Chicago Hospital Pricing: Is a 40% Discount Enough?

The Chicago Tribune reports that area hospitals are giving discounts of up to 40% to uninsured patients, or even “anyone who asks”. This may be a result of a law passed last year that attempted to compel some transparency and common-sense pricing for Illinois hospitals. As I’ve noted before (p. 9, and references), hospital pricing – and so-called “gouging” uninsured patients – is largely a consequence of laws that prevent hospitals from providing discounts. So it’s good to see countervailing laws take hold – even if it’s an imperfect “fix”.

But a 40% discount means that a hospital is charging 60% of list price. Research from California demonstrates that uninsured patients paid only 28% of hospitals’ billed charges in 2004-2005. I’ve spent a lot of time studying the literature on costs and uncompensated care for uninsured patients in hospitals, and it had not been quite clear to me whether a figure like 28% means that each uninsured patient paid 28% of his bill, or 28% of uninsured patients paid 100% of their charges and 72% of them paid zero, or somewhere in between these two extremes.

The California research suggests an answer, reporting that the mean net price paid by uninsured patients is significantly higher than the median net price, indicating that a few uninsured patients pay a high share of their charges, and most pay a tiny share (if any).

So, if Chicago hospitals’ new pricing policies will save the heart-ache of sending bill collectors out to chase uninsured patients, of whom most will pay very little (if any) of their bills, then things are moving in the right direction.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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