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Wrong Alan A.?

Alan A.

Medicare

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Medicare

Background Information

Employment History

Sloan-Kettering Cancer Center

Nurse

Web References (4 Total References)


TIME: Why Medical Bills Are Killing Us | The International Council for Truth in Medicine

www.7stepstohealth.com [cached]

In July 2011, an 88-year-old man whom I'll call Alan A. collapsed from a massive heart attack at his home outside Philadelphia. He survived, after two weeks in the intensive-care unit of the Virtua Marlton hospital. Virtua Marlton is part of a four-hospital chain that, in its 2010 federal filing, reported paying its CEO $3,073,000 and two other executives $1.4 million and $1.7 million from gross revenue of $633.7 million and an operating profit of $91 million. Alan A. then spent three weeks at a nearby convalescent-care center.

Medicare made quick work of the $268,227 in bills from the two hospitals, paying just $43,320. Except for $100 in incidental expenses, Alan A. paid nothing because 100% of inpatient hospital care is covered by Medicare.
The ManorCare convalescent center, which Alan A. says gave him "good care" in an "O.K. but not luxurious room," got paid $11,982 by Medicare for his three-week stay.
...
About a decade ago, Alan A. was diagnosed with non-Hodgkin's lymphoma. He was 78, and his doctors in southern New Jersey told him there was little they could do. Through a family friend, he got an appointment with one of the lymphoma specialists at Sloan-Kettering. That doctor told Alan A. he was willing to try a new chemotherapy regimen on him. The doctor warned, however, that he hadn't ever tried the treatment on a man of Alan A.'s age.
...
A decade later, Alan A. is still in remission. He now travels to Sloan-Kettering every six weeks to be examined by the doctor who saved his life and to get a transfusion of Flebogamma, a drug that bucks up his immune system.
With some minor variations each time, Sloan-Kettering's typical bill for each visit is the same as or similar to the $7,346 bill he received during the summer of 2011, which included $340 for a session with the doctor.
Assuming eight visits (but only four with the doctor), that makes the annual bill $57,408 a year to keep Alan A. alive. His actual out-of-pocket cost for each session is a fraction of that. For that $7,346 visit, it was about $50.
In some ways, the set of transactions around Alan A.'s Sloan-Kettering care represent the best the American medical marketplace has to offer. First, obviously, there's the fact that he is alive after other doctors gave him up for dead. And then there's the fact that Alan A., a retired chemist of average means, was able to get care that might otherwise be reserved for the rich but was available to him because he had the right insurance.
Medicare is the core of that insurance, although Alan A. - as do 90% of those on Medicare - has a supplemental-insurance policy that kicks in and generally pays 90% of the 20% of costs for doctors and outpatient care that Medicare does not cover.
...
According to Alan A., the nurse generally handles three or four patients at a time.
...
Whatever Sloan-Kettering's calculations may be, Medicare - whose patients, including Alan A., are about a third of all Sloan-Kettering patients - buys into none of that math. Its cost-based pricing formulas yield a price of $302 for everything other than the drug, including those hourly charges for the nurse and the miscellaneous charges. Medicare pays 80% of that, or $241, leaving Alan A. and his private insurance company together to pay about $60 more to Sloan-Kettering. Alan A. pays $6, and his supplemental insurer, Aetna, pays $54.
...
Applying that formula of average sales price plus the 6% premium, Medicare cuts Sloan-Kettering's $4,615 charge for Alan A.'s Flebogamma to $2,123. That's what the drugmaker tells Medicare the average sales price is plus 6%. Medicare again pays 80% of that, and Alan A. and his insurer split the other 20%, 10% for him and 90% for the insurer, which makes Alan A.'s cost $42.50.
...
Sloan-Kettering buys it from either Baxter International in the U.S. or, as is more likely in Alan A.'s case, a Barcelona-based company called Grifols.
...
In fact, seeing the way Alan A.'s bills from Sloan-Kettering were vetted and processed is one of the more eye-opening and least discouraging aspects of a look inside the world of medical economics.
The process is fast, accurate, customer-friendly and impressively high-tech. And it's all done quietly by a team of nonpolitical civil servants in close partnership with the private sector. In fact, despite calls to privatize Medicare by creating a voucher system under which the Medicare population would get money from the government to buy insurance from private companies, the current Medicare system is staffed with more people employed by private contractors (8,500) than government workers (700).
