Medical costs must be known to control them

You can’t blame the Hawaii consumer for being flummoxed by the data just issued by the Centers for Medicare & Medicaid Services. The recent release of individual "chargemaster" lists — the charges for specific medical services — showed an enormous price range, the variations seemingly making no sense.

The new "transparency" of this data represents at least one step down the long road of health care reform, but so much more needs to be done. Example: Among the most sustained health expenses for the consumer is the prescription drug bill, and until Congress enables more negotiation with pharmaceutical companies, bending down that particular part of the cost curve won’t happen.

There is little about the American health care system that resembles any other kind of marketplace. Rather than competition driving down costs, for instance, Medicare payments are lower because federal laws and its market share give it leverage.

The goal — and it’s a long-term one — should be to nudge the system closer to one in which provider charges more consistently reflect the care that’s actually delivered.

More specifically, the national data dump included charges by more than 3,000 hospitals receiving Medicare payments for the top 100 most frequently billed discharges.

Not all the differentials are egregious among the Hawaii hospitals, but to pull up just one example, the official charge for treating a gastrointestinal hemorrhage ran from about $13,000 to nearly $29,000, according to figures the Star-Advertiser published on Thursday.

Industry leaders protest that the charge variation reflects a true differential in the risk pool of each patient population: The ones treating people who are older and sicker have more expenses to cover through their charges.

They also caution that these charges are like the sticker price; even private insurance companies generally negotiate them down. That true cost is treated as proprietary information, so there’s a long way to go before real transparency is achieved.

But even this much information has value, by shining a light on the impor- tance of some elements of the Patient Protection and Affordable Care Act ("Obamacare").

In the Hawaii report, for example, Kaiser Moanalua Medical Center showed lower charges overall for the surveyed procedures. Other executives say this is because Kaiser is a "closed system," with the hospital and other providers sharing the same business office and other overhead costs that can compound and add to the bottom line at other hospitals.

It may be, then, that this is not an apples-to-apples comparison. But surely this is evidence of why there may be something to the smaller elements of health care reform, including a push toward shared, electronic medical records and other efficiency initiatives.

The consumer has limited opportunity, or drive, to act on this information. Those with coverage care more about their current premium costs than the price tag for a specific service, and few will see the incentive to "shop around" because that would mean all the upheaval of changing insurers and, often, the providers they can use.

But in the case of the biggest-ticket medical procedures, prospective patients know their co-pay will vary accordingly. In those cases, having at least a rough estimate in advance could affect consumer choice.

Hospitals also resist releasing information on what insurance companies actually pay them after negotiation, saying this disclosure would lead to price-fixing.

In the final analysis, though, antitrust laws weren’t put in place to conceal the truth of medical expense. For all the com- plaints that Obamacare doesn’t control costs, surely that suggests a starting point: We must know what the costs really are.