Transcript
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Cold Open
It's a little known fact that the price on a hospital bill is the one price almost nobody pays.
Take a hip or a knee replacement on Medicare. In 2024, the average hospital billed ninety-three thousand dollars for it. What actually got paid, all in? About seventeen thousand. The price was five times the payment.
So who's that ninety-three thousand dollar number really for? Stick around. Because in one state, that same hip got billed twenty-nine thousand. And there's an actual billing code for getting struck by a duck.
The Price List
So here's how it works. Every hospital keeps one giant price list. It's called the chargemaster. Every pill, every bandage, every minute in the operating room, it's all on there with a price. And the hospital writes that list itself. In most of the country, nobody caps it.
So how high do they go? Researchers checked. On average, the list price was about four times what the care actually cost the hospital. For a CT scan? Twenty-eight times.
And some places really went for it. In one study, the top hospitals billed up to twelve dollars and sixty cents for every dollar it cost them. Forty-nine of the top fifty were for-profit.
That's how you get the famous bills. In 2013, TIME magazine printed a cancer patient's bill from a hospital in Houston. One generic Tylenol? A buck fifty. A chest X-ray? Two hundred and eighty-three dollars. Medicare pays that same hospital about twenty bucks for that X-ray.
In Utah, a dad got a bill with a line on it that said "skin to skin after c-sec." Thirty-nine dollars and thirty-five cents. Now, in fairness, the hospital says that was for an extra staff member in the operating room, not for holding the baby. But that's what it said on the bill.
Why Have A Price
Now here's my favorite part. If nobody pays the sticker price, why have one?
Because it's the starting line. Insurance companies negotiate a discount off of something. Some contracts pay a percentage of the list price. Out-of-network bills start from it. And a guy with no insurance can get handed the whole thing. One study found that the higher a hospital's markup, the more money it took in.
And it's not a new trick. From the mid-eighties to the mid-two-thousands, hospital list prices went up about eleven percent a year. Medicare's rates went up about six.
And there was money in it. Medicare pays extra for the really expensive cases, and for years it figured "expensive" off the hospital's own prices. Raise your prices, get a bigger check. In 2006, Tenet, one of the big hospital chains, paid nine hundred million dollars to settle claims that were mostly about just that. They denied doing anything wrong. Naturally.
Who Pays What
So who actually pays what? Depends on the card in your wallet.
Medicare mostly ignores the price list. It sorts your stay into one of hundreds of buckets, by what's wrong with you, and it pays one flat price per bucket. Pneumonia's pneumonia. Three days or five, the hospital usually gets the same check.
The hospitals say Medicare pays them about eighty-three cents for every dollar it costs. Medicare's own advisers say the efficient hospitals come pretty close to breaking even. So, you know. Depends who you ask.
Private insurance is where the money is. One big study found employer plans paid hospitals about two and a half times what Medicare paid, for the same care. In eight states, more than triple.
And even then, it's not one price. At one hospital in New Mexico, the same back MRI ran anywhere from two hundred and twenty-one dollars to eighteen hundred, depending on whose insurance card you handed over.
Now, there's one state that looked at all this and said, enough. In Maryland, the state sets hospital prices, and everybody pays about the same. So on Medicare, that hip replacement in Maryland got billed twenty-nine thousand and paid twenty-six. In Nevada? Billed a hundred and eighty-three thousand. Paid nineteen.
And the guy with no insurance? Here's the part nobody knows. Most hospitals in this country are charities. Nonprofits. Fifty-eight percent of them. And to keep that tax break, they need a financial help policy. If you qualify, they can't charge you more for emergency or necessary care than they generally bill people with insurance. So the sticker price is the one price a nonprofit hospital isn't allowed to charge the guy who needs help.
The Codes
Now, the bill itself is written in code. Literally. One set of codes for what's wrong with you, another for what they did, another for which department did it.
And the what's-wrong-with-you book is really something. There's a code for "struck by duck." W61.62XA. There's "bitten by orca." "Sucked into jet engine." And my personal favorite, "burn due to water-skis on fire."
And if you see "subsequent encounter" on the duck? That doesn't mean the duck got you twice. It means you came back for a checkup. And here's the kicker. Hospitals don't even have to use those codes. Nationally, they're optional.
The other thing about the codes? The hospital bills on one form. The doctors bill on another. That's why you get a bill from the hospital, then one from the surgeon, then one from the anesthesiologist, then one from a radiologist you never met.
And if a hospital owns your doctor's office, it can tack on a facility fee. Same checkup, same doctor, plus a fee for the building. Back in 2018, Medicare paid about a hundred and sixteen bucks for a clinic visit at a hospital-owned office. At a regular doctor's office? Forty-six. Same visit. They've been chipping away at that gap ever since.