$1.5 Billion A Day Sloan-Kettering sends Alan A.'s bills to medicare electronically, all elaborately coded according to Medicare's rules.
...
Similar codes are calculated for laboratory and diagnostic tests like CT scans, ambulance services and, as we saw with Alan A.'s bill, drugs dispensed.
...
Alan A.'s bills from Sloan-Kettering are wired to a data center in Shelbyville, Ky., run by a private company (owned by WellPoint, the insurance company that operates under the Blue Cross and Blue Shield names in more than a dozen states) that has the contract to process claims originating from New York and Connecticut. Medicare is paying the company about $323 million over five years - which, as with the fees of other contractors serving other regions, works out to an average of 84¢ per claim.
In Shelbyville, Alan A.'s status as a beneficiary is verified, and then the bill is sent electronically to a data center in Columbia, S.C., operated by another contractor, also a subsidiary of an insurance company. There, the codes are checked for edits, after which Alan A.'s Sloan-Kettering bill goes electronically to a data center in Denver, where the payment instructions are prepared and entered into what Karen Jackson, who supervises Medicare's outside contractors, says is the largest accounting ledger in the world. The whole process takes three days - and that long only because the data is sent in batches.
...
In a review of other bills of those enrolled in Medicare, a pattern of deep, deep discounting of chargemaster charges emerged that mirrored how Alan A.'s bills were shrunk down to reality. A $121,414 Stanford Hospital bill for a 90-year-old California woman who fell and broke her wrist became $16,949.
...
Alan A. is now 89, and the mound of bills and Medicare statements he showed me for 2011 - when he had his heart attack and continued his treatments at Sloan-Kettering - seemed to add up to about $350,000, although I could not tell for sure because a few of the smaller ones may have been duplicates. What is certain - because his insurance company tallied it for him in a year-end statement - was that his total out-of-pocket expense was $1,139, or less than 0.2% of his overall medical bills. Those bills included what seemed to be 33 visits in one year to 11 doctors who had nothing to do with his recovery from the heart attack or his cancer. In all cases, he was routinely asked to pay almost nothing: $2.20 for a check of a sinus problem, $1.70 for an eye exam, 33¢ to deal with a bunion. When he showed me those bills he chuckled.
A comfortable member of the middle class, Alan A. could easily afford the burden of higher co-pays that would encourage him to use doctors less casually or would at least stick taxpayers with less of the bill if he wants to get that bunion treated. AARP (formerly the American Association of Retired Persons) and other liberal entitlement lobbies oppose these types of changes and consistently distort the arithmetic around them. But it seems clear that Medicare could save billions of dollars if it required that no Medicare supplemental-insurance plan for people with certain income or asset levels could result in their paying less than, say, 10% of a doctor's bill until they had paid $2,000 or $3,000 out of their pockets in total bills in a year. (The AARP might oppose this idea for another reason: it gets royalties from UnitedHealthcare for endorsing United's supplemental-insurance product.)
Medicare spent more than $6.5 billion last year to pay doctors (even at the discounted Medicare rates) for the service codes that denote the most basic categories of office visits. By asking people like Alan A. to pay more than a negligible share, Medicare could recoup $1 billion to $2 billion of those costs yearly.
Too Much Doctoring? Another doctor's bill, for which Alan A.'s share was 19¢, suggests a second apparent flaw in the system. This was one of 50 bills from 26 doctors who saw Alan A. at Virtua Marlton hospital or at the ManorCare convalescent center after his heart attack or read one of his diagnostic tests at the two facilities.
...
Alan A. didn't care how much time his cancer or heart doc


Bitter Pill: Why Medical Bills Are Killing Us - The Venus Project Foundation, an arts, sciences and educational, non-profit 501(c)(3), national organization

www.venusproject.org [cached]

In July 2011, an 88-year-old man whom I'll call Alan A. collapsed from a massive heart attack at his home outside Philadelphia. He survived, after two weeks in the intensive-care unit of the Virtua Marlton hospital. Virtua Marlton is part of a four-hospital chain that, in its 2010 federal filing, reported paying its CEO $3,073,000 and two other executives $1.4 million and $1.7 million from gross revenue of $633.7 million and an operating profit of $91 million. Alan A. then spent three weeks at a nearby convalescent-care center.

