Weapons of Mass Corruption (WMCs) Part I: Hospital Chargemasters
First, an Update
Read below to understand a hidden, but powerful weapon being used against employers and patients alike. But first, here’s an update on our efforts:
- Signature collection for the BrokenHealthcare ballot initiative was in full swing this past weekend. We have some phenomenal circulators who were at both the Democratic and Republican Assemblies. They collected thousands of signatures and found both groups very receptive.
- Between now and early August, getting all of the signatures we need will cost about $1,500 a day. Please consider making a small contribution. If everyone contributed just $10 per family member, we’d get there. Please don’t leave this to others—we all have a stake in this. After you read about the Weapons of Mass Corruption that you and your employer are being attacked with, please ask your employer if they will make a contribution, too.
- As I’ve mentioned previously, the committee hearing on HB18-1538 has been pushed back a week until Thursday, April 26th. This has given us some valuable time to meet with industry groups and draft some proposed amendments. Although the special interest lobbyists are mobilizing against us, our bill is getting stronger and more inclusive. We have strong testimony planned and we are looking forward to the discussion.
Weapons of Mass Corruption
I want to give you an idea of how insurance carriers are taking employers for a ride, and why patients suffer as a result. Most employers in Colorado use self-funded insurance plans. In the case of a large employer with a self-funded plan, the insurance carrier pre-negotiates rates with providers on behalf of that employer. If the employer says to its insurance carrier that it needs better rates with the local hospital, the insurance carrier “negotiates” with the hospital to get that better rate. But here’s the catch: often that “better rate” is not a better rate at all. It’s a better discount, on paper, for the employer, and a price increase for everyone else.
Let’s look at a sample scenario. Say the current contracted rate is 40% of billed charges. That means, for example, that for a CT scan billed at $4,000, the insurance carrier’s rate is $1,600. Now the insurance carrier says to the hospital, I need to take that down to 35% because my client (the employer) is looking for better prices. The hospital says, “enough is enough, we can’t go that low.” And that’s when the insurance company representative says, “Don’t get so worried… I haven’t told you what you can charge me yet (wink).” So what does the hospital do, it increases its chargemaster rate, the highest rate it charges and what we’d think of as its list price, by 5%. For the employer in this case, the price of the CT scan stays flat. For an uninsured patient or an out-of-network patient, the price just went up by 5%. This is a reality. It happens every year. As a result the chargemaster has grown to the point where in some cases, those not in the network are being charged as much as 30 times the price of in-network patients.
For the hospitals, the intent of the absurd chargemaster rates was not originally to rip off patients, and it’s not really their intent today. The chargemaster as the basis of negotiation with insurance carriers has become a game—a game the insurance carriers have learned to play to win. Their employer-customers think they are getting bigger savings. They are not. And patients get hit with bills based on a chargemaster increase by multiples of the inflation rate every year. After playing this game for decades, the result is the absurd and immoral prices you see as “charges” on your bill.
Finally, under an arcane rule from the Centers for Medicare and Medicaid Services, healthcare providers must “charge” every patient the same rate. They can discount it if they want, but everyone has to be charged the same. So if you are not in an in-network plan that has negotiated a good rate, you are screwed. You get charged those ever-increasing chargemaster rates.
You can quickly see why I call the chargemaster a “Weapon of Mass Corruption” used by both hospitals and insurance carriers alike. This is why we need all of the information about what has been negotiated—both the chargemaster and the rates negotiated with insurance carriers. Without both, we have nothing.
Please help us stop this insanity and go to the BrokenHealthcare.org website to make a contribution today. Without your help, we will not be able to collect the signatures we need to ensure you have the right to vote on this in November.