And that's a big deal now, because more than four out of five doctors in this country work for a hospital or a corporation.
Where The Money Goes
So how big is this thing? In 2024, America spent one point six trillion dollars on hospitals. That's about four and a half billion dollars a day. Nearly a third of all the health care money in the country.
And for all that, the typical hospital keeps about two and a half cents on the dollar. This year, forty-three percent of them are losing money.
So how do you square that with a buck fifty for a Tylenol? Some hospitals do great. A lot of them don't.
Take the nonprofits. Their tax break is worth about twenty-eight billion dollars a year. They spend about sixteen billion on charity care. Now, the hospitals say the good they do in their towns is worth a lot more than that. But those are the numbers.
And some of the big ones do better on Wall Street than in the operating room. Kaiser Permanente, the big nonprofit hospital and insurance outfit out of California, made one point four billion dollars last year running health care. Its total? Nine point three billion. Most of the difference was investments.
Then there's the for-profits. The biggest is HCA, out of Nashville, Tennessee. It started in 1968 with a doctor, his son, and the guy who bought Kentucky Fried Chicken from Colonel Sanders. Today it runs a hundred and eighty-nine hospitals. Last year it brought in seventy-five point six billion dollars, and kept six point eight billion of it.
And it helps not to have competition. One study found that a hospital with no rival in town charges about fifteen percent more than one in a town with four or more.
The ER Rule
Now, there's one rule that makes a hospital different from every other business on the street.
Back in the eighties, doctors at Cook County Hospital in Chicago counted the patients other hospitals shipped over to them. Eighty-seven percent got sent for one reason. No insurance.
So in 1986, Congress passed a law. If a hospital has an emergency room and takes Medicare, it has to check out anybody who walks in, and stabilize them, whether they can pay or not. And Congress didn't send any money to pay for it.
And no, that doesn't make it free. The law says they have to treat you. It doesn't say they can't bill you. Americans owe at least two hundred and twenty billion dollars in medical debt. About three million people owe more than ten grand.
Where This Came From
So how did we end up here? Glad you asked. You didn't, but I'm glad.
The word hospital comes from the same Latin word as hotel. It meant host, and it meant guest. So technically, it's a hotel. The checkout's just a lot worse.
And for most of history, hospitals were for poor people. If you had money, the doctor came to your house. In Thomas Jefferson's day, you could get turned away if they didn't think you were morally worthy enough to be sick there.
You've probably heard Ben Franklin started America's first hospital. He didn't. It was his friend, Dr. Thomas Bond. Franklin said so himself. What Franklin did was the money. In 1751, he got the colony to put up two thousand pounds, but only if regular folks raised the same amount first. The lawmakers voted yes because they figured it'd never happen. Then Franklin told the donors, every penny you give gets doubled. Worked like a charm. He said no scheme of his ever pleased him more. And it wasn't even his hospital.
Then in 1929, a hospital in Dallas was short on money. So Baylor University Hospital made the local schoolteachers an offer. Fifty cents a month, and you get up to twenty-one days in the hospital. That's where Blue Cross came from. Health insurance in America was invented by a hospital that wanted to get paid.
And why does your insurance come from your job? World War II. The government froze wages, but benefits didn't count. So companies that couldn't give you a raise gave you a health plan instead. We're still doing it.
In 1965, President Johnson flew out to Independence, Missouri, signed Medicare, and handed Harry Truman the first card. And at first, Medicare paid hospitals back whatever they said it cost them. You ever hand a cab driver a blank check? Don't.
That lasted till 1983. Two professors at Yale had built a system that sorted every hospital stay into four hundred and sixty-seven buckets. One of them was actually called "Ungroupable." And Medicare made it the price list. Those are the buckets from before.
Where It's Going
Now, the government wants all these prices out where you can see them. Since 2021, every hospital in the country has to post its prices online. All of them, including what it worked out with every insurance company. Almost six years in, the government's fined twenty-eight hospitals for not doing it. The biggest fine was under a million bucks. For a big hospital, the most they can fine you is about two million a year.
This year they tightened it up. Now hospitals have to post what actually got paid, not an estimate. And somebody at the top has to sign off that it's true.
And the surprise bills? Since 2022, if you get a surprise out-of-network bill in the ER, the law mostly keeps you out of it. The doctor and the insurance company fight it out in arbitration. The government figured that'd be about twenty-two thousand fights a year. In 2025, it was about two and a half million. And the doctors won about eighty-five percent of them.
So next time you open one of those bills, now you know what you're looking at. That big number at the top isn't the price. It's the opening offer. The real price depends on who's paying, what bucket you're in, and whose building you were standing in when it happened.
Next time, I'll tell you what all those stripes and bars on a cop's uniform actually mean. You didn't ask about that either.
Anyway. It's a little known fact. Now you know. You're welcome.