Medicare made quick work of the $268,227 in bills from the two hospitals, paying just $43,320. Except for $100 in incidental expenses, Alan A. paid nothing because 100% of inpatient hospital care is covered by Medicare.
The ManorCare convalescent center, which Alan A. says gave him "good care" in an "O.K. but not luxurious room," got paid $11,982 by Medicare for his three-week stay.
...
About a decade ago, Alan A. was diagnosed with non-Hodgkin's lymphoma. He was 78, and his doctors in southern New Jersey told him there was little they could do. Through a family friend, he got an appointment with one of the lymphoma specialists at Sloan-Kettering. That doctor told Alan A. he was willing to try a new chemotherapy regimen on him. The doctor warned, however, that he hadn't ever tried the treatment on a man of Alan A.'s age.
...
A decade later, Alan A. is still in remission. He now travels to Sloan-Kettering every six weeks to be examined by the doctor who saved his life and to get a transfusion of Flebogamma, a drug that bucks up his immune system.
With some minor variations each time, Sloan-Kettering's typical bill for each visit is the same as or similar to the $7,346 bill he received during the summer of 2011, which included $340 for a session with the doctor.
Assuming eight visits (but only four with the doctor), that makes the annual bill $57,408 a year to keep Alan A. alive. His actual out-of-pocket cost for each session is a fraction of that. For that $7,346 visit, it was about $50.
In some ways, the set of transactions around Alan A.'s Sloan-Kettering care represent the best the American medical marketplace has to offer. First, obviously, there's the fact that he is alive after other doctors gave him up for dead. And then there's the fact that Alan A., a retired chemist of average means, was able to get care that might otherwise be reserved for the rich but was available to him because he had the right insurance.
Medicare is the core of that insurance, although Alan A. - as do 90% of those on Medicare - has a supplemental-insurance policy that kicks in and generally pays 90% of the 20% of costs for doctors and outpatient care that Medicare does not cover.
...
According to Alan A., the nurse generally handles three or four patients at a time.
...
Whatever Sloan-Kettering's calculations may be, Medicare - whose patients, including Alan A., are about a third of all Sloan-Kettering patients - buys into none of that math. Its cost-based pricing formulas yield a price of $302 for everything other than the drug, including those hourly charges for the nurse and the miscellaneous charges. Medicare pays 80% of that, or $241, leaving Alan A. and his private insurance company together to pay about $60 more to Sloan-Kettering. Alan A. pays $6, and his supplemental insurer, Aetna, pays $54.
...
Applying that formula of average sales price plus the 6% premium, Medicare cuts Sloan-Kettering's $4,615 charge for Alan A.'s Flebogamma to $2,123. That's what the drugmaker tells Medicare the average sales price is plus 6%. Medicare again pays 80% of that, and Alan A. and his insurer split the other 20%, 10% for him and 90% for the insurer, which makes Alan A.'s cost $42.50.
...
Sloan-Kettering buys it from either Baxter International in the U.S. or, as is more likely in Alan A.'s case, a Barcelona-based company called Grifols.
...
In fact, seeing the way Alan A.'s bills from Sloan-Kettering were vetted and processed is one of the more eye-opening and least discouraging aspects of a look inside the world of medical economics.
...
Sloan-Kettering sends Alan A.'s bills to medicare electronically, all elaborately coded according to Medicare's rules.
...
Similar codes are calculated for laboratory and diagnostic tests like CT scans, ambulance services and, as we saw with Alan A.'s bill, drugs dispensed.
...
Alan A.'s bills from Sloan-Kettering are wired to a data center in Shelbyville, Ky., run by a private company (owned by WellPoint, the insurance company that operates under the Blue Cross and Blue Shield names in more than a dozen states) that has the contract to process claims originating from New York and Connecticut. Medicare is paying the company about $323 million over five years - which, as with the fees of other contractors serving other regions, works out to an average of 84¢ per claim.
In Shelbyville, Alan A.'s status as a beneficiary is verified, and then the bill is sent electronically to a data center in Columbia, S.C., operated by another contractor, also a subsidiary of an insurance company. There, the codes are checked for edits, after which Alan A.'s Sloan-Kettering bill goes electronically to a data center in Denver, where the payment instructions are prepared and entered into what Karen Jackson, who supervises Medicare's outside contractors, says is the largest accounting ledger in the world. The whole process takes three days - and that long only because the data is sent in batches.
...
In a review of other bills of those enrolled in Medicare, a pattern of deep, deep discounting of chargemaster charges emerged that mirrored how Alan A.'s bills were shrunk down to reality. A $121,414 Stanford Hospital bill for a 90-year-old California woman who fell and broke her wrist became $16,949.
...
Alan A. is now 89, and the mound of bills and Medicare statements he showed me for 2011 - when he had his heart attack and continued his treatments at Sloan-Kettering - seemed to add up to about $350,000, although I could not tell for sure because a few of the smaller ones may have been duplicates. What is certain - because his insurance company tallied it for him in a year-end statement - was that his total out-of-pocket expense was $1,139, or less than 0.2% of his overall medical bills. Those bills included what seemed to be 33 visits in one year to 11 doctors who had nothing to do with his recovery from the heart attack or his cancer. In all cases, he was routinely asked to pay almost nothing: $2.20 for a check of a sinus problem, $1.70 for an eye exam, 33¢ to deal with a bunion. When he showed me those bills he chuckled.
A comfortable member of the middle class, Alan A. could easily afford the burden of higher co-pays that would encourage him to use doctors less casually or would at least stick taxpayers with less of the bill if he wants to get that bunion treated. AARP (formerly the American Association of Retired Persons) and other liberal entitlement lobbies oppose these types of changes and consistently distort the arithmetic around them. But it seems clear that Medicare could save billions of dollars if it required that no Medicare supplemental-insurance plan for people with certain income or asset levels could result in their paying less than, say, 10% of a doctor's bill until they had paid $2,000 or $3,000 out of their pockets in total bills in a year. (The AARP might oppose this idea for another reason: it gets royalties from UnitedHealthcare for endorsing United's supplemental-insurance product.)
Medicare spent more than $6.5 billion last year to pay doctors (even at the discounted Medicare rates) for the service codes that denote the most basic categories of office visits. By asking people like Alan A. to pay more than a negligible share, Medicare could recoup $1 billion to $2 billion of those costs yearly.
Too Much Doctoring? Another doctor's bill, for which Alan A.'s share was 19¢, suggests a second apparent flaw in the system. This was one of 50 bills from 26 doctors who saw Alan A. at Virtua Marlton hospital or at the ManorCare convalescent center after his heart attack or read one of his diagnostic tests at the two facilities.
...
Alan A. didn't care how much time his cancer or heart doctor spent with him or how many tests he got. He cared only that he got better.
...
But there's also the cane that Alan A. got after his heart attack. Medicare paid $21.97 for it. Alan A. could have bought it on Amazon for about $12.
...
They might be tempted to, because, as we saw with Alan A., Medicare's protection is so broad and supplemental private insurance costs so little that it all but el


