Why the huge variation? It’s because of the huge disconnect between the consumer and provider. When a third party pays, all transparency, and need for it, is lost. As Glenn writes:
You could do more for real cost control by requiring hospitals to publish fixed prices for most procedures than from any amount of bureaucratic fiddling — though such an approach would provide disappointingly few opportunities for graft.
When I got my hernia fixed last year, I didn’t just shop doctors, I shopped surgery facilities and even anesthesiologists. Because I was paying for it.
I think the relevant statistic (as of a few years ago, anyway) was the the U.S. consumer only directly pays 13 cents out of every dollar spent on health care.
Of course, in comparable situation in which consumers pay close to 100 cents on the dollars — cosmetic surgery and veterinary care — the effect is to keep prices relatively low.
I’m not clear on when it was, according to the liberal mindset, that the fundamental laws of economics were repealed.
There is another variable that needs to be taken into account to square the numbers. In each case I’ll bet you find the hospital that charges the higher rate is also the hospital that cares for the Medicaid and emergency wound care in that area. We call our facility the Gun and Knife Club. The seriously injured are taken there because they have no insurance, and because the staff there is proficient in these types of surgeries. If you ask an insured patient or their family where to transport their loved one, invariably it will be to another hospital that specializes in the type of care the patient needs. Doctors and even EMT staff will point people in the right direction however subtly. Because of all the uninsured services are being performed in that facility they need to make ends meet by charging insurance companies more for the same procedures.
The pricing is also flexible based on who is paying.
Xray: Walk-in, $300. Insurance billed $100. Insurance paid$13 + “You owe nothing”. (There was a mixup on my insurance, I got the “No insurance” bill before getting it straightened out.)
That the honest price is more than $13, I have no doubt. But $300 is mighty steep for the service provided.
The type of service is also relevant. A cosmetic surgeon (who is -not- going to be reimbursed by insurance much, if at all) can rent an operating theatre and pay an anesthesiologist and come away with a profit on a couple-hour surgery at prices like $10,000. But a surgery that’s going to be reimbursed is billed at 10x.
The whole system is fundamentally having the “price fixing” problem. That is: Medicaid fixes prices. (This is what we’ll pay! No more!) And the rest of the system can absorb -some- of that.
But then everyone starts “turning the cow”. That is: When price fixing was used on cuts of beef, the butchers basically sliced the cow differently and said “New cut of beef! New -pricing-!” Same cow, worth 10x the ‘price fixed cuts’.
“insurance is the most expensive way to pay for anything”
We need to get everyone saying this mantra.
As well as: Mandatory Insurance is a mandatory middle-man.
I work in insurance, part of my job is reviewing claims. We see the ‘billed amount’, and also the network ‘allowed amount’. Wildly different in some cases, almost identical in others. It should be obvious, but…always use a provider who is in net. Another thing you can try is to pay cash and then submit your bill to insurance yourself, rather than having the provider submit, if the provider is willing give a cash discount.
No question that insurance is a huge added cost.
I had a hernia operation last year, at an “out of network” facility. They wanted $750 cash on the barrelhead at admission, with the statement that they would adjust the charges so that my out-of-pocket expense was equivalent to in-network. Signed all sorts of paper, guaranteeing that I would pay.
Fast forward 2 months, I get the insurance company statement, surgeon covered, owe 70, anesthesiologist covered, owe 130, facility, charges minus what they cover, owe 3500. $3500!, what! I start getting really excited, my wife finally calms me down, I call the facility about the bill.
Answer: You don’t owe a cent, the $750 at the beginning was the whole charge. Pay no attention to the bill.
At least in this case, $2250 is the padding on the bill.
BTW, it was more expensive than a standard herniaplasty because it was a repair of one that was done in 1965, and finally let go. Hope that the mesh procedure lasts that long, because I’ll be dead first 🙂
My podiatrist told me to get a walking brace for a foot problem. I was going to buy it right then and there, but the price tag was $300+. Guys, I’ve bought guns for less (and good ones, too!). So I went home and ordered one on Amazon for $85. Same product by the same manufacturer.
When I went back for my followup, I asked the podiatrist why he had priced himself out of the sale. His response was that, in order to be reimbursed $100 for the appliance, he had to charge the insurance company $300.