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Health Insurance & Affordable Care Act

Charges Vary Widely From Hospital to Hospital: FAQ


What does the publication of hospital pricing mean for the average person?

The bottom line: not much. The charges made public are for Medicare patients, and Medicare pays standard amounts for care. If you're covered by Medicare, the deductibles and co-insurance you pay for hospitalization are also set amounts.

For people who carry private insurance -- a PPO or HMO -- the pricing may also not be relevant to what they pay for inpatient care as long as they're in-network. That's because hospitals charge private insurers a rate they negotiate between themselves. Very few people have traditional insurance plans in which they pay the difference between what the hospital charges for a service and what the insurer will pay.

There are still other rates for people without health insurance. They need to negotiate with the hospital themselves. Knowing what Medicare pays is a good place to start negotiations.

If they aren't going to be paid what they charge, why do hospitals even set prices?

The hospital charges, theoretically, reflect the cost of providing a service. Some insured people have higher out-of-pocket costs that could be affected by the rate a particular hospital charges, and uninsured people might be able to use the data to get a baseline cost for an inpatient procedure, according to an HHS spokesperson.

The release of the pricing data was intended to get people to ask providers about the cost of their own health care, according to HHS. Ultimately, the agency believes that having the information will empower people and pressure health providers to make procedures more affordable.  

Will this practice be the same when the Affordable Care Act takes effect?

As the government tries to drive down costs of health care, insurance companies will be under greater pressure to get better rates in hospitals, says Custer.

"Insurers may be squeezed a bit between consumers and providers," he says.

Under the Affordable Care Act, hospitals will follow the lead of the Medicare pricing system, billing for episodes rather than services. And rates may be capped for the episode, depending on whether it's stroke care or internal bleeding, for example.

That's a positive, says Custer. "Right now, we pay for each service," he says. "If we begin to pay for an episode of care and weigh payment on the quality of care provided, providers will be given incentive to give only care that is necessary and to identify the most appropriate services.''

So, how should ordinary people choose a hospital if they need one?

Think quality rather than cost.

Pricing varies for reasons other than the actual cost of the services provided, anyway, so you're better off looking at quality-of-care information, says Custer.

That's not easy information to gather these days. But  some of that data are available in the "Hospital Compare'' section of the Department of Health and Human Services web site.

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