RIP off in healthcare

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scotto777 said:   "The expensive technology deployed on Janice S. was a bigger factor in her bill than the lab tests. An “NM MYO REST/SPEC EJCT MOT MUL” was billed at $7,997.54. That’s a stress test using a radioactive dye that is tracked by an X-ray computed tomography, or CT, scan. Medicare would have paid Stamford $554 for that test.

Janice S. was charged an additional $872.44 just for the dye used in the test. The regular stress test patients are more familiar with, in which arteries are monitored electronically with an electrocardiograph, would have cost far less — $1,200 even at the hospital’s chargemaster price."


The article goes on to say that the cheaper stress test would have been more than sufficient, however the hospital ordered the more expensive test to drive revenues and pay for their machine. While I agree that this like a part of the reason, the article doesnt mention (didnt get through the whole thing, so it may actually) about how these more advanced procedures are often driven out of fear of being sued. Should the patient have actually had legitimate heart problems and died, I guarantee you her family would have sued saying she would still be alive had the more advanced test been administered. Instances like these further drive up costs and overconsumption of healthcare services.


It does mention the removal (of all or most - can't remember) medical malpractice reform at the end as an issue as well.

dshibb quit hogging all the internet bandwidth for yourself, let others have some of the bandwidth too. for petes sake.

dshibb said:   NorthStar2020 said:   ryeny3 said:   When hospitals talk about the cost of providing care to uninsured patients, what rate structure are they basing these numbers on?

"IF" a hospital charges a Medicaid patient $10,000, a privately insured patient $20,000 and an uninsured patient $100,000 for the same service; when an uninsured patient doesn't pay, what is the cost of uncompensated care? Since requiring people to have insurance reduces the cost of uncompensated care, it would be reasonable to say that the cost to the hospital is the amount that it would have received if the patient had been insured and not the chargemaster rate that no insurance company pays.


In this case, an answer already exists. It'd be the cost plus model. The hospital should only write off what their actual costs are. This is a rule that IRS imposes for other businesses.
If you are a business selling widgets, cost of each widget is $10 and you sell it at $20. Let's say you sold 100 widgets to a customer and that customer stiffed you. You can only deduct $1000 as expenses in your tax return. IRS will not allow you to deduct $2000. Don't know why hospitals should be given a free pass.


But that isn't all of it.

There is tax accounting, financial accounting, and managerial accounting.

You sort of answered the first of the 3. I'm expecting to be given in answer for the latter 2. The last one is probably the most important because that governs how they operationally treat that loss for purposes of determining the amount of cost shifting they'll need to do in to make up for that loss.

In terms of the tax question if you are a for profit hospital you already are deducting the overhead, salaries, etc. associated with the business. So once you get to the actual procedure you are just going to write off the variable cost of service rendered, but not paid. But that doesn't represent your true cost you incurred because all of the other costs aren't factored in to that number(they don't need to be they were already deducted).

After thinking about it this what my guesses are:
From a financial standpoint the smart bet is that they would first figure out how much benefactor donations they'll receive for the year. They then look at that number and then realize that the most they can report for charity care claim is a number where the benefactor donations represent 30%(or whatever the percentage is I don't remember) of said number. They then try to go back and *likely* adjust the estimated losses down to fit with that percentage because otherwise if they reported a number where donations represented a lower percentage they wouldn't have a hope of receiving any claim money because they ran afoul with government regulated percentage of donations to be eligible for charity care claims.

My guess from an operational standpoint is that it might be a little bit all over the board, but I bet many use the full estimated insurance claim amount. I guess there it really doesn't matter all that much because if you assess a lower amount for the charity care cases than your going to be already assessing a higher amount for your normal insured patients and then add a lower journal entry adjustment to the insured group(and determine cost for the people that can pay for it). If you assess full estimated insurance claim amount to charity care patients than the journal entries for direct cost for normal insured patients will be lower, but with a higher journal entry adjustment added to those patients costs to account for the charity care group(the net affect is the same because obviously in both instances it's the people that can pay that will pay for that cost, but I think from a desire to find true operational cost so they can make the best decisions they'd likely use full estimated insurance reimbursement rates).


I don't know this is just what I was able to think up now. I'll know the real answer here soon.
Tax accounting is straightforward. Costs go up and revenue doesn't.

As you pointed out, managerial accounting is much more flexible. If an hospital wanted to minimize the costs of uncompensated care, he or she could count only variable costs. On the other hand, if the government was picking up the tab for some of the costs, adding in as much of the fixed costs as possible would benefit the hospital. If a hospital had to expand to handle an influx of nonpaying patients, one could argue that some portion of these costs should be considered as well.

scotto777 said:   "The expensive technology deployed on Janice S. was a bigger factor in her bill than the lab tests. An “NM MYO REST/SPEC EJCT MOT MUL” was billed at $7,997.54. That’s a stress test using a radioactive dye that is tracked by an X-ray computed tomography, or CT, scan. Medicare would have paid Stamford $554 for that test.

Janice S. was charged an additional $872.44 just for the dye used in the test. The regular stress test patients are more familiar with, in which arteries are monitored electronically with an electrocardiograph, would have cost far less — $1,200 even at the hospital’s chargemaster price."


The article goes on to say that the cheaper stress test would have been more than sufficient, however the hospital ordered the more expensive test to drive revenues and pay for their machine. While I agree that this like a part of the reason, the article doesnt mention (didnt get through the whole thing, so it may actually) about how these more advanced procedures are often driven out of fear of being sued. Should the patient have actually had legitimate heart problems and died, I guarantee you her family would have sued saying she would still be alive had the more advanced test been administered. Instances like these further drive up costs and overconsumption of healthcare services.


