Differential pricing by hospitals depending on payer

I found this tidbit earlier today which describes yet another serious problem with the US healthcare system:

Study: Hospitals Charge Uninsured, Self-Pay Patients 2.5 Times What Other Health Insurers Pay

People who lack health insurance and those who pay for care out of their own pockets were charged on average 2.5 times more for hospital services in 2004 than what health insurers pay and three times more than Medicare-allowable costs, a leading health policy researcher reported in the May-June 2007 issue of Health Affairs. The gap between rates hospitals charge to self-pay patients and other payers has widened greatly since 1984, study author Gerard F. Anderson reports.

“Over time, the uninsured have been paying higher and higher prices for hospital care compared to what the insured population pays,” said Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health in Baltimore, Md. “The markup on hospital care for these individuals, especially for those who can afford it least, is unjustifiable.”

The ratio of what hospitals asked self-pay patients to pay and Medicare-allowable costs was 3.07 in 2004. Thus, for every $100 in Medicare-allowable costs, the average hospital charged a self-pay patient $307. For-profit hospitals had the highest charge-to-cost ratio, at 4.10, while public hospitals had a charge-to-cost ratio of 2.49. The markup of charges over costs was much greater in small urban hospitals than in rural hospitals--3.25 compared with 2.42.

There is no basis in scale economics for charging self-payers more; in 99% of procedures I think it is fair to say that a hospital's cost is the same whether the patient being treated has their care paid for by Medicare or by the patient.