Bitter Pill: Why Medical Bills Are Killing Us

www.fcta.org [cached]

In July 2011, an 88-year-old man whom I'll call Alan A. collapsed from a massive heart attack at his home outside Philadelphia. He survived, after two weeks in the intensive-care unit of the Virtua Marlton hospital. Virtua Marlton is part of a four-hospital chain that, in its 2010 federal filing, reported paying its CEO $3,073,000 and two other executives $1.4 million and $1.7 million from gross revenue of $633.7 million and an operating profit of $91 million. Alan A. then spent three weeks at a nearby convalescent-care center.

Medicare made quick work of the $268,227 in bills from the two hospitals, paying just $43,320. Except for $100 in incidental expenses, Alan A. paid nothing because 100% of inpatient hospital care is covered by Medicare.
The ManorCare convalescent center, which Alan A. says gave him "good care" in an "O.K. but not luxurious room," got paid $11,982 by Medicare for his three-week stay.
...
About a decade ago, Alan A. was diagnosed with non-Hodgkin's lymphoma. He was 78, and his doctors in southern New Jersey told him there was little they could do. Through a family friend, he got an appointment with one of the lymphoma specialists at Sloan-Kettering. That doctor told Alan A. he was willing to try a new chemotherapy regimen on him. The doctor warned, however, that he hadn't ever tried the treatment on a man of Alan A.'s age.
The treatment worked. A decade later, Alan A. is still in remission. He now travels to Sloan-Kettering every six weeks to be examined by the doctor who saved his life and to get a transfusion of Flebogamma, a drug that bucks up his immune system.
With some minor variations each time, Sloan-Kettering's typical bill for each visit is the same as or similar to the $7,346 bill he received during the summer of 2011, which included $340 for a session with the doctor.
Assuming eight visits (but only four with the doctor), that makes the annual bill $57,408 a year to keep Alan A. alive. His actual out-of-pocket cost for each session is a fraction of that. For that $7,346 visit, it was about $50.
In some ways, the set of transactions around Alan A.'s Sloan-Kettering care represent the best the American medical marketplace has to offer. First, obviously, there's the fact that he is alive after other doctors gave him up for dead. And then there's the fact that Alan A., a retired chemist of average means, was able to get care that might otherwise be reserved for the rich but was available to him because he had the right insurance.
Medicare is the core of that insurance, although Alan A. -- as do 90% of those on Medicare -- has a supplemental-insurance policy that kicks in and generally pays 90% of the 20% of costs for doctors and outpatient care that Medicare does not cover.
...
According to Alan A., the nurse generally handles three or four patients at a time.
...
Whatever Sloan-Kettering's calculations may be, Medicare -- whose patients, including Alan A., are about a third of all Sloan-Kettering patients -- buys into none of that math. Its cost-based pricing formulas yield a price of $302 for everything other than the drug, including those hourly charges for the nurse and the miscellaneous charges. Medicare pays 80% of that, or $241, leaving Alan A. and his private insurance company together to pay about $60 more to Sloan-Kettering. Alan A. pays $6, and his supplemental insurer, Aetna, pays $54.
...
Applying that formula of average sales price plus the 6% premium, Medicare cuts Sloan-Kettering's $4,615 charge for Alan A.'s Flebogamma to $2,123. That's what the drugmaker tells Medicare the average sales price is plus 6%. Medicare again pays 80% of that, and Alan A. and his insurer split the other 20%, 10% for him and 90% for the insurer, which makes Alan A.'s cost $42.50.
...
Sloan-Kettering buys it from either Baxter International in the U.S. or, as is more likely in Alan A.'s case, a Barcelona-based company called Grifols.
...
In fact, seeing the way Alan A.'s bills from Sloan-Kettering were vetted and processed is one of the more eye-opening and least discouraging aspects of a look inside the world of medical economics.
...
Sloan-Kettering sends Alan A.'s bills to medicare electronically, all elaborately coded according to Medicare's rules.
...
