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February 5, 2008
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Christopher Fleming

Uninsured Californians Pay Net Hospital Prices Similar To Those Paid By Medicare, RAND Researchers Report

But Researchers Also Find Some Evidence That Hospitals In Nation’s Most Populous State May Be Changing Pricing Behavior In Response To Controversy Over Prices Charged To Uninsured Patients

Bethesda, MD -- Uninsured patients in California are paying net prices for hospital treatment that are as high as and higher than prices paid by Medicare, according to a new study by researchers at RAND and the University of Southern California (USC) published today on the Health Affairs Web site. The study comes on the heels of a crucial vote in a state Senate committee against a comprehensive plan to cover uninsured people in the nation’s most populous state. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.2.w116

Using data collected from 2001 through 2005 by the California state government, the researchers found that, on average, hospitals in that state collect a higher percentage of their list prices -- known as “charges” -- from uninsured patients than from those covered by Medicare. Very few patients actually pay the full charge for any hospital service, since Medicare and commercial carriers negotiate discounts and hospitals are unable to collect the full amount of their charges from the uninsured.

Over the 2001-02 period, hospitals collected 18 percent more of their charges from uninsured patients than from Medicare patients; by the 2004-05 period, that difference had risen slightly to 20 percent of charges. The median uninsured patient -- the patient midway between the patient who paid the highest percentage of charges and the patient who paid the smallest percentage -- paid a portion of hospital charges that was 8 percent higher than Medicare paid in 2001-02 and 1 percent lower than Medicare paid in 2004-05.

“The two measures, the average and the median, tell essentially the same story: Uninsured patients are paying net prices similar to those paid by Medicare -- and since Medicare prices went up 13 percent during our study period, that means prices for the uninsured are going up, too,” said lead author Glenn Melnick, professor and Blue Cross Chair at USC and RAND in Santa Monica. “The difference between our two measures reflects the fact that a few hospitals are charging much higher net prices to the uninsured, which raises the average price to the uninsured but not the median,” he explained.

The study by Melnick and coauthor Katya Fonkych, a research associate at USC and RAND, uses data collected by the California Office of Statewide Health Planning and Development. This unique hospital-level data set reports charges and net revenues separately for uninsured patients and several groups of insured patients. To eliminate year-to-year fluctuations caused by the timing of large collections, the researchers report many of their findings in two-year increments.

Melnick and Fonkych note that the uninsured account for significant amounts of hospital use. In 2005, uninsured Californians had 149,000 inpatient admissions, more than 842,000 inpatient days, and 3.96 million outpatient visits (including visits to the emergency department).

Some Measures Show That Hospitals May Be
Changing Pricing Behavior Toward The Uninsured

The issue of prices charged by hospitals to the uninsured has received a great deal of attention in recent years. While Melnick and Fonkych find that the uninsured are facing rising prices similar to those paid by Medicare, other measures they tracked show that at least some hospitals may be changing their pricing behavior toward the uninsured.

For example, the uninsured paid lower prices than those charged to commercially insured patients throughout the study period, and the uninsured fared relatively better over time on this score. On average, hospitals collected 1 percent less of their charges from uninsured patients than from commercially insured patients during the 2001-02 period and 14 percent less during the 2004-05 period. The median uninsured patient paid 11 percent less than his or her commercially insured counterpart in 2001-02 and 28 percent less in 2004-05.

Moreover, during 2001-02, 41 percent of uninsured Californians went to hospitals that collected a higher percentage of charges from uninsured patients than from commercially insured patients. By 2004-05, only 27 percent of uninsured state residents were treated at hospitals in this category. In 2001-02, 57 percent of uninsured Californians went to hospitals that collected a higher percentage of charges from uninsured patients than they did from Medicare patients. By 2004-05, 49 percent of uninsured Californians received treatment at such hospitals.

“We can’t tell for sure whether hospitals are changing their pricing to the uninsured or if uninsured patients are moving to hospitals that charged less all along, but it’s probably more the former than the latter,” said Melnick. “You could describe what we found as a mixed bag: The uninsured are still facing high net prices when they need hospital treatment, but there are signs of progress.”

You can read the article by Melnick and Fonkych at


Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.


©2008 Project HOPE–The People-to-People Health Foundation, Inc.