Imagine going to buy a gallon of milk and being told that it's free if you're older than 65, costs 50 cents if you have a good job but otherwise will cost you $50 - but don't worry, payment plans are available.

That doesn't happen when you buy milk, of course, but something similar happens when you buy health care.

In May, as part of the Affordable Care Act, the federal government began releasing data comparing what hospitals in a given area charge for 100 common services. The reports are an eye-opener, but perhaps not in the way they were intended. They are a dramatic illustration of just how broken our health care pricing system is.

The report showed, for instance, that some area hospitals charge three times as much as others for implanting a cardiac pacemaker. But the problem with comparing those prices is that they are an illusion.

When you look not at what hospitals bill, but at what they actually receive from Medicare for different procedures, the amounts are much closer from hospital to hospital. And the hospital that bills close to $100,000 for that pacemaker actually gets paid the same $13,000 or so that other area hospitals get from Medicare.

Why the inflated prices? In part, they're an attempt by hospitals to recoup some of the money they spend on charity care. In part, they're a bargaining tool, a high opening bid in negotiations with insurance companies. And in part they stem from pricing models that some hospitals set years ago and adjust across the board with automatic yearly increases. A yearly increase of just 5 percent eventually turns an aspirin into a $50 charge.

If you've got Medicare - which sets take-it-or-leave-it payments - or a good insurance plan, you never have to pay these inflated prices.

But what if you don't have insurance? You could be billed that inflated price. Most hospitals then immediately offer a steep discount and a payment plan. But don't expect to get the same break that Medicare or private insurers receive.

As for comparing hospital to hospital to see where you might want to have that elective surgery, comparing gross prices is decidedly unhelpful. Not only do they not reflect actual costs, they don't tell you anything about quality of care, successful outcomes or recovery times - the things that really matter to most of us.

What they do show is how strange and illogical hospital pricing can be, and how much this broken system needs to be fixed to better serve hospitals, patients and the rest of us, who are all helping to foot the bill.


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