No One Knows How Much Healthcare Costs Because Invoices Are Fiction

First the cat, now the health system puts the bite on me

By David Lazarus

January 15, 2013

A $55,000 hospital bill includes $16 for a generic Tylenol pill. Obamacare may end the systematic inflation of prices.

Call it the $55,000 cat bite.

That's the rough total in medical costs (so far) for a cat bite on my hand that turned into an infection that turned into surgery that turned into a week in the hospital. Cruddy cat.

When I first wrote about the episode in November, I observed that it opened my eyes about various aspects of the healthcare system, not the least of which was the extraordinary care provided by nurses and the state-of-the-art resources available to doctors.

I still have my left hand, thanks to them.

But the bill has finally arrived, and I'm a good deal less impressed with the money side of our medical system. Put simply, it's nuts.

Quiz: Test your healthcare knowledge

Case in point: My cozy hospital room at UCLA Medical Center in Santa Monica was priced at $4,000 a night. Four thousand. You can book a 1,400-square-foot Premier Suite at the Beverly Hills Hotel for less than that.

Another case in point: Sixteen bucks for a Tylenol. Actually, not even a proper Tylenol. That's for the generic equivalent.

"It's totally crazy," admitted Dr. David Feinberg, who isn't just some innocent bystander when it comes to UCLA's medical pricing. He's the president of UCLA Health System. He runs the place.

"Our billing system is terrible," Feinberg told me. "I get some explanations of benefits from my insurer, and I don't understand what they are."

To be fair, it's not just UCLA that's guilty of loony pricing. It's almost all hospitals and clinics.

This is the flip side to our exceptional levels of treatment — the insane and systematic inflation of prices to accommodate contracts with insurers and so-called cost shifting that leaves people lucky enough to have insurance holding the bag for those who don't.

Happily, that system may be coming to an end thanks toObamacare. More on that in a moment.

First, let's take a closer look at some of the charges I racked up during my hospital stay. At four grand a night, that's $24,000 right there.

The surgery on my hand: $12,282. Anesthesia: $780. MRI: $3,290. Assorted drugs: $3,412. Laboratory services: $4,534. Inserting a tube in my arm so I could have an intravenous drip at home: $2,352.

All in all, the various services and supplies I received were priced at $52,660.53. The assorted doctor visits and physical-therapy appointments that have accompanied this mess added a few thousand more to the equation.

My employer-provided insurer, Blue Cross Blue Shield of Illinois, will cover $38,448 of the hospital bill. My total amount due: $1,504.47.

That leaves $14,212.53 unaccounted for. Feinberg said it simply has disappeared. Poof!

"It's funny money," he explained. "It's not even there."

Now, I just want to point out that we spend nearly $3 trillion a year on healthcare in this country, which represents about 17% of the overall economy, which is more than any other country in the world. And we're talking about funny money?

Here's the long and short of it: Insurers demand discounts from hospitals in return for bringing them lots of patients. Hospitals, in turn, ridiculously inflate their prices so they can still turn a profit even after the insurer's discount kicks in.

Hospitals also pad people's bills with the cost of providing treatment to the uninsured or to patients who require months of care.

What that all means is that medical prices are being deliberately pumped full of hot air so that more money is changing hands. It also means it's almost impossible to know how much healthcare actually costs or whether you're getting a fair deal.

Some will say I have nothing to complain about. I'm paying only $1,500 for $52,000 in hospital bills. The system works.

But does it? UCLA billed my insurer more than $3,200 for an MRI. A Google search reveals I could have gotten that same MRI at a local clinic for closer to $300 — a tenth of the hospital's price.

So how much does an MRI really cost? Who knows? Is my $1,500 out-of-pocket payment a great deal or a rip-off, considering that the average worker pays $4,316 in annual premiums for employer-sponsored family coverage, according to the Kaiser Family Foundation?

Moreover, there's no consistency to pricing. People with different insurance plans will face different costs. Depending on income level, the uninsured could face anything from full price to discounts of 30% or more.

But this could soon change.

One little-discussed aspect of President Obama's healthcare reform law is a switch from the current reimbursement system, which rewards hospitals for treating sick people, to a system that provides incentives to hospitals and doctors to keep people from getting sick in the first place.

The basic idea, similar to the way Kaiser operates, is for insurers to give medical providers a fixed amount of money per member — say, $8,000 a year. If your doctor can keep healthcare spending below that amount, he or she pockets the difference. If you require extra treatment, insurance will cover the true costs of care.

"This is a seismic shift," Feinberg said. "It will allow us to stop sending out all the crazy bills. It will be all about what it actually costs to keep you healthy."

He said most hospitals and insurance plans will switch to the new system by the time so-called online insurance exchanges open next year for people who don't receive coverage through their employers.

"Right now, the more patients we have in the hospital, the more money we make," Feinberg said. "Soon, we'll make more money by keeping you out of the hospital."

This is a big deal, and hopefully will result in a more transparent healthcare system that focuses on the smartest use of resources, not on throwing funny money around.

I remain grateful that I received such high-quality care. I'm pleased that when I needed it, my insurance did what it was supposed to do.

But there's no excuse for charging $16 for a generic Tylenol, not to mention $70 for an IV bag of dextrose, which is basically sugar water. I found the same dose online for less than $3.

Anybody who charges prices like that deserves a little quality time with my cat.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send tips or feedback to david.lazarus@latimes.com.

Copyright © 2013, Los Angeles Times