Medicare Rates to Be Posted

By Ceci Connolly
Washington Post Staff Writer
Friday, March 17, 2006

Hospital bills are about to become less mysterious. Within a few weeks, the Bush administration plans to publish the prices Medicare pays for common medical procedures, a move that advocates for the poor say will pressure hospitals to give uninsured patients the discounts provided to people with insurance.

The goal is to arm patients with the same sort of information available when they buy a car or refrigerator.

"You go to the hospital now and you haven't got any idea why you pay what you pay," Health and Human Services Secretary Mike Leavitt said. Patients lined up in three beds "right next to each other can pay three different things."

Posting the Medicare rates for procedures such as hip replacement is one component of a multiyear, multi-pronged effort Leavitt dubs "payer power." The information will be available on .

"When people have information on price and quality, whether it's an individual consumer or a corporate payer, they'll be a better informed consumer," he said in an interview. "Prices will go down, and quality will go up. That happens whenever a competitive market is fully informed."

In coming months, the government will post on the Internet the health care rates negotiated by the Defense Department, the Federal Employees Health Benefits Program and private health plans in six communities. In 2007, the government will require hospitals to release mortality data on common illnesses such as heart attacks and infection, said Mark B. McClellan, head of the Centers for Medicare and Medicaid Services.

Eventually, he said, a senior citizen will be able to shop around before elective surgery, comparing the price and quality-control measures of hospitals.

Industry executives have long maintained that they charge everyone the same price, but that some customers -- such as large insurance companies and Medicare -- negotiate discounts. Part of the reason for the variation in pricing is the cost of treating people who do not pay, largely the uninsured.

Large group purchasers in essence receive bulk discounts. Medicare gets a reduced rate because "they're the government and they tell you what they are going to pay," said Charles N. Kahn III, president of the Federation of American Hospitals, which represents for-profit hospitals. Already, he said, hospitals are releasing more and more information about the quality of care they provide.

K.B. Forbes, a former GOP consultant who leads the advocacy group Consejo de Latinos Unidos, said too many hospitals engage in "price gouging," charging uninsured patients three and four times the price paid by insured patients.

A Miami woman recently called Forbes's group for help with a $22,000 bill for a routine appendectomy. Medicare pays $4,500 for the same surgery, and private insurance companies pay about $5,000, Forbes said.

"For the first time in five years, the federal government has stepped up and done something to help middle-class Americans who are uninsured," he said.

Groups such as Consejo and corporations have had limited success on pricing because they did not have sufficient leverage, Leavitt said. But the federal government -- which pays for health care through Medicaid, Medicare, the Veterans Administration and others -- makes up 46 percent of the total health care market. "We have the critical mass" to influence the industry, he said. As prices are made public, hospitals will be forced to devise a more equitable system.

The uninsured "will have immediate benefit from this," Leavitt said. "They'll be able to say: This is how much the insurance company pays, and this is what you want to charge me?"

Publishing government-negotiated rates will not solve the problem of care for 45 million uninsured Americans, because, Kahn said, "For most of the uninsured, they can't afford anything."

And, Rick Pollack, executive vice president of the American Hospital Association, disputed Leavitt's assertion that prices will come down. "On average, Medicare pays less than the cost of delivering the service," he said.

But Leavitt, who just returned from a West Coast swing, said medical care should be no different than hotels. On the back of his hotel room door in San Francisco was a sign that said the price of the room was $449. "My actual bill was slipped under the door during the night," he said. "I paid $130 instead of $449 because the government had negotiated special prices."

"With hotels I have the ability to ask what the rate is or go online, and they will actually search and tell me what various hotels are charging," he said. "None of that is available in health care."

© 2006 The Washington Post Company