USA Today - Hospitals sock uninsured with much bigger bills;
Insurance companies, Medicare get huge discounts individuals can't .

Ed and Dianna Jellison let their business' health insurance lapse while they shopped for a better price. But then Ed fell ill, spending 17 days in a Florida hospital as a viral infection ravaged his body.

Now the couple are fighting a $116,000 hospital bill, one they say could be as low as $25,000 if an insurance company were paying it.

The tough truth for patients like the Jellisons -- who earn too much to qualify for charity care -- is that they are often charged the highest prices for hospital services.

Few know that. And they're stunned when they learn.

"If they accept $25,000 from an insurance company on a routine basis, and what they're charging us for the same thing is $116,000, that's not fair, and it's not right," says Dianne, who closed the couple's roofing business and took a part-time job in a warehouse because Ed's illness left him disabled.

The long-standing hospital industry practice -- along with some hospitals' aggressive bill-collection tactics -- has caught the attention of lawmakers from Washington, D.C., to California.

Wading into the controversy for the first time, the Department of Health and Human Services (HHS) last week told hospitals that there are no federal rules stopping them from offering discounts to uninsured patients.

Hospitals had blamed federal rules for presenting a "string of barriers" that discouraged them from reducing charges to the uninsured. On Monday, Rick Wade of the American Hospital Association (AHA) said some points still need clarification, but acknowledged that the "regulatory path is now essentially clear."

In recent months, pressure brought on hospitals by advocacy groups, many backed by organized labor, prompted some, including the nation's largest chain, to offer discounts to more low-income patients.

Still, those programs vary widely -- and most do not cover patients like the Jellisons, who have middle-class incomes or assets. Some advocates say discounts should be extended to all uninsured.

"I'm not sure why anyone should be overcharged," says Anthony Wright, executive director of Health Access, a patient advocacy group based in California.

The debate comes as the hospital industry faces a number of challenges.

Rising health insurance costs are leading to more uninsured, who seek free or low-cost care. Hospitals give away billions in charity care each year to low-income patients. Hospitals are also paying more for labor and new, expensive medical equipment. Those challenges are compounded by a decade of managed care that saw insurers drive deep discounts from hospitals, a reversal from the time when private insurers were hospitals' best-paying customers. About the only thing all sides seem to agree on is that more families will find themselves stuck like the Jellisons unless ways can be found to reduce the number of uninsured.

"This family typifies the problem we have in our whole health care system: the affordability of health insurance, the tremendous cost you can incur when you get very sick and the question of who is going to pick up the tab," says Rich Morrison, a regional vice president for Florida Hospital in Orlando, where Ed Jellison received his care.

Few patients pay full list price

To understand how the uninsured get hit with the highest prices means trying to understand hospital charges. And that's complex. While it varies by hospital, charges nationally are about double hospitals' costs of providing services, according to Glenn Melnick, professor of health care financing at the University of Southern California. That's up from 10 years ago when charges were about one- third higher than costs, according to data analyzed by Melnick.

But hospitals typically receive less than their listed charges because insurers and government programs such as Medicare and Medicaid negotiate discounts.

"The typical range of discounts nationwide (among private insurers) might be around 45% to 50% on hospital services," says actuary John Bowerline with Milliman USA, a firm that tracks health care costs and consults with employers and health care providers.

Those discounts can be even higher in some markets. Hospital financial data collected by the state of California show that large hospital systems there in 2002 collected 30% to 35% of their billed charges, meaning insurers, the government and other payers receive 65% to 70% discounts.

Uninsured patients generally are able to negotiate smaller discounts, if any. The other group that gets stuck paying all or close to all charges are insurance companies whose policyholders go to out-of-network hospitals, with whom they have not negotiated discounts.
Adding to the pressure on the uninsured is that many hospitals have sharply increased charges in the past two years.

"The charges are inflated because of the way the payment system works," says Dick Davidson, president of the American Hospital Association. "If we had tried to create a billing system to confuse the public, this is what we would have created."

Laura Helm, 48, works as a reservation clerk at an Urbana, Ill., hotel that does not offer its hourly employees health insurance. She bought her own coverage for a while but dropped it when the premiums became too expensive.

