Why Hospitals Overcharge the Uninsured

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http://www.alternet.org/story.html?StoryID=16466

 

Why Hospitals Overcharge the Uninsured

 

 

By Kari Lydersen, AlterNet

July 23, 2003

 

Rose Shaffer is a homecare nurse and grandmother of seven who lives on Chicago's

south side. Though she spends all day caring for the health of others, her job

doesn't provide her with health insurance.

 

 

 

Advocate is one of the largest chains of hospitals in Illinois, with 10

hospitals in the Cook County area and profits of $108 million in 2001.

 

 

 

But Shaffer – and millions like her around the country – are actually

subsidizing Advocate and other major hospitals, according to a report recently

released by the Service Employees International Union (SEIU). That's because the

approximately 41.2 million Americans who don't have health insurance today not

only have to pay astronomically high healthcare bills out of their own pockets,

but they actually pay around 50 to 70 percent more than insurance companies do

for health coverage.

 

 

 

When an insurance carrier foots a hospital bill, the company " negotiates " a

price with the hospital that is usually about half the original billing price.

Yet when an individual without insurance is forced to pay for healthcare, they

don't have this bargaining power. So they end up paying the " full " rates, making

up the slack for the deals the insurance companies have gotten (as well as the

uninsured individuals who never pay their bills).

 

 

 

" If you look at it from the insurance company's perspective, they are a big

group who can make a deal with the hospital, " said Marianne McMullen,

communications director of the Service Employees International Union (SEIU)

Hospital Accountability Project, a relatively new initiative aimed at linking

workers' and patients' rights. " But from the perspective of the uninsured, it's

really gross. The hospitals are making their biggest profit off them. "

 

 

 

The full rates uninsured people end up paying are usually vastly inflated from

the actual cost of providing service. For the past 20 years healthcare bills

have risen at twice the inflation rate. In 1993 the U.S. General Accounting

Office reported that 99 percent of hospital bills have overcharges, which can

include " phantom charges " for services that weren't actually given, markups,

duplicate billings and charges for unnecessarily long hospital stays or unneeded

services.

 

 

 

Hospital administrators argue that many uninsured individuals never pay their

bills, so hospitals have to keep costs high to avoid losing money. But that

doesn't make it any easier for those who do pay. And most hospitals don't just

write off the unpaid bills. It is common practice for hospitals to sue patients

for tens of thousands of dollars, money they often just don't have. After

Shaffer had a major heart attack in October 2000, she couldn't pay the bills.

She noted that even though she told her doctors she didn't have insurance, she

was never given available financial aid forms to fill out for her treatment.

 

 

 

So Advocate South Suburban Hospital where she was treated sued her for the

amount of her bill – $17,760. Never mind that if Shaffer had had health

insurance, the company would only have been billed about $8,500. Shaffer said

she could have handled the $8,500. But coming up with over $17,000 was

impossible. So she put her house in foreclosure and declared bankruptcy.

Meanwhile the stress this has caused isn't helping her health any.

 

 

 

" I'm grateful to the hospital for the care I received – they saved my life, "

Shaffer said. " But now they are trying to take it away from me again. "

 

 

 

A study by the SEIU project found that at Advocate hospitals in Cook County,

Illinois, uninsured residents like Shaffer were charged an average 139 percent

more than the charge insurance companies ended up paying for the same services.

That equals out to $13,854 compared to $5,805 on average for inpatient services

– funds an average uninsured person can hardly spare. This amounted to a total

gap of $58 million between charges for the insured and uninsured at Advocate

hospitals in 2001, the SEIU said.

 

 

 

McMullen said that while virtually all hospitals overcharge the uninsured,

Advocate is the current target of the overpricing campaign because they have the

area's highest average charges for uninsured people and also because they are a

non-profit, religiously affiliated chain which is supposed to have the mission

of helping the needy. Advocate is affiliated with the Illinois Conference of the

United Church of Christ and the Evangelical Lutheran Church of America. In 2001,

the SEIU report says, Advocate made an $8,460 profit on the uninsured patients

who paid their full bills.

 

 

 

" This just incredibly wrong, " said Toure Muhammad, communications director for

the SEIU. " Advocate is a religiously sponsored non-profit institution that is

getting tax breaks that the community pays for. "

 

 

 

Advocate spokesman Ed Domansky said that Advocate's billing practices are

mandated by federal law, as are the billing structures of all hospitals. He

thinks the SEIU is singling out Advocate since they are trying to unionize the

hospitals, in what has turned into an extremely contentious campaign.

 

 

 

" They're exploiting the uninsured with this study and they're singling out

Advocate because they want to unionize, " he said. " It's pretty clear what this

is about. It's just another tactic they're using to mislead the public. " He

added that Advocate has " one of the most generous charity care programs in the

country. "

 

 

 

The SEIU alleges that overcharging also allows non-profit hospitals like

Advocate to inflate the amount of charity care they provide – Advocate claimed

to provide $32.7 million in charity care in 2001, but the SEIU pegged the true

cost of the care at only $12.7 million.

 

 

 

Members of the SEIU project hope that by drawing attention to Advocate's

practices, hospitals around the country will be forced to change their ways.

Already, McMullen noted, two national for-profit hospital chains – Columbia HCA

and Tenet – have promised to stop charging more to uninsured patients. In

response, Domansky said, " Whatever the SEIU has pressured Columbia HCA and Tenet

into doing, they will find that the federal government doesn't allow them to use

that pricing structure. "

 

 

 

Meanwhile between the tough job market and the rising costs of coverage for

employers, the number of uninsured in the country is likely to keep rising.

While the ranks of the uninsured include the unemployed and homeless, the

majority of uninsured people are employed, working everything from service

industry and blue collar jobs to professional jobs with temporary agencies,

small businesses or non-profit organizations. Minorities are also more likely to

lack health insurance, as are immigrants. For example in Illinois 28.9 percent

of Latinos and 22.8 percent of African-Americans are uninsured, compared to 11

percent of whites.

 

 

 

In June the Hospital Accountability Project held a widely attended Town Hall

meeting in Chicago on the topic of overcharging, and they have staged numerous

protests outside Advocate hospitals as well as advocating on the behalf of

individual patients.

 

 

 

They hope a victory in ending or reducing the overcharging of uninsured people

will aid both low income people in general and health care workers themselves –

workers who ironically are themselves often uninsured or underinsured. The

Hospital Accountability Project also plans to undertake other campaigns linking

the rights of workers and patients, noting that healthcare workers' rights are

inextricably linked to patient safety and vice versa.

 

 

 

Already the SEIU is on the verge of winning passage of Illinois state

legislation that requires hospitals to make public their staffing levels,

infection rates and other crucial data, which can both help people choose what

hospital to go to based on these indicators of quality of care, and help unions

fight against understaffing and other workplace issues. Legislation that is

similar, though not as comprehensive, already exists in Wisconsin and California

and is in the works in other states.

 

 

 

" We're working on behalf of the patients, workers and the community in which

[the hospitals] operate, " said McMullen. " Unions usually just work on the behalf

of employees, but here we're working on behalf of the whole community. It's part

of the new direction unions have to go in. "

 

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