Uninsured Americans Get Hit With Biggest Hospital BillsCharles R. Babcock
By the time Astra Augustus left Virtua Memorial Hospital in New Jersey after the last of four surgeries, she’d run up about $255,000 in bills.
At first, Augustus said, she thought she was lucky. Virtua gave her a charity discount, to $30,530. Then she got statements from the doctors who treated her in the hospital, adding $18,000. “I didn’t know who to pay first,” Augustus said.
Virtua sued last month after she fell behind in her $400-a-month installment plan. While the nonprofit hospital had been generous, she said, the debt is still overwhelming for someone with a monthly income of $2,200.
Hospitals’ fast-rising sticker prices are adding to the financial burdens of the 49 million Americans without insurance, more than 20 million of whom won’t be covered under President Barack Obama’s Affordable Care Act.
So-called full charges at hospitals grew an average 10 percent a year between 2000 and 2010, according to Gerard Anderson, a Johns Hopkins University professor who analyzed hospital financial reports. The charges went up at four times the pace of inflation, and faster than hospital costs, which Anderson said increased an average 6 percent a year.
While the charges appear on hospital invoices across the U.S., the amounts people actually pay vary widely, depending on their health coverage. The system is so irrational that those without any insurance can get stuck owing the most money, said David Himmelstein, a professor at City University School of Public Health at Hunter College in New York.
“It’s unconscionable,” said Himmelstein, who co-authored a 2009 study that found illness and medical debt was a factor in more than 60 percent of personal bankruptcies. “It adds to the already grave suffering of the uninsured.”
Rich Umbdenstock, president of the American Hospital Association, doesn’t defend the pricing structure. He said it’s part of a “broken system” that has evolved over decades and that hospitals can’t change on their own.
Full charges keep rising because hospitals have to try to make up for charity care, debts they can’t collect and inadequate reimbursements from the government Medicare and Medicaid programs, Umbdenstock said.
“If we could have fixed this, we would’ve,” he said. “Why would we want to perpetuate this?” Stories about people facing insurmountable bills are “one of the toughest PR issues we have” and damage the industry’s credibility, Umbdenstock said.
While “hospitals are not victims,” he said, “we are caught up in a larger system.” He said that unfortunately for some uninsured Americans, it’s a “crazy system.”
The nation’s 5,000 community hospitals provided $41 billion in uncompensated care in 2011, or 5.9 percent of total expenses, according to the Washington-based trade group. That number was calculated from the costs of the care, not the full charges, and included charity and bad debt, or what’s owed after attempts to collect, according to the AHA.
The “vast majority” of patients pay less than the full charges billed, Umbdenstock said. Medicare and Medicaid rates for the most part don’t cover costs, while private insurers strike deals that average 34 percent above costs, AHA data show.
Between 2000 and 2010, payments to hospitals went up at the same average annual rate as hospitals’ costs, according to Anderson, director of the Center for Hospital Finance and Management at the Bloomberg School of Public Health at Johns Hopkins in Baltimore. The school is named for Michael Bloomberg, the principal owner of Bloomberg News publisher Bloomberg LP.
The average full-charge bill was 2.5 times costs in 2000 and 3.6 times costs 10 years later, Anderson said. He analyzed data contained in reports hospitals file annually with U.S. regulators outlining what they spend, what they charge and what they’re paid.
Markups over costs varied widely, even geographically, according to Anderson. They were highest in 2010 in Nevada, where the average full-charges bill was 5.91 times costs. Pennsylvania was second at 5.58 times and New Jersey third at 5.3 times. In Maryland -- which has a hospital price control law -- the average was 1.37 times costs, the lowest in the U.S.
That range is evidence that full charges “have no relationship to reality,” said David Knowlton, president of the New Jersey Health Care Quality Institute, a Pennington-based nonprofit. They’re like automobile sticker prices, starting points for bargaining, he said. “You’re going to highball me, then discount from that. That’s just what hospitals do.”
Anderson, a critic of hospital billing practices who has testified as a paid expert witness on behalf of plaintiffs claiming they were overcharged, said it was difficult to predict whether the 2010 health-care law would have any limiting effect on full-charge growth.