Similar codes are calculated for laboratory and diagnostic tests like CT scans, ambulance services and, as we saw with Alan A.'s bill, drugs dispensed.
...
Alan A.'s bills from Sloan-Kettering are wired to a data center in Shelbyville, Ky., run by a private company (owned by WellPoint, the insurance company that operates under the Blue Cross and Blue Shield names in more than a dozen states) that has the contract to process claims originating from New York and Connecticut. Medicare is paying the company about $323 million over five years -- which, as with the fees of other contractors serving other regions, works out to an average of 84 ¢ per claim.
In Shelbyville, Alan A.'s status as a beneficiary is verified, and then the bill is sent electronically to a data center in Columbia, S.C., operated by another contractor, also a subsidiary of an insurance company. There, the codes are checked for edits, after which Alan A.'s Sloan-Kettering bill goes electronically to a data center in Denver, where the payment instructions are prepared and entered into what Karen Jackson, who supervises Medicare's outside contractors, says is the largest accounting ledger in the world. The whole process takes three days -- and that long only because the data is sent in batches.
...
In a review of other bills of those enrolled in Medicare, a pattern of deep, deep discounting of chargemaster charges emerged that mirrored how Alan A.'s bills were shrunk down to reality. A $121,414 Stanford Hospital bill for a 90-year-old California woman who fell and broke her wrist became $16,949.
...
Alan A. is now 89, and the mound of bills and Medicare statements he showed me for 2011 -- when he had his heart attack and continued his treatments at Sloan-Kettering -- seemed to add up to about $350,000, although I could not tell for sure because a few of the smaller ones may have been duplicates. What is certain -- because his insurance company tallied it for him in a year-end statement -- was that his total out-of-pocket expense was $1,139, or less than 0.2% of his overall medical bills. Those bills included what seemed to be 33 visits in one year to 11 doctors who had nothing to do with his recovery from the heart attack or his cancer. In all cases, he was routinely asked to pay almost nothing: $2.20 for a check of a sinus problem, $1.70 for an eye exam, 33 ¢ to deal with a bunion. When he showed me those bills he chuckled.
A comfortable member of the middle class, Alan A. could easily afford the burden of higher co-pays that would encourage him to use doctors less casually or would at least stick taxpayers with less of the bill if he wants to get that bunion treated. AARP (formerly the American Association of Retired Persons) and other liberal entitlement lobbies oppose these types of changes and consistently distort the arithmetic around them. But it seems clear that Medicare could save billions of dollars if it required that no Medicare supplemental-insurance plan for people with certain income or asset levels could result in their paying less than, say, 10% of a doctor's bill until they had paid $2,000 or $3,000 out of their pockets in total bills in a year. (The AARP might oppose this idea for another reason: it gets royalties from UnitedHealthcare for endorsing United's supplemental-insurance product.)
Medicare spent more than $6.5 billion last year to pay doctors (even at the discounted Medicare rates) for the service codes that denote the most basic categories of office visits. By asking people like Alan A. to pay more than a negligible share, Medicare could recoup $1 billion to $2 billion of those costs yearly.
Too Much Doctoring? Another doctor's bill, for which Alan A.'s share was 19 ¢, suggests a second apparent flaw in the system. This was one of 50 bills from 26 doctors who saw Alan A. at Virtua Marlton hospital or at the ManorCare convalescent center after his heart attack or read one of his diagnostic tests at the two facilities.
...
Alan A. didn't care how much time his cancer or heart doctor spent with him or how many tests he got. He cared only that he got better.
...
But there's also the cane that Alan A. got after his heart attack. Medicare paid $21.97 for it. Alan A. could have bought it on Amazon for about $12.
...
They might be tempted to, because, as we saw with Alan A., Medicare's protection is so broad and supplemental private insurance cost


