Indigent Care or Wallet Biopsy?

Congress discusses issue in hearings

At least two congressional committees have held hearings into hospital billing and collection practices. The Subcommittee on Oversight of the House Ways and Means Committee held a hearing on pricing practices of tax-exempt and other hospitals.

Subcommittee chairman Amo Houghton (R-NY) said hospitals were only 1.9% of the more than 300,000 reporting tax-exempt 501(c)(3) entities in 2001, but constituted 41% of total expenditures. Under current law, he said, hospitals are considered tax-exempt because they promote the health of a class of people broad enough to benefit the community as a whole.

Many hospitals increase their charges to shift the costs of treating the indigent onto public and private payers. In 2002, Mr. Houghton said, hospital charges exceeded their average costs by 118%, according to the Centers for Medicare & Medicaid. Individuals without health insurance are billed full charges. Thus, the uninsured are liable for charges that were inflated to cover the costs of indigent medical care. He added that hospital charges are not transparent. So consumers, including the uninsured, don’t have access to information on the costs of medical treatment across hospitals. Some advocate empowering consumers with information on hospital costs and quality to increase competition and slow medical cost inflation.

House Energy and Commerce Committee Subcommittee on Oversight and Investigations chairman Jim Greenwood (R-PA) has been looking at hospital billing and collection practices, including overcharging the uninsured.

After a hearing on hospital payment rates for the uninsured, Mr. Greenwood told reporters the system was a form of Russian roulette in which one uninsured person who can’t pay for hospital care will pay nothing, while another, under pressure from the hospital billing department, ends up losing his house in an effort to pay for hospital services based on master charges that virtually no one other than the uninsured pay.

While the hospital industry argues that the master charges are the starting point for negotiating rates, Mr. Greenwood said, that’s really not the case. Critics, he said, liken the master charges to the sticker prices for cars that only the most naïve shoppers actually pay.

And while hospitals cite the large estimates of the amount of uncompensated care they provide, Mr. Greenwood said they actually "are more than breaking even on their costs for charitable care" because of Medicare and Medicaid disproportionate share payments.

He said he doesn’t know yet what changes should be made in the law to protect low-income patients against large out-of-pocket payments, expressing an interest in watching to see if hospitals voluntarily adopt patient-friendly billing and collection practices advocated by the American Hospital Association.

If legislation is necessary, according to Mr. Greenwood, one possibility would be a mandated system to require hospitals to notify patients whether they qualify for charity care. He said he also would consider a ceiling on rates hospitals could charge low-income patients not qualifying for charity care, perhaps Medicare rates plus some percentage.