“A rational argument would be that the ratios would stop growing because hospitals will have additional revenue because of the increasing number of insured and will not have to markup the charges as much,” Anderson said. “However, old habits take a long time to die. There is not any real adverse impact to the hospital if they raise charges.”
The health-care law will by 2017 expand coverage so that 27 million more Americans will have insurance, according to Congressional Budget Office estimates.
Most people without coverage are in working families, according to the Kaiser Commission on Medicaid and the Uninsured. About 63 percent were in households with incomes under $50,000 in 2011, according to a September report by the U.S. Department of Health and Human Services. Such households took a bigger financial hit between 2000 and 2010 than the rest of the population: Their average income fell 9.6 percent between 2000 and 2010, according to the U.S. Census Bureau, while the average drop for people in households earning more than $50,000 was 5.5 percent.
While a provision in the health-care law is aimed at protecting those who will remain uncovered, it won’t be much of a safeguard from full charges, said Glenn Melnick, a health care finance professor at the University of Southern California in Los Angeles who has studied the uninsured population.
Unlike measures in eight states that cap the amounts hospitals can ask from low-income residents who don’t have insurance, the federal act doesn’t set firm limits.
Proposed regulations from the Internal Revenue Service say that nonprofits, about 58 percent of community hospitals, can demand “not more than the amounts generally billed to individuals who have insurance.” For-profit institutions won’t be subject to the rules. The proposed regulations let hospitals choose how they calculate generally-billed, either by using a Medicare rate or a combination of Medicare and private insurer payments.
The language is too vague, Melnick said. He said state laws work because they’re clear-cut.
In California, for example, a person whose family income is 350 percent of the U.S. poverty level or less pays the Medicare rate, in effect. Before that measure was adopted in 2007, California hospitals collected 23 percent of full charges from the uninsured, Melnick said, and by 2011 it was down to 12 percent.
While the federal provision may be imprecise, it’s “one of the few things in the law that protects individual patients and their pocketbook,” said Jessica Curtis, director of the Hospital Accountability Project at Community Catalyst, a Boston-based nonprofit. “It will be significant progress if we ever get a final rule and someone to monitor and enforce it.”
The California measure didn’t help Matthew Boehm when he went to the Santa Clara Valley Medical Center four years ago with chest pains, which he said turned out to be symptoms of an anxiety attack. Boehm, now 44, was a graduate student, and his wife was a school teacher. To save money, they’d not added him to her insurance plan, he said, and she earned too much for him to be eligible for curtailed rates.
Boehm said he was shocked to learn he owed the hospital $21,628. Now he’s offering to settle up for $3,000, he said. “I am being asked to pay for it in full. It’s ridiculous.”
The hospital’s debt review committee will consider Boehm’s proposed settlement on Thursday, Gwendolyn Mitchell, the county’s director of public affairs, said in an e-mail.
In New Jersey, Astra Augustus did get a big discount, but still faces financial difficulties, after “a sharp pain hit me like I never felt in my life” in October 2011.
At the time, she was 64 -- eight months from eligibility for Medicare. She had four operations over five months related to urinary and kidney stones, according to her records. They all took place at Virtua Memorial in Mount Holly, New Jersey.
After she received the bills, she asked for help and received the 88 percent reduction. “It was generous of the hospital,” said Augustus, who is retired. “I thought I could pay it.” She said she realized she couldn’t after the additional invoices from doctors came in. She made only one $400 installment to Virtua, she said.
The hospital sued her in Burlington County Superior Court Feb. 12. Virtua took the step because of a “broken agreement,” said Peggy Leone, a spokesman for the hospital. “Virtua has worked closely with this patient to help her in every way possible.” A hospital representative is scheduled to meet with Augustus this week to set up a possible new payment plan for what she owes Virtua along with the separate doctor bills.
Medicare would have paid Virtua about $30,000 for the treatment Augustus received, according to Richard Henriksen, a hospital billing and reimbursement consultant in Minneapolis who analyzed her bills. Augustus herself would have been personally responsible for about $2,500, he said.
“If only I could have held out for eight more months,” Augustus said from her home in Willingboro, northeast of Philadelphia, where she lives on pension and Social Security benefits. She turned 65 in July, and is now covered by Medicare.
“I’m in this nightmare, I’m in this mess,” she said. “I’m not trying to skirt my responsibilities. But people have to work with me. I don’t have the money.”