Medicare Could Use Some Surgery

Medicare is on the rocks, financially. So says President Reagan.

The dollar amount of charges made by hospitals to Medicare is much greater than the funds appropriated for such costs. President Reagan is appointing a study commissioned to do for Medicare what special Social Security Study Commission did for that program. 

I have a limited knowledge of what hospital costs are, but I have acquired some knowledge of what hospital charges are. Last December I had an emergency operation at Memorial Mission Hospital in Asheville for a detached retina. Before I went to the hospital, the doctor gave me an estimate of charges for a seven-day stay, amounting to $2,300. The actual hospital bill was for $3,475. The discrepancy is substantial.

One item in the bill was shocking - a pharmacy charge of $677. The doctor's estimate for pharmaceuticals was $100. I did get some medication over and above the doctor's foreknowledge, but I was still disturbed. I wrote the hospital and asked for an itemized statement - and got another shock.

One medication I take daily, under doctor's orders, cost me just under seven cents, at retail. The hospital charge for the same medication was $3.04. In one case the charge was listed at $6.08. A third medication which I buy for 15 cents was billed at $6.60 for two units.

An aspirin tablet was billed to me at $3.12.

To get some comparative prices, I asked a druggist friend to note each item with which I was unfamiliar, and to also note his comparable price. The hospital charges run from 300% to 4000% of retail prices.

There is other confusion. One item for which my druggist friend charges $9.90 was billed to me at $63.28 on two occasions and at $31.06 on three occasions. Another item, no retail price listed, was billed at $35.20 on several occasions and at $17.60 on other occasions. There is no indication in the service code of the hospital that the higher price was for a double dose.

I spoke to my doctor about these charges and he said to take the matter up with the hospital authorities - no other comment. I wrote asking the hospital administrator for his comments. In reply I heard from the Director of Pharmacy Services: "We charge the actual costs of the items plus a fee which includes the following: inventory costs, drug profile screening, dispensing drugs on a daily basis, personnel necessary for 24 hour pharmacy operation and other overhead costs."

My retail druggist friend carries an inventory, keeps a drug profile on each customer and dispenses drugs on a daily basis. He is not open 24 hours a day, only 12.

The hospital pharmacist says his inventory is five times that of the community drug store. That may be so, but on the basis of my experience his inventory turnover and cash flow are just as rapid as that of the community druggist, and are therefore his inventory costs are little, if any, more expensive.

Two other categories of charges on my bill seemed high, but I have no adequate basis for reaching any conclusion about them.

I have been told not to worry about the bills - Medicare and my health insurance paid them all. However, I shall have increased taxes to make up the Medicare deficits, and shall have an increased Medicare deductible to add to my insurance company costs, all of which will increase  my insurance premiums.

It is also suggested that pharmacy charges are inflated to compensate for losses in providing other hospital services. Medicare pays whatever charges the hospital makes to Medicare patients, without raising questions about the propriety of such charges. In any case, a more thorough exploration of the reasons for escalated pharmacy prices might suggest methods of doing some surgery on Medicare deficits.