Contributed by: filbert Tuesday, August 05 2008 @ 08:37 PM CST
Hospitals gain a “charity” tax deduction for the difference between what they collect and their “list” prices. If they can actually collect the money, which they often do by threatening collection lawsuits, they make a tremendous profit. If not, then they deduct from taxable income their phantom “losses” from patients who don’t pay.
So, for example, an ambulance ride with a “list cost” of $1000 could bring in $1000 from a patient who pays or a tax deduction of $1,000 from the patient who doesn’t, which then can be deducted against other income. Furthermore, the “list” prices inflate other medical costs. The uninsured today are a major source of hospital profits, as detailed in J. Patrick Rooney and Dan Perrin’s America’s Health Care Crisis Solved[*2] . The book describes how a Denver hospital patient tracked down the charges for his treatment paid by medicare and health insurance companies, which totaled $6,000, compared to the $67,000 the hospital demanded.
I always wondered why medical bills were so enormously much higher than what the insurance companies would pay for the services. Now I know. The fix is in the system.