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Inflated Medical Bills Mask True Cost Of Care

LOS ANGELES TIMES

One man's case illustrates the problem: His medicine to treat Crohn's disease runs the hospital about $6,300 per dose. But the bill he gets is for $38,000.

It's bad enough that her son has a chronic disease that can send him to the emergency room when the pain becomes unbearable. But Susan Kenyon is also grappling with wildly inflated medical prices that have become a mainstay of our healthcare system.

Her son's medicine runs the hospital about $6,300 per dose. But the bill that patients are hit with is a whopping $38,000. Discounts and insurance cover most of that, but the system makes it virtually impossible to know the true cost of a treatment.

"We need to stop the price gouging," Kenyon said. "That's the only way we can start getting costs under control."

It's a problem that affects all of us. As hospitals jack up prices to get more money from insurance companies, insurers in turn hike premiums for all members to cover their rising expenses. It's a vicious cycle that exacerbates the unaffordability and inaccessibility of treatment in the United States.

Kenyon, 56, of Lakewood, has been frustrated by this since her son, Scott, was diagnosed with Crohn's disease five years ago. Crohn's is a disorder affecting the digestive tract. It can cause severe abdominal pain, among other symptoms.

"It's like getting stabbed in the stomach," Scott, 26, said of the flare ups that would send him to the emergency room about once a month. "They'd have to give me morphine to control the pain."

That changed in 2007 when he started receiving a drug called Remicade. "Now things are a lot more manageable," Scott said. "I haven't been to the emergency room once this year."

However, Remicade is expensive. The maker of the drug, Janssen Biotech, a division of Johnson & Johnson, says Remicade is sold to hospitals and pharmacies for nearly $700 per 100-miligram vial. Scott requires an intravenous drip of nine vials every other month — a wholesale cost per dose of about $6,300.

But according to his most recent bill from Long Beach Memorial Medical Center, the hospital charged $38,064.95 for the treatment. It then discounted that amount by almost $25,000.

Why the sky-high charge and steep discount? Government-run insurance programs demanded reduced prices from healthcare providers decades ago. Private insurers insisted on equal treatment, and soon it became standard practice for medical bills to be heavily inflated to accommodate the contractual discounts.

In other words, with mandated discounts baked into the system, hospitals routinely overstate medical fees — often by tens of thousands of dollars — so their final reimbursement is closer to actual costs.

"The charges do confuse things," acknowledged John Cascell, vice president of managed care for Long Beach Memorial. "It would probably be better if the charges weren't even on the bill and you just see how much is being covered by the insurer."

In Scott's case, the roller-coaster of charges resulted in a claim of $13,123.32 being submitted to his insurer, UnitedHealthcare. Of that amount, the insurance company covered $10,498.65 of the cost, leaving Kenyon's family with an out-of-pocket expense of $2,624.67.

Scott recently graduated from Cal State Long Beach with a degree in geology. He's now doing an internship with the U.S. Geological Survey. When that's done, he plans to pursue a graduate degree — if he can.

His parents pay his medical bills, and are prepared to keep doing so. However, Scott's school-provided policy with UnitedHealthcare caps coverage at $100,000 per illness. He's already run up more than $50,000 in claims.

At this rate, his coverage will hit the limit at some point next year. That means, to stay insured, Scott may have to forgo an advanced degree and try to get a job — any job — that comes with health insurance.

He won't be eligible for individual coverage until a provision of the healthcare reform law takes effect in 2014. It will prevent insurers from denying coverage to people with pre-existing conditions.

Susan Kenyon, who holds a clerical job with the Los Alamitos Unified School District, said "it's getting to be a challenge" to cover her son's more than $15,000 in annual medical costs. But she said she and her husband, an engineer, will do whatever it takes to support him.

What bothers Kenyon most is the lunacy of a healthcare system under which pricing bears no relation to actual costs. Is it any wonder that Americans on average pay about twice per person for healthcare than people in such countries as Germany, France, Denmark and Britain?

"Consumers are left in the dark about the true value of services they receive," said Jerry Flanagan, a staff attorney at Consumer Watchdog, the Santa Monica advocacy group. "They're unable to shop around among different hospitals because they don't know what things really cost."

He added that the inflated bills can also devastate the uninsured, who can be stuck with charges many times higher than what other patients pay.

How do we fix things? A first step would be to establish a panel of medical experts who can determine fair prices for most treatments — a sort of Kelley Blue Book for healthcare.

Then healthcare providers and insurers (both public and private) need to agree on new terms for claims and reimbursement that ensure fair and reasonable payments without relying on accounting gimmickry.

Finally, all costs need to be clearly presented to patients so they can understand what they're paying for and be better-informed medical consumers. There also needs to be easier ways for people to challenge being charged, say, $10 for an aspirin tablet.

Supporters of our healthcare system like to say it's the best in the world. But there's no way to justify $6,300 worth of medicine resulting in a bill for $38,000.

That's not just bad math. It's bad medicine.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com