I definitely think it's a justifying factor, but honestly you have to go no further than a hospital that is willing to charge thousands of dollars for a procedure to stay alive and cover other costs is also the type of place that will order the more expensive option every time to also try to stay afloat.


I can tell you right now that it's the hospital administrators and consultants that are the most bleak about the whole problem because they know that any solution that will actually make it better eventually will just run right over the hospitals in the process. I mean let's say I wave a magic wand tomorrow and we've managed to get healthcare utilization rates down by 50%(which is what needs to happen) what happens that day? Well hospitals have less patient flow, but they are extremely operationally leveraged so what do they do? They start jacking rates exponentially and cutting back on capital investment and staffing trying to survive best they can. For a time being the insurance premiums stay the same because even though quantity of claims has fallen by half. Claim amounts are on their way to double to support the hospitals operating expenses. Many hospitals go bankrupt as the squeeze continues.

Finally, there is light at the end of the tunnel as they've managed to cut costs enough to bring their hospitals back to stability. From there competitive pressure brings down insurance reimbursement rates and finally insurance premiums start to fall.

That is what success looks like. But hospitals know that they're the ones that get ramrodded if this happens.

Also, what I described it basically impossible without just about every person in the country having skin in the game(high deductibles and co-pays--including those on Medicare/Medicaid).

xerty said:   Last I remember, they proved Medicare wasted 10% of their budget on fraud, and they guessed it was probably closer to 20%. If you're not committing Medicare fraud, you're not getting your money's worth.

Where did you get those numbers from?

jerosen said:   xerty said:   Last I remember, they proved Medicare wasted 10% of their budget on fraud, and they guessed it was probably closer to 20%. If you're not committing Medicare fraud, you're not getting your money's worth.

Where did you get those numbers from?


RED Associates research study.*


*Rectally Extracted Data

We have a horrible, screwed-up healthcare system. Obamacare makes it worse by relying on the same underlying principles when the whole thing should be torn down so that we can start fresh.

Healthcare costs less (both for the entities providing it and for the consumer thereof) and has a higher overall quality in essentially every other developed nation on earth. Most of these systems, perhaps all, use universal systems, although these do not necessarily resemble one another - the German system is nothing like the British system, for instance.

I'm not saying we should copy their model, perhaps it wouldn't work in the United States. But it seems abundantly clear that pretty much anything would be better than the system we have now.

So I got my answer back. I get what she said in terms of charity care and actually made more sense of some other things she's told me, but in terms of the financial/managerial accounting of that I get some of what she said, but she lost me a bit:

1) The process for accounting for charity care cases for the purposes of receiving government money is governed almost entirely by state by state very complicated protocol. First you have to maintain the 30% rule for donated funds in order to be eligible for anything. It is then handled primarily on a case by case basis "Where you have to prove the patients financial inability to pay based upon an exhausted quantity of criteria." That process is very time consuming and costly. In many instances the potential cost of going through, the probability of receiving government funds, vs. the amount that could be received render the process as a money loser. This made more sense out of a comment my sister made about the state of Maine's charity care program when she said that her company made it quite clear "Don't even bother to file any charity care cases with the state of Maine they haven't paid one in 2 years"(that was a few years ago). The physical loss incurred for the charity care 'claim' to the state in question is also determined by protocol and requires it to be 'proven'. I read that to mean that essentially you have to argue your case and the state in question will just determine what you should get(which will probably have to do more with their financial position than anything else).

2) Operationally from a financial standpoint a hospital traditionally uses their 'cash factor' to value the non payment case. The cash factor is usually around 30%. I asked so is that the estimated value of that debt--30 cents on the dollar? She said, "No, it's set by contractual arrangement". I asked her to explain that and she was just like "it's complicated", "contractual arrangements with the government, etc." and I didn't get it. So I then asked how does the hospital handle it from an a managerial accounting standpoint. So after whatever you can collect, get in donations from benefactors, collect from the government, etc., how do you apply what's left? "Bad debt of course" hospitals don't ever assess things on an that level of individual basis. "They always go from aggregate down to individual." So you take the aggregate non paid off bills, subtract whatever you were able to collect, subtract total donations, subtract total government money received, and you have bad debt. You can then take that bad debt number and divide it up among the remaining patients who have the capacity to pay and you have your number for which makes complete sense I guess. She also said that operationally all hospitals treat it a little bit differently based on what are local factors they're experiencing, the local risks, issues they have, etc.


So not quite the simple answer I thought it could be, but hopefully this sheds some light on it.

NorthStar2020 said:   Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.


You're all very welcome.

The government hopes you all die at 65.

VerbalK said:   NorthStar2020 said:   Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.


You're all very welcome.


Let's not confuse "overhead costs" and "overhead costs that are absorbed by Medicare". It is the first that matters, but we only look at the latter. Also, as someone else mentioned, if overhead between two entities is identical, but one entity has higher expenses, it will give the false impression of lower overhead when looked upon as a percentage.

dshibb said:   So I got my answer back. I get what she said in terms of charity care and actually made more sense of some other things she's told me, but in terms of the financial/managerial accounting of that I get some of what she said, but she lost me a bit:

1) The process for accounting for charity care cases for the purposes of receiving government money is governed almost entirely by state by state very complicated protocol. First you have to maintain the 30% rule for donated funds in order to be eligible for anything. It is then handled primarily on a case by case basis "Where you have to prove the patients financial inability to pay based upon an exhausted quantity of criteria." That process is very time consuming and costly. In many instances the potential cost of going through, the probability of receiving government funds, vs. the amount that could be received render the process as a money loser. This made more sense out of a comment my sister made about the state of Maine's charity care program when she said that her company made it quite clear "Don't even bother to file any charity care cases with the state of Maine they haven't paid one in 2 years"(that was a few years ago). The physical loss incurred for the charity care 'claim' to the state in question is also determined by protocol and requires it to be 'proven'. I read that to mean that essentially you have to argue your case and the state in question will just determine what you should get(which will probably have to do more with their financial position than anything else).

