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Adding Up and Breaking Down Health Care’s Big Price Tags

February 25, 2013 at 12:00 AM EST
Why does a few days of lab work end up costing more than the price of a car? Judy Woodruff interviews journalist Steven Brill about his Time magazine cover story about how and why the private marketplace isn't working in the health care industry.
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JUDY WOODRUFF: Next: a big story on the big price tags attached to medical care.

Steven Brill spent months reporting his 26,000-word cover story in the latest issue of “TIME” magazine looking at what’s behind our country’s high cost of health care. What he found was startling: a few days of lab work that costs more than a car, a trip to an emergency room for indigestion that totaled more than a semester in college, and many more examples.

In response, the American Hospital Association released a statement that claimed the system is broken and that — quote — “Patients may look at a hospital bill and think the prices they see only reflect the direct care they received, when in fact what’s reflected are all the resources to provide the care.”

Steven Brill joins me now.

Welcome to the NewsHour.

STEVEN BRILL, TIME Magazine: Hi, Judy. How are you?

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JUDY WOODRUFF: I’m well.

Let me just begin by, you paint a devastating picture of the American health care system, and you talk, of course, about a system that is based on private enterprise, the private marketplace in America. I guess my question is…

STEVEN BRILL: Exactly.

JUDY WOODRUFF: … why isn’t the private marketplace working?

STEVEN BRILL: Because the private marketplace in other aspect of our lives implies that there’s some kind of balance between the seller and the buyer.

And in medicine, in health care, there is no balance. If you go into a shoe store and you see a pair of shoes and you say, well, maybe they’re, you know, $200 dollars, I think I will buy them, and the guy behind the counter at the shoe store tells you that the shoes are $6,000 dollars, you can turn around and walk out. In fact, you can walk out and go up the block and go to a different shoe store. You don’t have to buy the shoes.

And in health care, not only do you have to buy it, because you don’t have any choice, but you don’t know what the price is before you buy it. When you read the statement from the American Hospital Association, I sort of had to chuckle, because the implication there is that if they charge, as I found, $77 dollars for a box of, you know, gauze pads, the reason they’re doing that is because of all the other care in the hospital that you’re getting, the room and the board, the nurses and everything.

But they charge for that, too. There was one hospital that was charging $1.50, as you know from the cover of the magazine, for a Tylenol. And yet they were charging $1,791 dollars for the room. Now, you would think if you’re paying $1,791 dollars for the room, they would, you know, decide to throw in the Tylenol.

JUDY WOODRUFF: Well, the Hospital Association and those who are defending their point of view do say that what you’re paying for is just essentially to keep the hospital running. That’s what patients are being charged for. But you point out…

STEVEN BRILL: Well …

STEVEN BRILL: You know, yes, it’s keeping the hospital running plus an extra 11.5 to 12 percent in pure profit that goes to the non-doctor administrators at the hospital, who are making a million, $2 million, $3 million, $4 million, $6 million dollars a year in salaries.

JUDY WOODRUFF: You also write, Steven Brill, about something called the charge master that sets the price in these hospitals. And you cite some extraordinary examples. I mean, we cited a couple of them earlier, thousands — tens of thousands of dollars when someone wasn’t even found sick. What is a charge master?

STEVEN BRILL: Well, it’s this thing that everybody in this alternate universe of the health care economy, where everybody is making a ton of money, everybody there knows about it. It’s this giant price list of every item that the hospital provides, ranging from an aspirin to the paper cup that you drink the water out of when you take the aspirin to, you know, a $10,000 wonder drug for cancer.

It’s every single item, and the thing about the charge master is that every hospital has completely different prices. They’re typically five to 10 times what it cost the hospital to buy those items or provide those items. And insurance companies get big discounts off of the charge master, but the discounts that they get are still not enough to keep these hospitals from making very high profit margins and from all the non-doctor administrators at these hospitals from making exorbitant salaries.

JUDY WOODRUFF: Well…

STEVEN BRILL: And that’s just not the hospitals. It’s also the drug companies. It’s the lab companies.

You know, it’s as if we have two economies in this country. We have the economy that you and I live in, which has been hard-pressed over the last, you know, half-decade. You know, jobs have been scarce. We’re under all kinds of pressure. And then there’s this other economy called the health care economy where everybody just keeps making more and more money, where unemployment is nil, and where everything is fine.

And yet the worst part about it is, is that that economy is bleeding our economy.

JUDY WOODRUFF: What I think is striking, too — there are a number of things that are striking in the piece. But one is that those who fall under one of the government health care plans, Medicaid and in particular Medicare, somehow get taken care of. And certainly those who have insurance, who have an insurance policy, they get taken care of.

And yet a lot of the discussion we hear about reform now has to do with reforming Medicare and putting it back into the — or putting it into the private sector. Based on what you’re seeing, how would that work?

STEVEN BRILL: Well, Medicare, first of all, is in the private sector.

Medicare has 600 or 700 government employees and about 8,000 employees from the private sector who do a terrific job administering the claims and running the program. Medicare buys its services much more efficiently, because it is the big player in the marketplace. None of the insurance companies have the leverage that Medicare has.

Now, the irony is that the only place where Medicare is not able to buy efficiently is where Congress has handcuffed Medicare. Medicare can’t negotiate the cost of prescription drugs. It can’t negotiate the cost of wheelchairs and canes and things like that. So you could knock easily another quarter of a trillion dollars out of the Medicare bill, the taxpayers’ bill, if you took the handcuffs off of Medicare.

And another way, ironically, you could save taxpayers money, believe it or not, is if you lowered the age of Medicare and allowed more people in their 60s to join Medicare, as opposed to the Obamacare solution now, which is they’re all going to have to buy health insurance, but the government is going to subsidize their much more expensive private health insurance.

JUDY WOODRUFF: Very quickly, we have less than a minute now. But I want to ask you about Obamacare. You just raised it.

What effect do you see it having on the health care system after all your reporting?

STEVEN BRILL: Well, there are a lot of good aspects of it. It curbs some of the billing collection practices. It obviously puts an umbrella over many more people who will have insurance, but it really sort of nips away at the edges of the problem.

The problem is the price tag that everybody is able to charge because they’re basically able to gouge people because the buyers don’t have any leverage. And Obamacare really does nothing to attack that.

JUDY WOODRUFF: Well, we are going to leave it there, Steven Brill. The article is in this week’s TIME magazine. Thank you very much.

STEVEN BRILL: Thanks for having me.