Calif. law effective at curbing hospital charges to uninsured

A 2006 California law intended to cap what uninsured patients would have to pay for treatment at hospitals has resulted in lower charges for them overall, according to a new study published in Health Affairs.

Ge Bai, a professor of accounting at Washington & Lee University in Virginia, examined 3,418 hospital records between 2003 and 2012 from 390 facilities operating in California. She also noted in her study that while the hospital law was passed into law in 2006, most facilities did not offer any true financial assistance to patients until media reports pressured them to do so around 2008.

The old pricing environment in California has put the uninsured in an unenviable situation in which their lack of bargaining power means they're often charged far more than what multi-billion dollar insurance carriers pay for the same services, according to Medscape. And hospitals typically charge private insurers far more than public payers, FierceHealthFinance has reported.

However, the impact of the law in the years after has been fairly stunning: In 2004, two years before it took effect, the net price paid by uninsured patients who received care at California hospitals averaged 6 percent higher than Medicare rates. But by 2012 the net price paid by the uninsured was 68 percent lower than Medicare prices. 

According to Bai, 81 percent of California hospitals charged Medicare rates or less to uninsured patients with incomes below 350 percent of the federal poverty level. Thirty-two percent of hospitals gave such discounts to uninsured patients at or above 350 percent of the federal poverty level.

The gross collections rate--the amount the hospital received from the patient for every dollar charged--also dropped from 32 percent to 11 percent, although Bai suggested this could be the collateral effect of hospitals rapidly inflating their gross, or chargemaster, prices. Evidence has suggested that such prices have been relentlessly on the rise in recent years. And even fairly simple procedures have undergone significant price inflation in recent years.

Bai did not assign a dollar value to the discounts accorded patients, but given that around a quarter of Californians are uninsured, it likely was in the range of tens of millions of dollars.

"It has been argued that inflated charges are innocuous, since uninsured patients will not pay them in full anyway. As I show in this study, however, before the Hospital Fair Pricing Act was passed, uninsured patients paid as much as Medicare paid," Bai concluded. "Six years after the law was enacted, they paid one-third of what Medicare paid. Actual price paid by patients, therefore, is sensitive to hospitals' pricing behavior."

To learn more:
- read the Health Affairs study abstract
- check out the Medscape article