Medicare gets bad press as a big federal expense, but it is the hero of a recent expose on health care costs.
In fact, journalist and author Steven Brill, who investigated hospital costs nationwide, found huge markups on things you purchase as part of your hospital care.
Brill wrote the piece for Time magazine, and Time Managing Editor Richard Stengel cites the 10,000 percent markup hospitals put on acetaminophen as just one example.
In fact, Brill said on ABC’s This Week Sunday morning show Feb. 24, 2013, that if the introductory age for Medicare were lowered, not raised, health care costs would drop.
Unlike most businesses, hospitals charge you for everything you use, including the little paper cup you get with your acetaminophen in it. It probably costs the hospital pennies per cup to buy, but they might charge a few bucks for it.
And prices vary from place to place, as consumer adviser Clark Howard cited in an Atlanta Journal-Constitution column Feb. 28,2013.
What’s happening is that if you don’t have any insurance, you’ll get billed the marked-up price for your hospital care. Insurers, because they represent lots of people, can negotiate those prices down. And Medicare, the federal health insurance program for senior citizens, is only allowed to pay, by law, somewhere around the hospital’s cost for the item.
We can certainly debate whether hospitals would lose money if more people were on Medicare. Health care workers sing the blues over how little Medicare pays for things, and some providers won’t treat Medicare patients for that reason.
We also know that hospitals and other health care providers have to make up for those people whom they treat, but who can’t, or won’t, pay them. Hence, they mark up bills for paying patients to help recoup.
Brill also pointed out on This Week that Medicare processes claims for less than a dollar per claim, while private insurers pay about $20 to process each claim.
The point the Brill story makes is that insurance lowers medical costs. Medicare lowers them the best, but would a system in which everyone were on Medicare be sustainable? Would hospitals and other health care providers be able to survive on Medicare pricing?
Unlike other businesses, in which technological advantages and competition LOWER costs, technological innovation and competition can RAISE costs in the health care arena. Suppose Institution X get a CT scanner. Institution Y across town will want one, too, even though one scanner would probably service the whole area.
Institution Y doesn’t want to send its patients to Institution X for CT scans, out of fear that patients will elect to get all of their care at Institution X out of convenience. What if Institution Y LOWERED its prices because it doesn’t have the overhead to maintain the expensive CT scanner? If you cut your hand, would you want to pay the overhead for a CT scanner just to get a bandage?
The point is that people need to see, and care about, what things cost and how they are billed. Insurance makes people less concerned about that, but even though the patient may not be paying much of the cost, he still should negotiate bills. Don’t pay $5 for a paper medicine cup that you know costs the hospital a few cents. Or, better yet, have insurance for everyone and have the insurers negotiate prices down, Brill points out.
Health care is tricky, and there is plenty the average person doesn’t know, or care about. The Brill piece helped expose some of it, but it will be tough to get health care costs down considerably. Also, if we could reduce the costs considerably, how many health care providers can survive with the lower margins? Health care costs are high, in part, because we, as patients, don’t know where the money goes. If everyone were losing money, the system would have changed a long time ago. Someone, or some entities, benefit largely from this lack of knowledge. The money trail needs to be exposed, and the Brill piece goes a long way to do that.
If you don’t want to worry so much about costs, visit www.bign.com/pbilodeau. Not only will it help you save money on some medical care, it can help you earn enough money, perhaps, that you can easily pay for anything you need.

Peter