2) Operationally from a financial standpoint a hospital traditionally uses their 'cash factor' to value the non payment case. The cash factor is usually around 30%. I asked so is that the estimated value of that debt--30 cents on the dollar? She said, "No, it's set by contractual arrangement". I asked her to explain that and she was just like "it's complicated", "contractual arrangements with the government, etc." and I didn't get it. So I then asked how does the hospital handle it from an a managerial accounting standpoint. So after whatever you can collect, get in donations from benefactors, collect from the government, etc., how do you apply what's left? "Bad debt of course" hospitals don't ever assess things on an that level of individual basis. "They always go from aggregate down to individual." So you take the aggregate non paid off bills, subtract whatever you were able to collect, subtract total donations, subtract total government money received, and you have bad debt. You can then take that bad debt number and divide it up among the remaining patients who have the capacity to pay and you have your number for which makes complete sense I guess. She also said that operationally all hospitals treat it a little bit differently based on what are local factors they're experiencing, the local risks, issues they have, etc.


So not quite the simple answer I thought it could be, but hopefully this sheds some light on it.
Thank you and your sister. It's very helpful.

If it read this correctly, it sounds like the average uninsured patient might be more profitable than the average insured patient. Basically, a hospital bills a very high amount knowing that some will pay the full bill, some will negotiate a better rate, and some won't pay anything. If average hospital bill for an uninsured patient is $10,000 and the hospital expects to collect about 30% or $3,000 plus any donations or government assistance is added in, I wouldn't be surprised if not only Medicaid but private insurance pays even less than $3,000. "IF" every uninsured patient was coerced or incentivized to purchase health insurance, it's possible that hospitals total revenue for providing the same care would decline.

Because of their immigration status, some of the people who won't be required to have insurance may be too poor to make more than a minimal payment for their care, the numbers look even worse. I would be surprised if there are enough wealthy foreigners paying cash to offset the costs of providing care to the former group.

ryeny3 said:   dshibb said:   So I got my answer back. I get what she said in terms of charity care and actually made more sense of some other things she's told me, but in terms of the financial/managerial accounting of that I get some of what she said, but she lost me a bit:

1) The process for accounting for charity care cases for the purposes of receiving government money is governed almost entirely by state by state very complicated protocol. First you have to maintain the 30% rule for donated funds in order to be eligible for anything. It is then handled primarily on a case by case basis "Where you have to prove the patients financial inability to pay based upon an exhausted quantity of criteria." That process is very time consuming and costly. In many instances the potential cost of going through, the probability of receiving government funds, vs. the amount that could be received render the process as a money loser. This made more sense out of a comment my sister made about the state of Maine's charity care program when she said that her company made it quite clear "Don't even bother to file any charity care cases with the state of Maine they haven't paid one in 2 years"(that was a few years ago). The physical loss incurred for the charity care 'claim' to the state in question is also determined by protocol and requires it to be 'proven'. I read that to mean that essentially you have to argue your case and the state in question will just determine what you should get(which will probably have to do more with their financial position than anything else).

2) Operationally from a financial standpoint a hospital traditionally uses their 'cash factor' to value the non payment case. The cash factor is usually around 30%. I asked so is that the estimated value of that debt--30 cents on the dollar? She said, "No, it's set by contractual arrangement". I asked her to explain that and she was just like "it's complicated", "contractual arrangements with the government, etc." and I didn't get it. So I then asked how does the hospital handle it from an a managerial accounting standpoint. So after whatever you can collect, get in donations from benefactors, collect from the government, etc., how do you apply what's left? "Bad debt of course" hospitals don't ever assess things on an that level of individual basis. "They always go from aggregate down to individual." So you take the aggregate non paid off bills, subtract whatever you were able to collect, subtract total donations, subtract total government money received, and you have bad debt. You can then take that bad debt number and divide it up among the remaining patients who have the capacity to pay and you have your number for which makes complete sense I guess. She also said that operationally all hospitals treat it a little bit differently based on what are local factors they're experiencing, the local risks, issues they have, etc.


So not quite the simple answer I thought it could be, but hopefully this sheds some light on it.
Thank you and your sister. It's very helpful.

If it read this correctly, it sounds like the average uninsured patient might be more profitable than insured patients. Basically, a hospital bills a very high amount knowing that some will pay the full bill, some will negotiate a better rate, and some won't pay anything. If average hospital bill for an uninsured patient is $10,000 and the hospital expects to collect about 30% or $3,000 plus any donations or government assistance is added in, I wouldn't be surprised if not only Medicaid but private insurance pays even less than $3,000. "IF" every uninsured patient was coerced or incentivized to purchase health insurance, it's possible that hospitals total revenue for providing the same care would decline. Since some people because of their immigration status won't be required to have insurance and the possibility that these individuals are too poor to make more than a minimal payment for their care, the numbers look even worse.


