. Kathy @ 12:42am

    I hope that alarming episode is not continuing.
    If that had happened to me I would review what food/drink I consumed that day and the day before. If I were on a low calorie diet (as for weight loss) I would discontinue it.

    Did someone in ER ask you about diet and about prescription medicines?

  28. kathy; can you ask your doctor to recheck the MRI, or seek an otologist to read it, and specifically look for vestibular irregularities? What you described sounds like a Meniere’s attack or one of the many other vestibular problems. As for being “dizzy”; did you feel as if you were spinning or was the room spinning around you? If the latter; that was a vertigo attack. Vestibular problems need to be specifically looked for; they aren’t something that pops up during exams or tests. First diagnosed in 1974 with Meniere’s; I have been disabled by it since 1994; the description of your attack fits Meniere’s. While my otologist was out of town after my MRI; a copy of it was sent to my primary physician who congratulated me for not having brain cancer. When I asked about the condition of my Meniere’s, he knew nothing about that but why wasn’t I happy to know I don’t have brain cancer.

    My current primary physician spent 5 years telling me I need physical therapy; I repeatedly told her I cannot do physical therapy due to severe imbalance and I have had therapy for that problem. Finally asked how much she knew about vestibular therapy and got a blank stare but no more orders to seek physical therapy. Sometimes we have to get into our own form of diagnostics because we know our own bodies. Just sayin’

  29. Thing is, in order to receive treatment patients are required to sign the paperwork accepting financial responsibility. This despite havinf absolutely no idea what the treatment will cost!! Because doctors, hospitals, and insurance companies won’t tell them!

    Unless it’s elective surgery. THEN you can get an accurate estimate.

  30. Stacy; you are so right. And does it ever occur to anyone who has had or plans to have surgery that ultimately they are all “elective; because they require your signature agreeing to the surgical procedure? Which usually includes the fine print stating they cannot be held responsible if anything goes wrong.

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