Hospitals Price Gouging Uninsured?

For Ed and Dianne Jellison, it was the perfect storm of bad luck. They had just dropped their health insurance to look for a cheaper plan, when one morning, Dianne Jellison found Ed unconscious.

"He was blue," she says. "He didn't respond to me at all, and so I just immediately called 911."

Ed Jellison was rushed to Florida Hospital, where for 18 days he was treated for a brain infection that destroyed his short-term memory.

"He had to learn to read all over again," she says. "It was like he had never had known how."

And then, as CBS News Correspondent Wyatt Andrews reports, the $116,000 bill arrived.

Diane Jellison characterizes it as "price gouging."

As she studied the bill, she discovered an open secret: Uninsured patients routinely face hospital bills three or four times higher than patients with insurance.

Take Jellision's $116,000 bill. An insurance company would have paid just $65,000 to $80,000. Medicare would only have paid $12,000 for the same care.

"Florida Hospital appears to be worse than a used car salesman," says K.B. Forbes, an activist for the uninsured.

"These guys are giving the uninsured markups of 400 to 500 percent," says Forbes.

He says it's like this everywhere.

Hospitals claim there is only one sticker price for a given service, but, Medicare then gets a big discount. Insurance companies and HMOs also negotiate a discount. At the end it really is only patients without insurance who are ever asked to pay full fare.

The reason, Florida Hospital's Rich Morrison says, is that the hospital is stuck in a bizarre and broken system. He admits that the sticker prices at hospitals have to be inflated to balance out all those discounts.

"Hospitals are forced to come up with some pricing structure that would try to account for this mishmash of how we are being paid," says Morrison.

Florida Hospital says it helps the uninsured, giving away tens of millions worth of free care and operating a clinic for the uninsured. That means most of the people stuck with full sticker price are uninsured patients with assets - patients like the Jellisons.

"We simply asked for a reasonable price," says Ed Jellison. "They just did it their way to try to stick you with it."

The hospital has tried to settle with the Jellisons but at prices they have rejected. They admit they owe money but have gone to court, arguing that a system that produces a bill like theirs should be sent to intensive care.

They're not alone. A class-action lawsuit has been filed against a West Virginia hospital by patients without medical insurance. It's one of dozens filed by uninsured patients in the past year against hospitals in 26 states, all charging that uninsured patients were being charged more.