Best New Book

Everyone knows that hospitals lose money treating the uninsured. But do they really?

  • One California hospital charged uninsured patients $10,150 per day and collected $7,815. Its actual costs: $2,036.
  • Another California hospital charged the uninsured $11,098 per day and collected $8,535. Its actual costs: $2,172.

In both cases, the hospitals not only made money on the uninsured, they collected a whopping four times what the care really cost to deliver.

These examples are from a fascinating new book, America's Health Care Crisis Solved, by Pat Rooney and Dan Perrin. It's a must-read for anyone interested in health policy.

As chairman and CEO of Golden Rule Insurance Company, Rooney did more than any other single human being to bring the idea of Health Savings Accounts to market-first by developing an HSA plan for Golden Rule's own employees and then by marketing HSA plans to the general public. Dan Perrin probably did more than anyone (as a lobbyist on Capitol Hill) to help make tax-free HSAs a legislative reality.

The book has an excellent treatment of HSAs, how they work, and what employers and politicians could do to make them work better. Also included is a proposal to completely change the way the government subsidizes private health insurance through the tax system, along the lines suggested by presidential candidate John McCain.

Yet what is most novel is the book's treatment of hospital prices. Although hospitals charge every patient the same list price, no one ever pays these prices except the hapless uninsured patient who gets caught up unprepared in the system. Do the uninsured have to take this lying down? Actually, no. Rooney and Perrin show step-by-step how the uninsured can challenge their bills and end up paying reasonable charges instead. Along the way they make these points:

  • What Medicare pays hospitals is designed by law to be a little more than the real costs incurred by an efficiently run hospital. (In California-the only state where such records are made public-about half the hospitals make a profit and half incur a loss on Medicare patients).
  • Hospital pricing expert Gerard Anderson concludes that a reasonable markup for the uninsured is Medicare plus 25%.
  • An independent Florida panel found that the right price should be Medicare plus 20%.

Medicare, by the way, pays way below list price. For gall-bladder removal, without complications and without a laparoscope, the national average Medicare payment in 2006 was $15,967. The average hospital charge for the same procedure was $50,946.

Comments (7)

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  1. Ralph F. Weber says:

    I really enjoyed the book, and the website

  2. Dan Perrin says:

    Thanks for the kind words John.

  3. GN Sirkin says:

    Who published the Rooney-Perrin book?

    Please try to compress the width. Your lines run about 10 beyond the permissible width of an e-mail, requiring moving the picture each time one wants to read the rest of the line.

  4. Devon Herrick says:

    The publisher is John Wiley & Sons. And, we are looking into your formatting issue.

  5. Gert says:

    We defniielty need more smart people like you around.

  6. vmrmcegvmco says:

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