I'm almost positive that isn't correct. Based on the way she was speaking and what I could understand that is not at all what I gathered.

Notice how when I asked her if she was saying the value of said debt was 30 cents on the dollar and she said no. So she clearly wasn't giving me an average collection rate(at least I don't think and if it was it could just refer to the 30% of benefactor donations), and furthermore she gave me that as a response to how they determine whether to use the medicare reimbursement rate, the insurance rate, etc. I don't know what she meant by 'cash factor' maybe someone else can better explain it(she's busy and not the type that likes to talk shop so there is a limit to how much I can press her).

But based on how she responded it the 30% cash factor was implied as a tool to understand how they figure the amount lost and not some recovery rate they used to value the receivable(If she did say Yes, I would have corrected her and pointed out that wasn't what I was asking).

dshibb said:   ryeny3 said:   dshibb said:   So I got my answer back. I get what she said in terms of charity care and actually made more sense of some other things she's told me, but in terms of the financial/managerial accounting of that I get some of what she said, but she lost me a bit:

1) The process for accounting for charity care cases for the purposes of receiving government money is governed almost entirely by state by state very complicated protocol. First you have to maintain the 30% rule for donated funds in order to be eligible for anything. It is then handled primarily on a case by case basis "Where you have to prove the patients financial inability to pay based upon an exhausted quantity of criteria." That process is very time consuming and costly. In many instances the potential cost of going through, the probability of receiving government funds, vs. the amount that could be received render the process as a money loser. This made more sense out of a comment my sister made about the state of Maine's charity care program when she said that her company made it quite clear "Don't even bother to file any charity care cases with the state of Maine they haven't paid one in 2 years"(that was a few years ago). The physical loss incurred for the charity care 'claim' to the state in question is also determined by protocol and requires it to be 'proven'. I read that to mean that essentially you have to argue your case and the state in question will just determine what you should get(which will probably have to do more with their financial position than anything else).

2) Operationally from a financial standpoint a hospital traditionally uses their 'cash factor' to value the non payment case. The cash factor is usually around 30%. I asked so is that the estimated value of that debt--30 cents on the dollar? She said, "No, it's set by contractual arrangement". I asked her to explain that and she was just like "it's complicated", "contractual arrangements with the government, etc." and I didn't get it. So I then asked how does the hospital handle it from an a managerial accounting standpoint. So after whatever you can collect, get in donations from benefactors, collect from the government, etc., how do you apply what's left? "Bad debt of course" hospitals don't ever assess things on an that level of individual basis. "They always go from aggregate down to individual." So you take the aggregate non paid off bills, subtract whatever you were able to collect, subtract total donations, subtract total government money received, and you have bad debt. You can then take that bad debt number and divide it up among the remaining patients who have the capacity to pay and you have your number for which makes complete sense I guess. She also said that operationally all hospitals treat it a little bit differently based on what are local factors they're experiencing, the local risks, issues they have, etc.


So not quite the simple answer I thought it could be, but hopefully this sheds some light on it.
Thank you and your sister. It's very helpful.

If it read this correctly, it sounds like the average uninsured patient might be more profitable than insured patients. Basically, a hospital bills a very high amount knowing that some will pay the full bill, some will negotiate a better rate, and some won't pay anything. If average hospital bill for an uninsured patient is $10,000 and the hospital expects to collect about 30% or $3,000 plus any donations or government assistance is added in, I wouldn't be surprised if not only Medicaid but private insurance pays even less than $3,000. "IF" every uninsured patient was coerced or incentivized to purchase health insurance, it's possible that hospitals total revenue for providing the same care would decline. Since some people because of their immigration status won't be required to have insurance and the possibility that these individuals are too poor to make more than a minimal payment for their care, the numbers look even worse.


I'm almost positive that isn't correct. Based on the way she was speaking and what I could understand that is not at all what I gathered.

Notice how when I asked her if she was saying the value of said debt was 30 cents on the dollar and she said no. So she clearly wasn't giving me an average collection rate, and furthermore she gave me that as a response to how they determine whether to use the medicare reimbursement rate, the insurance rate, etc. I don't know what she meant by 'cash factor' maybe someone else can better explain it(she's busy and not the type that likes to talk shop so there is a limit to how much I can press her).

But based on how she responded it the 30% cash factor was implied as a tool to understand how they figure the amount lost and not some recovery rate they used to value the receivable(If she did say Yes, I would have corrected her and pointed out that wasn't what I was asking).
I was interested in what rate schedule the hospital used to value the cost of caring for the uninsured and it sounds like it is the "rack rate." I just wanted a rough number to use in my example and 30% seemed like a good starting point. I understood from your explanation that the cash factor wasn't the same as the expected recovery rate.

ryeny3 said:   I was interested in what rate schedule the hospital used to value the cost of caring for the uninsured and it sounds like it is the "rack rate." I just wanted some number to use in my example and 30% seemed like a good starting point. I understood from your explanation that the cash factor wasn't the same as the expected recovery rate.

Yeah that was what I was after as well, but she was just basically like "it's complicated" it's determined by this tool we call a 'cash factor'. Probably should have asked her what rate schedule that will most closely mimic, but I didn't think of framing it that way. It doesn't help that we frequently speak in a different style and misunderstand each other quite a bit. Whenever I'm done talking with her about something complicated I usually have the feeling of trying to interpret whatever she just said afterward(and she never usually has the patience to walk me through anything).

