Hospitals and Price Gouging

The Time Magazine article on hospital pricing is one of the few pieces of journalism to have come out of Time Magazine in years, because it is that rarest of media beasts, an in-depth look at the subject, but it’s also incomplete.

1. Brill focuses extensively on CEO salaries, but no matter how outsized the salary of the CEO is, it doesn’t significantly inflate the cost. Non-profit executives are drastically overcompensated, but a 1 or 2 million dollar salary is still a blip when it comes to financials on this level. The salary picture is incomplete without looking at the whole tier of administrator salaries, excessive overtime compensation and surplus union salaries.

2. The more complex the price structure is, the more unfair it becomes. When there are multiple groups paying dramatically different amounts for the same services based on the groups that they belong to, the pricing will always be unfair and non-transparent. The attempt to legislate fairness by imposing a myriad of price structures just means that anyone outside the protection of a group is forced to cover the cost of those in the group.

A dishonest system perpetuates dishonesty. And then you end up with price gouging as hospitals make up for losses with profits at a human cost. Hospitals are never going to be able to break even on undercompensation by charging “the rich” more. And that means anyone without the right kind of insurance will be their target.

It’s easy enough to slam hospitals for gouging those people, but it’s the inevitable outcome of the system that was put into place. That system was supposed to be benevolent. It was supposed to be noble and fair. Instead it is creating unfairness.

Right now medical pricing is so tangled that it takes entire teams of specialists just to deal with the subject. There are entire specialties dedicated to dealing with just pricing costs. And there is an echo of progressive taxation in progressive medical pricing which instead of making life fairer, has made it more confusing and unfair, and made it impossible for most people to even figure out how they are being cheated.

Obviously everyone can’t afford to pay the same price and we aren’t about to dismantle the social safety net, but we might want to begin dramatically simplifying it, because the cost of figuring out what to charge someone is a surprisingly big part of medical expenses.

Instead all we’ve been doing is adding more middle-men and more rules and bureaucracies into the mix, whether it’s HMOs or ObamaCare. And all those extra layers run up expenses further leading to a medical marketplace that has more than a little in common with a Middle Eastern bazaar.

  • Ar'nun

    Ever ask a medical service provider their prices before accepting their services? They have no clue. Imagine selling a product without even knowing the cost? Imagine meeting with David Horowitz to negotiate your contract and telling him you are not sure how much you will charge him per blog, that you'll just send him the bill after he Frontpage posts it. He would laugh at you as he throws you out of his office.

    This is essentially what we get from the Medical Industrial Complex. You can't ask for a price prior to receiving the product, because you are convinced you need it and the insurance will cover it. Then you get a bill, and realize, you can't afford this. And they don't care.

    • Daniel Greenfield

      It lets them juggle prices. They have a good deal more leverage over patients before services are rendered than afterward.