Why Do Hospitals Charge So Much? The Shocking Truth


5 minute read.


Have you ever walked into a hospital and thought “Of course I want as much medical care as possible. What could be the downside?”


Well, there are a ton of downsides.


For starters, how about the fact that hospitals rips off folks like you and me every day. Hospitals are expensive, but it is worth it?


Compared to other systems of health care, no, it isn’t.


American health care is not the best in the world. But despite that, we spend more per person annually on health care than any other developed nation in the world. And a big part of the reason for that is American hospitals overcharge patients massively.


Take for example a neck brace. It is worth twenty dollars. But the hospital charges a hundred and fifty four dollars. How about an IV bag? It costs less than a buck, but they charge a hundred and thirty seven dollars. (Elisabeth Rosenthal, New York Times, Dec. 2, 2013.)


These are real prices folks. Yep, they are wildly inflated health care prices. And it’s all made up…for a specific reason.


Now, you may think, this sounds like the work of politicians. Is it because of Obamacare? Or Trump aid? No, this time it’s not the politicians’ fault.


The problem starts with something called the “Charge Master” (or Chargemaster).


In the United States, the Charge Master, also known as Chargemaster, or charge description master (CDM), is a comprehensive listing of items billable to a hospital patient or a patient’s health insurance provider. It is a secret document full of insane prices that hospitals use to charge us whatever they want.


Let’s go on a short trip through the history of medical billing, shall we?


A hundred years ago, hospital pricing was pretty simple. They took the cost of providing care and put a little on top to make a profit. A procedure might have costed five bucks so they charged you $6.50. Fair enough, right?


But after the rise of huge insurance companies, hospital billing got complicated, in part because these gigantic corporations demanded gigantic discounts. (Christopher Tompkins, et al., Health Affairs, Jan. 2006.)


They would say things like “We send you thousands of patients every day, so we want half of all your prices. What?? Hospitals couldn’t afford that. So, to please these powerful insurance companies, hospitals cooked up a plan.


They made up really high fake prices and then gave discounts to the insurance companies. In less than a century, health care prices went from reasonable to absolutely absurd.


They did things like making one Tylenol cost $37, and made three stitches cost something like $2,200. A single alcohol swab costs $7. These crazily inflated prices are kept in the hospital’s chargemaster. It’s actually a computer file.


It’s completely ridiculous, and it’s also completely true.


Then you might say “Well I only pay my premiums. If they want to rip off my insurance company with their fake prices, what do I care?”


Well, here’s why you should care. If you ever lose your insurance, you’ll care in a big hurry. Here’s the really evil part. If you don’t have insurance, you actually get charged these fake prices. Heart x-rays? That’ll be $33,000.


Can’t afford that? Well, tough shit. They’ll just garnish your wages. They actually charge people without insurance these fake prices. Yep. It’s true.


Well then, you might say “Thankfully I have insurance, so the charge master doesn’t affect me.”


Unfortunately it does. Even if you’re insured, you can get billed charge master prices if you go out of network. What if you have an emergency and you are not in a place where you are in-network? Anything can be out of network. The hospitals you go through, the equipment used to treat you, and even the doctors you see.


Hospitals make a shit ton of money overcharging out-of-network patients. It’s a real cash cow and we all get milked.


Want to know something else? Every hospital has its own charge master. A treatment that costs seven thousand dollars at one hospital could cost 100 grand down the road. And you can’t comparison shop when you’re dying.


And get this. Since your insurance company faces inflated costs, that can trickle down to you in the form of higher premiums.


How do they get away with this? Simple. The health care industry spends more on lobbying than the oil and defense industries combined. (Steven Brill, Time, March 4, 2013.)


So how we you stop it? What do we do?


Honestly, nothing. You can’t stop it.


We need to go to the hospital. So they have no incentive to change how they do business, and politicians have spent decades arguing over how to pay the bill instead of asking why the bill is so high. Until they do, we’re stuck with this system.


What if you get fired and lose your insurance? Well, just hope you don’t get fired and lose your insurance. You’re going to need it.


I hope this article was helpful. I understand that you might find it depressing, but I’d rather tell you the truth than give you a bunch of bullshit you can’t use.


If you have the truth, then maybe something can be done to change it and make it better.


As always, keep leaping forward my friends.





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