In an analysis of Medicare billing records from 2,700 hospitals in 2013, the Journal of the American Medical Association (JAMA) found that emergency departments charged between 1.0 and 12.6 % higher prices compared to what Medicaid paid for the same treatments. The disparity between the fees paid by Medicare patients and other patients were especially high when performed by emergency medicine physicians (an average markup of 340 percent) compared to internal medicine physicians (an average of 110 percent markup). The higher markups for patients were more commonly seen in: (1) for-profit hospitals, (2) hospitals with a greater percentage of uninsured patients, and (3) location – with the Southeastern and Midwestern United States having the highest markups.
Unfortunately, these higher prices for the same services hit those with the least ability to pay – those that are uninsured or a member of a minority group. In short, insurance companies often “negotiate” the prices of hospital services. Therefore, when an insured person receives a procedure at a hospital – the insurance company will pay a lower pre-negotiated fee to the hospital, the insurer will then “kick in” their share of the payment, and the patient is left with a price that has been both negotiated lower and discounted by the insurance company’s payment. A person without insurance faces a different situation. First, they do not have an insurance company to negotiate lower prices for them. Instead, the hospital sets the rates (always higher than an insured person would pay). The hospital uses a complex algorithm with a goal of hitting certain profit targets, while also taking into account the expected collection rates of uninsured patients. This algorithm changes daily – therefore, an uninsured person is never exactly sure how much their procedure will cost.