AMERICAN PROSPECT: New data released Wednesday show wild variation in how much hospitals charge Medicare for the same procedure, not just in the same region but even in the same city. In St. Augustine, Florida, the difference in price for a minimally invasive gallbladder surgery varies by over $50,000 depending on the hospital. While experts expected some variation, they found the large differences “difficult to comprehend.”
Since Medicare pays set rates by procedure and private insurers negotiate discounts below sticker prices, most people are not directly affected by what hospitals charge—except for those without insurance. Provisions in the Affordable Care Act are now driving costs for the uninsured toward Medicare rates, making them less exposed to higher prices. Private insurers may still face high costs, however. The new data show that insurers paid 30 percent above what Medicare pays, according to a hospital-finance expert. “If you’re charging 10 percent more or 20 percent more than what it costs to deliver the service, that’s an acceptable profit margin,” he says. “Charging 400 percent more than what it costs has no rational basis in it at all.”
