Clarence Fanto: Our sickening health care costs



Why are medical bills killing us?

That's the question rarely asked and answered in such brilliant, exhaustive (but not exhausting) detail as by Steven Brill, the author, journalist and founder of Court TV and The American Lawyer magazine, in the March 4 Time Magazine. It's 24,105 words, the fruit of six months' labor, and reads like a suspense novel. But it's all fact, must reading for anyone who may ever use a hospital or a medical practice. In short, everyone.

Even a Cliff Notes version could not do justice to this landmark investigative report delving deeply into the $2.8 trillion a year medical-care industry. It's remarkable that in all the fractious debate on log-jammed Capitol Hill, the obvious solution for our (often-overstated) deficit and debt problems is rarely broached. Brill's article makes the most powerful case yet for lowering the eligible age for Medicare -- not raising it to 66 or 67, as Republicans advocate -- and for universal, single-payer insurance, a political non-starter in this country, sadly.

Here are just a few sample factoids to whet your appetite for the entire report (available free at most public libraries or on-line at with a subscription):


* Hospitals send out exorbitant bills based on their chargemaster, a secret price list that could include $77 for a box of sterile gauze pads ($8 to $12 on Amazon or at your local pharmacy) and $1.50 for a single over-the-counter painkiller pill that normally costs 15 cents retail. A saline solution (sodium chloride) that fetches $5.16 on-line is billed at $84 by some hospitals.

* A 42-year-old cancer patient at the renowned MD Anderson Center in Houston was charged $83,900 for a treatment plan and a first round of chemo. If he had been old enough to be covered by Medicare, the bill might have been 10 percent of the total, nearly all covered by the government. A heart-attack false alarm that turned out to be heartburn cost a Stamford, Conn., non-profit hospital patient $21,000 for three hours of ER testing and a brief chat with a doctor on duty.

* Although the chargemaster's fantasy-world list-price menu is only a starting point for bargaining, many people are under-insured and may be unaware of caps (payout limits) on their benefits for catastrophic illnesses or accidents. The patients hardest-hit, and often wiped out financially, by medical bills are middle to upper-middle class folks under 65. President Obama's Affordable Care Act (also known as Obamacare) will wipe out those caps by next year. Currently, a typical employer-provided insurance plan has a $500,000 to $750,000 annual limit. Hospitalization for a catastrophic illness can easily max out over that limit.

* Hospital CEOs and other top administrators often earn salaries well over $1 million, not only at blue-ribbon centers like MD Anderson or Memorial-Sloan Kettering in New York but also at regional hospitals. Normally, a hospital receives 35 percent of the chargemaster bill, still a major markup from actual costs. Profit margins range from 12.7 percent at the Stamford facility, fairly typical, to nearly 30 percent at some specialized treatment centers. The nation's largest non-profit hospital, University of Pittsburgh Medical Center, racked up a $769 million operating profit in 2010 and paid its CEO just under $6 million.

* The markup on medical devices, especially high-tech MRI and CT scan units, and on prescription medication -- notably cancer drugs -- is humongous, thanks in part to demand fueled by the ordering of unnecessary tests and procedures, often sought by patients unaware of their potential out-of-pocket costs. Many doctors and hospitals order superfluous tests simply to avoid potential malpractice lawsuits. Three CT scans at Seton Medical Center in Daly City, Calif., were billed at $6,538 to a patient; Medicare would have taken care of the charge by paying $825, still profitable for the hospital.

* Desperate patients staring at bills totaling in the hundreds of thousands, or less, increasingly hire billing advocates, a rapidly-growing cottage industry of hard-bargainers who charge hourly fees and achieve significant discounts, but rarely more than 30 percent off the bottom line grand total.

One solution explored by Brill involves extending Medicare to younger age groups, charging them premiums similar to what they would pay for government-subsidized private insurance. Doctors would earn less, he acknowledged, and medical research funding would need to be funded separately.


An unrealistic outcome, to be sure. Better to acknowledge that our monopolistic medical system, one-fifth of our economy, does not operate in a free market, as it's supposed to. Brill proposes a 75 percent tax on hospital profits and a tax surcharge on hospital administrators' salaries above $750,000. Outlaw the chargemaster and replace it with an up-front, before-treatment, transparent billing system based on actual costs with a reasonable markup. Medical malpractice policies should be reformed to spare doctors from the threat or reality of frivolous suits.

The power of lobbyists representing physicians and hospitals on Capitol Hill remains so formidable that any major change seems out of reach, though the Affordable Care Act will be helpful on the margins. Gerard Anderson, a health-care economist at the Johns Hopkins Bloomberg School of Public Health, put it succinctly for Brill's final summation: "All the prices are too damn high."

That's obvious but needs constant reminding. Whether it's medical costs here in Massachusetts that could threaten this state's remarkable health-insurance reforms or the broken national system, our economy will continue to be strangled by the medical-industrial complex until Americans and their political leaders forcefully demand a re-invention of the wheel. That's what's required, STAT (immediately), as they say on the hospital intercom.

Clarence Fanto is a regular Eagle contributor.


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