I might try again to get more clarity, but I know she's on a very hectic schedule today and tomorrow and I could sense she was a little worn when I talked to her.

gendos said:   ER mandated by most states to treat everyone with or without insurance. Medicare and insurance companies pay actual cost of procedure + some extra $$$ . Yet hospital has cost involved in providing services to uninsured . Most uninsured do not pay ER bills , therefore hospitals forced to bill some astronomical amounts in hopes to recover some cost . Additionally, even insurance companies are paying some extra $$ to offset cost of uninsured patients . Buttom line - most of us already paying for medical cost of uninsured patient
It is a federal law--not state--that the ER must treat anyone who presents with an emergency without regard to ability to pay: http://en.wikipedia.org/wiki/Emergency_Medical_Treatment_and_Act...
However the criteria about emergencies are very specific, and once you are stabilized the hospital can transfer you somewhere else.
Interestingly, it only applies to hospitals accepting medicare and medicaid. So if medicare and medicaid are money losers as claimed by some hospitals/providers, I don't understand why hospitals won't stop taking both programs and then they can also refuse service to uninsured persons.

MilleniumBuc said:   Wow. No wonder we are screwed. The sad reality from the following 2 paragraphs:

"Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market."

"... the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives."



Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand, but there is a line that has to be drawn on the price of lives.


Kenneth Arrow, one of the if not the most influential microeconomist of our time, wrote a great paper on healthcare all the way back in 1963. It lays out step by step why markets, which are typically highly successful at organizing economic activity, fail so badly in the case of healthcare. He went on to win the Nobel Prize in Economics for this work, among others.

Uncertainty and the Welfare Economics of Medical Care

biomedeng said:   gendos said:   ER mandated by most states to treat everyone with or without insurance. Medicare and insurance companies pay actual cost of procedure + some extra $$$ . Yet hospital has cost involved in providing services to uninsured . Most uninsured do not pay ER bills , therefore hospitals forced to bill some astronomical amounts in hopes to recover some cost . Additionally, even insurance companies are paying some extra $$ to offset cost of uninsured patients . Buttom line - most of us already paying for medical cost of uninsured patient
It is a federal law--not state--that the ER must treat anyone who presents with an emergency without regard to ability to pay: http://en.wikipedia.org/wiki/Emergency_Medical_Treatment_and_Act...
However the criteria about emergencies are very specific, and once you are stabilized the hospital can transfer you somewhere else.
Interestingly, it only applies to hospitals accepting medicare and medicaid. So if medicare and medicaid are money losers as claimed by some hospitals/providers, I don't understand why hospitals won't stop taking both programs and then they can also refuse service to uninsured persons.


You didn't understand the post I made before explaining this did you?

Okay your a company and you hire a person and pay them $50k to do a job. He makes custom created computers. The variable costs of creating a computer are lets say $500. Let's say you estimate 100 orders this year. $50k/100 = $500 in fixed cost per order. That means that in order for you to remain in the black you need to average at least $1000 per job. Now you have come to find out that 30 of those potential orders have fell under this umbrella called Medicare and they are telling you take it or leave it, but you're only getting $700 for computers.

Now you can refuse them and say absolutely not and get:

$50k/70= $715 in fixed cost + $500 = a minimum of $1215 per computer to break even.

or you can accept them and get:

$700-$500(variable) = $200 towards fixed costs. $200*30=$6000. $50000-$6000=$44000.

$44,000/70 = $630. $630 + 500 = $1130 per computer for the remaining 70 people to break even.

But in either way the construct has essentially screwed everybody else because it would have been $1000 and they just forced price shifting on to other people.


This illustrates the difference between contribution margin and profit margin. The system would collapse instantaneously if everybody got Medicare pricing, but when only some people get it they only have to in aggregate pay more that the variable costs in order for hospitals to agree to it.

Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand,

" but there is a line that has to be drawn on the price of lives."

So you would support only selling cars with a base price of $80,000 that can withstand much higher impacts than current cars. -It will save lives and auto companies constantly fight safety features due to cost.

Planes with escape pods so they are the size of a 757 but only carry 25 people at $3000 for a Coach ticket. -but you will survive a catastrophe.

Do you feel cheap healthcare is a right?

cristinaaaron said:   There is so much fraud in medicare that they justify the reimbursement rates.

There is no way that it is possible the true cost of a chest xray is $21 when the process normally involves 30min of time for an xray technician with a loaded salary of $80k/year ($50k pay + $30k benefits), cost for device time, facility cost, and billing cost. The only way this reimbursement rate is feasible is if a high percentage of claims are fraudulent (which they are).

Sure, the normal cost for these procedures is inflated, but the medicare cost is artificially low because a huge percentage of procedures which medicare pays are in actuality not done.

30 min time for chest x-ray? it is pretty much like in and out in 5 minutes. Rest of the time is baggage.

enc0re said:   MilleniumBuc said:   Wow. No wonder we are screwed. The sad reality from the following 2 paragraphs:

"Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market."

"... the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives."



Might as well say it. Healthcare (Profit and Non-for-Profit) will push the price as high as you can for a very simple proposition: How much are you willing to pay to live without pain - or even further - to remain alive. I support capitalism, supply and demand, but there is a line that has to be drawn on the price of lives.


Kenneth Arrow, one of the if not the most influential microeconomist of our time, wrote a great paper on healthcare all the way back in 1963. It lays out step by step why markets, which are typically highly successful at organizing economic activity, fail so badly in the case of healthcare. He went on to win the Nobel Prize in Economics for this work, among others.