The International Council for Truth in Medicine

www.7stepstohealth.com [cached]

It is part of a for-profit chain owned by Carlyle Group, a blue-chip private-equity firm. About a decade ago, Alan A. was diagnosed with non-Hodgkin's lymphoma. He was 78, and his doctors in southern New Jersey told him there was little they could do. Through a family friend, he got an appointment with one of the lymphoma specialists at Sloan-Kettering. That doctor told Alan A. he was willing to try a new chemotherapy regimen on him. The doctor warned, however, that he hadn't ever tried the treatment on a man of Alan A.'s age. The original version of this article stated that the Assurant Health insurance policy of Rebecca and Scott S. had an annual pay limit of $100,000. It was $200,000. The treatment worked. A decade later, Alan A. is still in remission. He now travels to Sloan-Kettering every six weeks to be examined by the doctor who saved his life and to get a transfusion of Flebogamma, a drug that bucks up his immune system. With some minor variations each time, Sloan-Kettering's typical bill for each visit is the same as or similar to the $7,346 bill he received during the summer of 2011, which included $340 for a session with the doctor. Assuming eight visits (but only four with the doctor), that makes the annual bill $57,408 a year to keep Alan A. alive. His actual out-of-pocket cost for each session is a fraction of that. For that $7,346 visit, it was about $50. In some ways, the set of transactions around Alan A.'s Sloan-Kettering care represent the best the American medical marketplace has to offer. First, obviously, there's the fact that he is alive after other doctors gave him up for dead. And then there's the fact that Alan A., a retired chemist of average means, was able to get care that might otherwise be reserved for the rich but was available to him because he had the right insurance. Medicare is the core of that insurance, although Alan A. - as do 90% of those on Medicare - has a supplemental-insurance policy that kicks in and generally pays 90% of the 20% of costs for doctors and outpatient care that Medicare does not cover. Here's how it all computes for him using that summer 2011 bill as an example. Not counting the doctor's separate $340 bill, Sloan-Kettering's bill for the transfusion is about $7,006. In addition to a few hundred dollars in miscellaneous items, the two basic Sloan-Kettering charges are $414 per hour for five hours of nurse time for administering the Flebogamma and a $4,615 charge for the Flebogamma. According to Alan A., the nurse generally handles three or four patients at a time.

