On the Ridiculousness of Hospital Pricing

A recent Time magazine article by Steven Brill has received a lot of attention, for highlighting some of the crazy ways that hospital set their prices. One quote in particular caught my attention. It had to do with what hospitals call the charge master, which is essentially a big list of what they charge for different services. I wrote about the charge master in a previous post, which emphasized the arbitrariness with which these prices are set. But here is a hospital administrator trying to defend the charge master:

“We think the chargemaster is totally fair,” says William Gedge, senior vice president of payer relations at Yale New Haven Health System. “It’s fair because everyone gets the same bill. Even Medicare gets exactly the same charges that this patient got. Of course, we will have different arrangements for how Medicare or an insurance company will not pay some of the charges or discount the charges, but everyone starts from the same place.”

Notice how he switches from defending the charge master, as totally fair because even Medicare gets the same charges that the patients get, to say that of course they make different arrangements for different people. In other words, it is not fair at all. This system can’t last!

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