Study Shows Health Care Price Markups Are Highest In Texas

Sep 9, 2019

From Texas Standard:

Johns Hopkins University researchers recently analyzed hospital fees nationwide and found that Texas had the country’s highest health care markup ratio. Those ratios were highest in Brownsville-Harlingen, Laredo and El Paso. A markup ratio is what a hospital charges for a service, compared to the Medicare "allowable amount" – the rate that the federal government determines a service is worth.

Dr. Marty Makary is a surgeon and professor of health policy at Johns Hopkins University, and he’s one of the researchers who studied these markups. Makary also wrote the book, "The Price We Pay: What Broke American Health Care – and How to Fix It."

“The sticker prices of a lot of Texas hospitals are the highest in the country,” Makary says. “When we look at those actual prices, we don’t know what they mean.”

Makary says hospital bills are often negotiable – something most patients don’t realize.

A problem many patients face is not knowing the cost of a health care service before it's performed. Makary says “that’s a disgrace.”

“Imagine going on a travel website … and the airlines maybe would argue they can’t give you a price,” he says. “The lack of transparency … feeds price gauging.”

In health care, he says patients aren’t included in discussions about pricing between doctors, hospitals and insurance companies. He says that’s unfair.

“The great public trust in America’s health care institutions is being eroded,” Makary says. “The price gauging and predatory billing today is threatening the great public trust in the medical profession.”

Makary says hospitals and insurers haggle out pricing in secret to prevent competition. But he argues that stifling competition has wide-ranging effects.

“People are spending up to half of their Social Security checks on health care. Part of the defense budget is the Defense Department’s own health care system. Interest on the [national] debt is, in part, interest on health care debt,” Makary says. “All of that stuff adds up, and it’s half of your tax dollars going to health care.”

Makary says the health care system can be more efficient, and thus less costly. For example, he says an uncomplicated vaginal birth can cost $7,000 at one hospital and $60,000 at another. To reduce these discrepancies, he says the system needs to rely on proxies like health plans, employers and individual consumers who pay out of pocket to help even out the market.

“We have to enable proxy shoppers to do their work to keep markets in check,” Makary says. “They want to know what the discount is of the other place, they want to see what the real prices are to shop on your behalf.”

Beyond that, he says health care consumers need to start negotiating with hospitals and look for better deals when possible. And, again, he urges hospitals to be more transparent about their prices.

Listen to the full story in the player above.

Support for Texas Standard’s ”Spotlight on Health” project is provided by St. David’s Foundation.

Written by Caroline Covington.