by Stanley David Gold

Opponents to ColoradoCare are going to tell you that the health care system in Colorado is too complex for any large solution such as ColoradoCare to work. What they neglect to mention is that the health care payment system is already so complex and expensive that it’s not only failing us, it’s bankrupting our country. Furthermore, it’s rigged to benefit corporations rather than Coloradoans.

This November, Coloradoans can take back their health care by voting for ColoradoCare, Amendment 69. ColoradoCare is like to Medicare for all Coloradoans. Please review the resources under the Amendment 69 tab on ColoradoCare.org.

This February the Denver Post published an article by David Olinger entitled “Study: Surgery Costs higher in Rural Areas.” The article highlights that a hip replacement in one hospital could cost $19,000 and over $45,000 in another.

Significant price variance is nothing new to health care and is certainly not new to Colorado. Case in point: the following five articles, written in various years by various news sources, address the same problem and come to the same conclusion; either more investigation is needed or no concrete conclusion is available. Some articles actually offer reasons by experts or special interest groups but they often conflict with other explanations.

1. Hospital Charges Show Huge Variance in Study: U.S. News and World Report published this article in 2012.

2. Latest hospital pricing data show wide variance in costs of procedures: Milwaukee Business Journal published this article in 2014.

3. Charges vary widely among Dallas-area hospitals: The Dallas Morning News published this article in 2013.

4. Medicare report: Charges vary widely among area hospitals: The Daily Gazette published this article in 2015

5. Hospital Billing Varies Wildly, Government Data Shows: The New York Times published this article in 2013.

The Denver Post article states that “CIVHC [the Center for Improving Value in Health Care] [the organization providing the data for this article] and hospital officials agree that more study is needed to understand why charges vary so much from place to place within the state.” The implications found in this sentence are that (1) the answer is actually too complicated to be addressed now (2) that this problem is unique to Colorado and (3), that this is a new problem that hasn’t been fully addressed.

Not true.

The straightforward answer as to why hospitals charge what they charge is simple: they can.

According to the Health Affairs article “The Pricing Of U.S. Hospital Services: Chaos Behind A Veil Of Secrecy,” when William McGowan, CFO of the University of California Health System, with over 30 years of experience in hospital financing, was asked to explain how hospitals charge for their services, he said, “There is no method to this madness. As we went through the years, we had these cockamamie formulas. We multiplied our costs to set our charges.” Furthermore, hospitals do not have published charges for hip replacements or other surgeries; they privately negotiate the price with the payer (in most cases an HMO). In other words, they make the absolute maximum they can. Why? To maximize revenues.

Please note that there are currently no federal laws obliging hospitals to justify their charges or to standardize hospital fees. Health care is mainly a private venture in the U.S.

Let’s look at at the economic theory of price elasticity of demand. This theory has become a standard method for setting prices in any market, including health care. According to Professor Robert S. Pindyck at MIT, this method is used for “profit-maximization.” Although the theory is complex, the basic premise is that a company will continue to increase its prices until the point at which profits are adversely affected. This would be the point at which the price has become elastic. This is how McDonald’s prices a cheeseburger and how a hospital prices a hip.

This pricing methodology does not necessarily take into account the costs that went into producing whatever was produced, the value of the product, any form of ethics or an actual rationale. There is no rhyme or reason; it is the price set that will maximize profits, period. This is capitalism. Charge what you can. Make what you can. Sell as much as you can. And keep doing it, over and over.

To be fair, each hospital does have factors that need to be incorporated into the cost of their services, such as practitioner salaries, the cost of their medical equipment, what it cost to build the hospital, the expertise of the staff, quality ratings and so forth. But can these factors explain the drastic variance in the price of a hip replacement? According to CIVHC, the median price for a hip replacement across Colorado is somewhere between $19,000 and $48,000. This does not even make commonsense. So let’s forget the illusory complexities and needs for more intellectual studies that call for more studies and finally call a spade a spade. The health care system has been purposefully structured to put the profit before the patient: simple and true.

You can vote this November to make health care work for you. ColoradoCare pays for health care for 100 percent of Coloradoans regardless of their employment status. Additionally, ColoradoCare has no deductibles or premiums and, in many cases, no co-pays. Patients could choose their provider without having to worry about the in-network and out of network system. We, as Coloradoans, would cover each other through our income-based contributions. Everybody contributes, everyone benefits and everyone has care. Amendment 69 puts Coloradoans first.

It’s time for the purpose of health care to be the health of patients.

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