Uncertainty and the Welfare Economics of Medical Care


People have been claiming certain markets are special for decades. The food industry has been slapped with the same label yet works very, very well in the United States. The education industry was slapped with the same label and got the attention of government and now the average adult American cannot even pass a 6th grade exit exam from the late 1800s(read they are getting increasingly less educated).



I mean seriously answer this question once. How do you reconcile the fact that the 3 industries that we Americans complain the most about Healthcare, education, and financial services just so happen to be the 3 industries which with government is most involved? If you say they are involved primarily because they are vital industries you bring up a falsehood because the food industry is even more vital yet and has less government involvement than the above 3 and works fine.

I mean seriously think about that for a while.

sensia said:   cristinaaaron said:   There is so much fraud in medicare that they justify the reimbursement rates.

There is no way that it is possible the true cost of a chest xray is $21 when the process normally involves 30min of time for an xray technician with a loaded salary of $80k/year ($50k pay + $30k benefits), cost for device time, facility cost, and billing cost. The only way this reimbursement rate is feasible is if a high percentage of claims are fraudulent (which they are).

Sure, the normal cost for these procedures is inflated, but the medicare cost is artificially low because a huge percentage of procedures which medicare pays are in actuality not done.

30 min time for chest x-ray? it is pretty much like in and out in 5 minutes. Rest of the time is baggage.


That is incorrect, but let's just presume it was for a second because this will illustrate real quick why the population has a faulty logic on how business activity actually occurs.

40 hours a week for 52 weeks = 2080 hours a year(if you don't include vacation/sick leave). 2080 hours a year* 60 minutes = 124,800 minutes of work. Divide that by 5 minutes(5 min for each procedure) = 24960 procedures a year(putting aside the fact that it would be impossible for them to keep up with that many) if they were able to do them back to back at 5 minute intervals. Are people trinkets on an assembly line? Do they break bones with regular consistency and at the quantity to keep someone constantly at work? No! The value of your time isn't set at the number of procedures you can do, but the rate at which people come into you to have them done.


Next let's assume again for a second that there are no other costs associated with providing an X-Ray than a technician's time(hugely untrue, but whatever). $80k a year, right? $80,000/$21 = 3810 X rays a year. That means that you would have to have someone coming into your hospital with a broken whatever every 32 minutes in order to break even on just that single salary. What rural hospital for example has a population of people breaking bones every 32 minutes? And that doesn't even factor in doctor time, nurse time, X-Ray machine amortization, the film that the X ray prints on, *and the f*cking cost of the building, claims department, utilities, cleaning staff, and all the other costs associated with running a hospital.*


^^^This problem here. The problem of the population not understanding basic accounting is at the root of a lot of issues. If people actually understood it our politics wouldn't be retarded and people would be a lot more successful starting businesses.

cristinaaaron said:   There is so much fraud in medicare that they justify the reimbursement rates.

There is no way that it is possible the true cost of a chest xray is $21 when the process normally involves 30min of time for an xray technician with a loaded salary of $80k/year ($50k pay + $30k benefits), cost for device time, facility cost, and billing cost. The only way this reimbursement rate is feasible is if a high percentage of claims are fraudulent (which they are).

Sure, the normal cost for these procedures is inflated, but the medicare cost is artificially low because a huge percentage of procedures which medicare pays are in actuality not done.


I get paid more from medicare to pluck/epilate an eyelash. That doesn't sound right to me.....

Unless its am emergency I ask questions, I've negotiated better prices than insurance, paid cash and filed on my own. People that don't shop ill never understand. Same for prescriptions, each store is just hoping to get you to buy all of the drugs from them.. Shop for each prescription, with and without insurance. You'll be surprised.

fatzz said:   what's all the complaining, the "affordable healthcare act" is going to make everything a lot cheaper or free,dont you remember we were told that for years now, you have to 'BELIEVE"...there better not be anyone on here complaining if they voted for mr. wonderful...choi baby

Red for a comment that lacked substance.

BrodyInsurance said:   VerbalK said:   NorthStar2020 said:   Medicare, how much ever anybody hates it is one of the most efficient organizations in the world with just 2-3% overhead costs, operating at a gigantic scale.
We should target for Medicare prices, not hospital prices and not insurance negotiated prices.


You're all very welcome.


Let's not confuse "overhead costs" and "overhead costs that are absorbed by Medicare". It is the first that matters, but we only look at the latter. Also, as someone else mentioned, if overhead between two entities is identical, but one entity has higher expenses, it will give the false impression of lower overhead when looked upon as a percentage.


I don't know way you mean, but I just successfully maneuvered through one of the most ridiculous 2 billion dollar (annual) payment cuts this week. It is the definition of "arbitrary and capricious", but if I was a RAC and got to "eat what I kill", I'd could retire.

Unless its am emergency I ask questions, I've negotiated better prices than insurance, paid cash and filed on my own. People that don't shop ill never understand. Same for prescriptions, each store is just hoping to get you to buy all of the drugs from them.. Shop for each prescription, with and without insurance. You'll be surprised.

For some things yes but for drugs that have no generic you cannot negotiate a discount. You can't buy Zyvox for less that $85 per pill (quoting counterfiet drug prices from India or Turkey does not count).

Not all hospitals are alike. While you might have a teaching hospital or another with a specialized branch, your typical local hospital is not going to rake in the money with overpriced procedures. Medicare does not cover costs. Medicaid is worse. The return on individuals with no insurance is almost nothing. Sure they can ask in advance for these things that allow for advanced notice, but if someone walks into the hospital, sick and cared for for days without insurance, the hospital will likely see nothing for that.