Eighteen months ago, she spent a day and a half in Provena Covenant hospital after having chest pains, racking up a bill of nearly $4,000. She earns about $16,000 a year, too much to qualify for the hospital's charity program. Calls to set up a payment program were not returned by the hospital, she says, so she started sending in small monthly amounts.

"The next thing I know, I'm getting letters from them, very hateful letters about not paying the bill and how they were going to sue me," she says.

When the hospital suggested she take out a loan with a local bank at 12.9% interest, Helm agreed. She will be paying that loan for more than two years. Meanwhile, she still cannot afford health insurance.

In May, Provena got a new chief executive, Mark Wiener, who began making changes and working with a local non-profit advocacy group, the Champaign County Health Care Consumers.

One change is that the hospital will accept payments as low as $35 a month toward bills, although it also still encourages bank loans. The hospital also increased eligibility for its discount program. For patients who earn up to 120% of the federal poverty level, care is free. A sliding scale of discounts, which range from nearly 92% to about 6%, are offered to those who earn up to 300% of poverty level.

The federal poverty level is $8,980 for a single person, $12,120 for two and $18,400 for a family of four. A couple earning 200% of poverty level would have an annual income of $24,240, while a family of four at 400% of poverty level would have an income of $73,600.
Last week, Illinois officials revoked the property tax exemption for Provena Covenant, saying the hospital didn't meet the standards of a charitable institution because it had sued patients to collect debt. The hospital said it would appeal the ruling.
Other hospitals are also making changes to their policies on charging the uninsured:

* The nation's largest hospital chain, HCA, standardized its policy in October to offer free care to those up to 200% of the federal poverty level.

* Tenet, the second-largest chain, agreed to offer the uninsured discounts similar to those it gives managed-care insurers in each of its markets. But that policy has not gone into effect; Tenet says it is awaiting a legal opinion from federal regulators.

* Hospital associations in California, New York and Illinois have recently published voluntary guidelines suggesting ways hospitals could offer discounts to low-income patients. California suggests discounts for patients earning up to 300% of the poverty level; the other states suggest 200%.

"All the uninsured should be charged reasonable rates similar to what insured pay," says K.B. Forbes of Consejo de Latinos Unidos, a Los Angeles-based advocacy group that is helping the Jellisons.

A $116,000 bill vs. $25,000?

After analyzing the Jellisons' 49-page hospital bill, Forbes' group says the $116,000 total would likely have been reduced to about $25,000 if an insurance company were paying the bill, a 78% discount.

The Jellisons say they offered to pay Florida Hospital $30,000. "That was everything we had left in savings and borrowing against the equity in our house," Dianna says.

Florida Hospital spokesman Morrison says the hospital rejected an initial offer by the Jellisons to pay $8,000. The couple did not qualify for the hospital's charity care program because their pre- illness income was above $48,000, which the hospital sets as its limit. The hospital offers discounts of up to 49% to patients who earn less than 400% of the poverty level.

He says the hospital, part of the Adventist Health System, has no record of the Jellisons' $30,000 offer. Instead, the hospital offered to settle for $80,000, if the couple paid promptly. The $25,000 figure quoted to the Jellisons by Forbes' group would represent "significantly more of a discount than we're offering any managed-care company," he says.

Morrison says most hospitals lose money on uninsured patients.

"There's this allegation made that we're getting rich off the uninsured," Morrison says. "As a system, we're collecting less than 10 cents on the dollar on the uninsured across the board."
The long-term answer for the nation, Morrison says, requires both that society spend more money preventing illness and that individuals take more responsibility to plan for their health costs.
"If folks can reasonably afford health insurance, and they choose to do something else, then what's the responsibility everyone else has for these people?" he asks.

Other hospital officials also pointed to the issue of the uninsured. At Centura Health in Colorado, which was criticized by Forbes' group for its efforts to collect from the uninsured, spokeswoman Laura Wegscheid says the chain offers discounts to patients up to 400% of the poverty level.

Still, she said, discounts won't solve the problem: "It will probably ease the burden on a portion of patients, but the end result of a lot of this dialogue is, 'How do we reduce the ranks of the uninsured?' "

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