...
Pressed on that, Nelson conceded that the profit is higher and is meant to cover other hospital costs like research and capital equipment. Whatever Sloan-Kettering's calculations may be, Medicare - whose patients, including Alan A., are about a third of all Sloan-Kettering patients - buys into none of that math.
...
Medicare pays 80% of that, or $241, leaving Alan A. and his private insurance company together to pay about $60 more to Sloan-Kettering. Alan A. pays $6, and his supplemental insurer, Aetna, pays $54. Bottom line: Sloan-Kettering gets paid $302 by Medicare for about $2,400 worth of its chargemaster charges, and Alan A. ends up paying $6. The Cancer Drug Profit Chain It's with the bill for the transfusion that the peculiar economics of American medicine take a different turn, even when Medicare is involved. We have seen that even with big discounts for insurance companies and bigger discounts for Medicare, the chargemaster prices on everything from room and board to Tylenol to CT scans are high enough to make hospital costs a leading cause of the $750 billion Americans overspend each year on health care. We're now going to see how drug pricing is a major contributor to the way Americans overpay for medical care. By law, Medicare has to pay hospitals 6% above what Congress calls the drug company's "average sales price," which is supposedly the average price at which the drugmaker sells the drug to hospitals and clinics. But Congress does not control what drugmakers charge. The drug companies are free to set their own prices. This seems fair in a free-market economy, but when the drug is a one-of-a-kind lifesaving serum, the result is anything but fair. Applying that formula of average sales price plus the 6% premium, Medicare cuts Sloan-Kettering's $4,615 charge for Alan A.'s Flebogamma to $2,123. That's what the drugmaker tells Medicare the average sales price is plus 6%. Medicare again pays 80% of that, and Alan A. and his insurer split the other 20%, 10% for him and 90% for the insurer, which makes Alan A.'s cost $42.50. In practice, the average sales price does not appear to be a real average.
...
Sloan-Kettering buys it from either Baxter International in the U.S. or, as is more likely in Alan A.'s case, a Barcelona-based company called Grifols. In its half-year 2012 shareholders report, Grifols featured a picture of the Flebogamma plasma serum and its packaging - "produced at the Clayton facility, North Carolina," according to the caption. Worldwide sales of all Grifols products were reported as up 15.2%, to $1.62 billion, in the first half of 2012.
...
But Medicare's growth is not a matter of those "bureaucrats" that Betsy McCaughey complains about having gone off the rails in how they operate it. In fact, seeing the way Alan A.'s bills from Sloan-Kettering were vetted and processed is one of the more eye-opening and least discouraging aspects of a look inside the world of medical economics. The process is fast, accurate, customer-friendly and impressively high-tech.
...
In fact, despite calls to privatize Medicare by creating a voucher system under which the Medicare population would get money from the government to buy insurance from private companies, the current Medicare system is staffed with more people employed by private contractors (8,500) than government workers (700). $1.5 Billion A Day Sloan-Kettering sends Alan A.'s bills to medicare electronically, all elaborately coded according to Medicare's rules. There are two basic kinds of codes for the services billed.
...
Except for emergency services, no hospital has to accept Medicare patients and these prices, but they all do. Similar codes are calculated for laboratory and diagnostic tests like CT scans, ambulance services and, as we saw with Alan A.'s bill, drugs dispensed. "When I tell my friends what I do here, it sounds boring, but it's exciting," says Diane Kovach, who works at Medicare's Maryland campus and whose title is deputy director of the provider billing group.
...
"Our goal at the first stage is that no one has to touch the bill," says Leslie Trazzi, who focuses on instructions and edits for doctors' claims. Alan A.'s bills from Sloan-Kettering are wired to a data center in Shelbyville, Ky., run by a private company (owned by WellPoint, the insurance company that operates under the Blue Cross and Blue Shield names in more than a dozen states) that has the contract to process claims originating from New York and Connecticut.
...
Medicare is paying the company about $323 million over five years - which, as with the fees of other contractors serving other regions, works out to an average of 84¢ per claim. In Shelbyville, Alan A.'s status as a beneficiary is verified, and then the bill is sent electronically to a data center in Columbia, S.C., operated by another contractor, also a subsidiary of an insurance company. There, the codes are checked for edits, after which Alan A.'s Sloan-Kettering bill goes electronically to a data center in Denver, where the payment instructions are prepared and entered

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