Let's say they knew the cost ahead of time, would she have taken her husband to the same hospital or go somewhere more affordable. It seems her decision was based on previous experience, wanting the best.

tmwilkin said:   Unless its am emergency I ask questions, I've negotiated better prices than insurance, paid cash and filed on my own. People that don't shop ill never understand. Same for prescriptions, each store is just hoping to get you to buy all of the drugs from them.. Shop for each prescription, with and without insurance. You'll be surprised.
How do I price comparison shop when I don't know what prices are better than insurance? Sure with a pharmacy you can price the medicine with or without insurance. But even going to the doctor's office or getting labwork there is no way to know what the insurance rate is until they bill your insurance. And the 'discount' you got with cash, might be 30-50%, but the discounts gotten with insurance are often 60-90%.

dshibb said:    This illustrates the difference between contribution margin and profit margin. The system would collapse instantaneously if everybody got Medicare pricing, but when only some people get it they only have to in aggregate pay more that the variable costs in order for hospitals to agree to it.
I understand what you are saying. I get that taking medicare is better than not taking it. But I am sick of all the other people on these threads saying that:
Nessy said: Medicare does not cover costs. Medicaid is worse.
My point was just that it is technically possible for hospitals to refuse medicaid/medicare, and then they could also then refuse emergency care for people who won't pay. The fact that no hospital does this indicates to me it is financially beneficial to take these government programs and the burden of uninsured ER patients.

biomedeng said:   dshibb said:    This illustrates the difference between contribution margin and profit margin. The system would collapse instantaneously if everybody got Medicare pricing, but when only some people get it they only have to in aggregate pay more that the variable costs in order for hospitals to agree to it.
I understand what you are saying. I get that taking medicare is better than not taking it. But I am sick of all the other people on these threads saying that:
Nessy said: Medicare does not cover costs. Medicaid is worse.
My point was just that it is technically possible for hospitals to refuse medicaid/medicare, and then they could also then refuse emergency care for people who won't pay. The fact that no hospital does this indicates to me it is financially beneficial to take these government programs and the burden of uninsured ER patients.


I think it's more of a practical matter -- it's next to impossible to do so.

stanolshefski said:   I think it's more of a practical matter -- it's next to impossible to do so.
Many doctors do not take medicaid, a fair number are starting to refuse medicare.
Also some hospitals have begun to refuse medicaid patients:
http://sundaygazettemail.com/News/201011091397?page=1
http://www.healthleadersmedia.com/content/HEP-272588/2-hospitals...
Even Mayo has done this (note they even cut off some medicare patients seeking primary care):
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/12/...
So it is possible.

biomedeng said:   dshibb said:    This illustrates the difference between contribution margin and profit margin. The system would collapse instantaneously if everybody got Medicare pricing, but when only some people get it they only have to in aggregate pay more that the variable costs in order for hospitals to agree to it.
I understand what you are saying. I get that taking medicare is better than not taking it. But I am sick of all the other people on these threads saying that:
Nessy said: Medicare does not cover costs. Medicaid is worse.
My point was just that it is technically possible for hospitals to refuse medicaid/medicare, and then they could also then refuse emergency care for people who won't pay. The fact that no hospital does this indicates to me it is financially beneficial to take these government programs and the burden of uninsured ER patients.


I'll admit that is a fair point.

But there is a limit to that. It doesn't make anybody on here feel better about it because it only means the government sets the reimbursement rate just high enough for hospitals to be a willing participant in fleecing us.

Furthermore, once the hospitals have accepted that it still means that they we're stuck with the not only the cost shifting onto us, but also with the overutilization that comes with it...both of which drives up our insurance premiums.

biomedeng said:   stanolshefski said:   I think it's more of a practical matter -- it's next to impossible to do so.
Many doctors do not take medicaid, a fair number are starting to refuse medicare.
Also some hospitals have begun to refuse medicaid patients:
http://sundaygazettemail.com/News/201011091397?page=1
http://www.healthleadersmedia.com/content/HEP-272588/2-hospitals...
Even Mayo has done this (note they even cut off some medicare patients seeking primary care):
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/12/...
So it is possible.


Doctors not accepting Medicare (not very common, but slowly becoming more common) or Medicaid (very common) is one thing, but it's quite another for hospitals. There's a certain expectation that people who show up in emergency rooms will have their emergencies tended to -- not doing so may cause greater goodwill losses than could ever be saved by not treating people unable to pay for emergency medical services.

In addition, there may be state laws that mandate emergency care outside of COBRA (Comprehensive Omnibus Reconciliation Act of 1985).

stanolshefski said:   biomedeng said:   stanolshefski said:   I think it's more of a practical matter -- it's next to impossible to do so.
Many doctors do not take medicaid, a fair number are starting to refuse medicare.
Also some hospitals have begun to refuse medicaid patients:
http://sundaygazettemail.com/News/201011091397?page=1
http://www.healthleadersmedia.com/content/HEP-272588/2-hospitals...
Even Mayo has done this (note they even cut off some medicare patients seeking primary care):
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/12/...
So it is possible.


Doctors not accepting Medicare (not very common, but slowly becoming more common) or Medicaid (very common) is one thing, but it's quite another for hospitals. There's a certain expectation that people who show up in emergency rooms will have their emergencies tended to -- not doing so may cause greater goodwill losses than could ever be saved by not treating people unable to pay for emergency medical services.

In addition, there may be state laws that mandate emergency care outside of COBRA (Comprehensive Omnibus Reconciliation Act of 1985).


