The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
Aug. 24--Once Pennsylvania Insurance Department officials sign off on Highmark's transition plan for separating from UPMC, Highmark members may learn they have more access to UPMC physicians and facilities than they expected -- but it could come at a very steep price.
They also may soon become familiar with a new term: chargemaster.
The chargemaster is a hospital's master list of how much it will charge for services, including every treatment, test, scan and aspirin. But, unlike a restaurant that lists meal prices on a menu, the hospital prices are secret and -- almost uniformly -- many times higher than what the service actually cost the hospital to provide.
Most patients are not affected by charges because their insurer pays a pre-determined rate and the patient knows upfront what their deductible and co-payment will be. But those without insurance, or who are out-of-network, have no such protection.
"People need to know there's no rhyme or reason to what goes into your bill," said Robert Cicco, a neonatologist with the Allegheny Health Network. "The system we have set up is totally discriminatory against people who are either underinsured or uninsured."
Beginning Jan. 1, people carrying a Highmark card in their wallet may feel its effects more than in the past.
As the region awaits details about the Pittsburgh insurer's formal transition plan, which should become public in the next week or two, the June 27 consent decree signed by Highmark and UPMC -- presented as a "framework" for the transition plan -- said UPMC out-of-network rates could not exceed 60 percent of its charges.
While a 40 percent discount sounds like a bargain at the shopping mall, the same is not true for hospital charges. UPMC declined to provide specific information on its hospital charges, but some examples have come out:
--In February, the Post-Gazette reported on a Butler family whose hospital charges for cancer treatment at UPMC Passavant were five times more for the same procedures, tests and medications received at Johns Hopkins in Baltimore a few weeks earlier. Fortunately, the family's insurance covered nearly all of the cost.
--The U.S. Centers for Medicare and Medicaid last year released data showing that implanting a pacemaker, for example, carries an average charge of $89,793 at UPMC Presbyterian-Shadyside, while Allegheny General's average charge was $56,364. By comparison, the average charge at Heritage Valley Sewickley is $22,365.
--In January, a California nurses union issued a report on hospital charges that found that UPMC Presbyterian-Shadyside charges more than eight times its costs, 40th-highest among U.S. hospitals.
UPMC is not unique among major U.S. health systems, nor are its charges the most eye-opening.
Earlier this month, a New York affiliate for NBC reported that a New Jersey hospital billed a teacher more than $8,500 to bandage a cut finger that had not healed after he sought care at an out-of-network facility. The itemized breakdown: $8,200 for an emergency room visit with no X-rays, $180 for a tetanus shot, $242 for sterile supplies and $8 for antibacterial ointment.
Also this month, researchers at the University of California, San Francisco reported hospital charges for a simple blood cholesterol test in that state ranged from $10 to $10,169. Similar variations showed up for nine other common blood tests.
"Everybody knows that [the chargemaster] has no relation to reality," said Gerard Anderson, director for the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health.
He noted a common rationale is that the charges must make up for the discounted payments negotiated with commercial insurers. "So I guess what the hospitals are saying is, 'We're going to make it up on the backs of the people who cannot afford it very well.'"
The chargemaster and accompanying out-of-network costs carry risks for both UPMC and Highmark. If people opt for a lower premium, narrower network plan such as Highmark's Community Blue, UPMC's health system loses patients. If people are concerned about the potential costs of out-of-network care at UPMC, they may switch insurers.
The other factor at play is secrecy surrounding hospital chargemasters, which means people often do not know how big a hole they're digging financially if they seek care at an out-of-network facility.
"One shouldn't have to wonder or worry about what a hospital will charge for every individual service or supply item," said Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, Downtown.
"For common procedures, the hospital and physician should tell you what the total cost will be upfront, and they should include a warranty that assures that if you get a complication they could have prevented, you won't have to pay more for them to treat it."
For all the criticism and dissatisfaction with chargemaster systems, changing or getting rid of something so embedded in the pricing structure would not be easy, said Charles Kahn III, president and CEO of the Federation of American Hospitals, which represents investor-owned hospitals such as HCA and Tenet Healthcare.
Chargemasters serve as a reference price for Medicare in determining cost-to-charge ratios, he said. Although not the case locally, some insurers negotiate reimbursement rates for providers based on a percentage of the hospital charges.
Then there are the administrative and technical obstacles. "My biggest member, HCA, has 165 hospitals nationwide and they have literally thousands of contracts with payers," said Mr. Kahn. "To spend the time and effort to completely renegotiate your prices with all of your payers would probably not be productive time."
Mr. Anderson noted another disincentive: If a hospital decides to bring its chargemaster closer to its actual costs but surrounding hospitals don't follow suit, "then all of the uninsured will come to you."
Johns Hopkins and other Maryland hospitals are subject to state-mandated rate regulation, which some see as one possible answer to exorbitant charges. Another is litigation, said Mr. Anderson, noting that big chain hospitals have changed their policies or established charity care provision after being sued.
He doesn't see Congress intervening because Medicare and Medicaid programs set their own rates.
Dr. Cicco thinks some cap on charges is called for, perhaps based on a percentage of Medicare rates. He noted that when people see a dentist who is out-of-network or doesn't accept commercial insurance, the difference between what the insurer pays and the dentist charges may be only 10-15 percent.
"But when I go to the doctor, it costs 100 percent more," he said. "And the fact that it is hidden from everybody is egregious."
It may not remain hidden for long. One reason the chargemaster has not received greater attention before is that "only an infinitesimally small number [of patients] would ever pay the charges," said Mr. Kahn.
The equation changes, though, if large numbers of Highmark subscribers find themselves out-of-network at UPMC.
"The problem," said Mr. Kahn, "is that the chargemaster system was not made for situations where you have two big institutions in town and they are basically at war with each other."
Steve Twedt: email@example.com or 412-263-1963.
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