It's actually more practical than that. You essentially can't have an ER and refuse Medicaid/Medicare/EMTA. You're plugged into government emergency dispatch system and there is essentially no practical method at scene for checking whether someone has health insurance vs. Medicaid, Medicare, no insurance. So hospitals with ER are always stuck with Medicare/Medicaid/EMTA.

Now it's clinics that are a more interesting subject matter. They don't need to provide emergency services. I'm curious as to what other issues they might have that weigh on their decision to refuse Medicare/Medicaid/EMTA. For the time being I'm content knowing that reimbursement rates are priced just high enough to make a marginal improvement in their financial situation to accept it which is truly sad for a business as capital intensive as a hospital.

cestmoi123 said:   jerosen said:   [Where did you get those numbers from?*Rectally Extracted Data
Sadly I don't have to make this stuff up:

http://www.forbes.com/forbes/2010/0510/opinions-insurance-fraud-...

Forbes said: The Centers for Medicare & Medicaid Services acknowledge $47 billion a year in "questionable claims" (i.e., fraud) in Medicare--about 10% of the program's $480 billion budget. Attorney General Eric Holder puts fraud even higher, at maybe $60 billion. In contrast, private-sector health insurers, which spend more than $600 billion a year on claims, keep the fraud rate to 1.5%...

Medicaid (slitly different, I know) estimates 10% fraud and 20-30% more in waste. $2M fraud/patient in NY - ouch.

http://www.thenewamerican.com/usnews/health-care/item/13146-medi...

You know when the mob gives up on H&B in NYC to move down to Florida to run Medicare scams, we're talking Big Bucks with little chance of being caught.

http://www.forbes.com/sites/merrillmatthews/2012/05/31/medicare-...

Federal officials set up the Medicare Fraud Strike Force in 2007, which visited at random nearly 1,600 businesses in Miami, ground zero for Medicare fraud, that had billed Medicare for durable medical equipment. Officials found that nearly a third of the businesses, 481, didn’t even exist, yet they had billed Medicare for $237 million over the previous year, according to National Public Radio.

Indeed, scamming Medicare and Medicaid is so lucrative that the Russian and Nigerian mobs have gotten involved. And one of the New York crime families has moved to Florida because defrauding Medicare is both more lucrative and less dangerous than some of the traditional organized crime activities.

Here is a piece of information that should freak everyone out and crystallize the issue about utilization.

Doctor's represent about .3% of the US population okay. The average doctor sees about 15 patients a day. That means that 4.5% of the US population is seeing a doctor every single day.

If each doctors visit represented a unique person without any repeat visits 1,170% of the population would have seen the doctor in a year and that assumes every doctor works 5 days a week(when in reality is that it's slightly more if you figure in the new entrants being overworked from the start). That represent over 10 times the population. Now we all know it's actually the same people going in repeatedly, but that is staggeringly high.

The only way to get healthcare costs down is to get that percentage down, period! You have 2 choices how to do it. You can either have the government or insurance carriers constrict utilization rate by bureaucratic fiat or you can say to people "okay you want to use that much, fine you now have to pay out of pocket for more and less people will be willing to fork out dough for stuff they don't need." There is no other way around it.

I graduated from med school in India - and there are plenty of radiology clinics in the affluent areas of major metropolitan areas that charge something like $5-$8 for an X-ray. An MRI with contrast of the head/neck region would cost around $200. The same MRI here costs $2,000 or more. Do note that a lot of times I've seen more expensive and advanced equipment used for the $200 scans, so it's not like the $200 charge is because of an inferior machine. Most equipment used globally is the same - Siemens, GE, etc. Granted that doctors/staff in India get paid a lot less than their US counterparts.. but isn't the entire point of medicine to *help* people? Not gouge them? I don't mind paying a reasonable amount of money for treatment.. but when they sent me a bill for $500 for laying on a bed in the ER for 15 minutes (just monitoring my BP.. had a panic attack once) then it's nuts!

If I thought that medical costs were shocking when I moved here.. I was even more surprised by dental expenses. $1,500 for a root canal? Get the same for $50 back home - same equipment. It's a joke when profits are a priority when it comes to essential services like healthcare and education.

dshibb said:   It doesn't make anybody on here feel better about it because it only means the government sets the reimbursement rate just high enough for hospitals to be a willing participant in fleecing us.

Furthermore, once the hospitals have accepted that it still means that they we're stuck with the not only the cost shifting onto us, but also with the overutilization that comes with it...both of which drives up our insurance premiums.

I will agree if the reimbursement rate from the government is low, then the cost is shifted to those with private insurance.
But if the reimbursement rate was set higher, we might pay less for private insurance, but we would definitely have to pay more in taxes. Also with a higher reimbursement rate the overutilization would be worse as more people would accept the government plans. Just look at the things the government overpays for (e.g. those medical scooters) and then you realize that businesses will spring up (the scooter store) just to service these areas.
Seems like a no-win situation to me.

Medicare will pay hospitals more for the same service than when performed in a private physician practice. So now many physicians will opt to be a hospital employee because they can earn more for the same amount of work. The upshot of this Medicare ploy is the bills to patients have been higher according to WSJl article several months ago.
Why does Medicare not worry about this problem? First it's not their money, but also hospital chains will be easier to control later when rationing is necessary. Solo physicians are hard to control by government employee here to help us. (sic)

Medicare is opaque as to what and when it will cover a procedure. So a patient could be charged much more when Medicare refuses payment than Medicare would otherwise pay. There should be a limit on how much more it should cost.



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