You Better Shop Around
Marc Cooper spends 20 hours in the hospital and tells his story here. Price of stay without insurance: $116, 749. Price with insurance: $4,730. Only in America, folks.
He's not very clear if this was an emergency situation -- like, did he have a heart attack and get rushed to the hospital in an ambulance -- or an important but non-emergency situation. I will assume the latter by the tone of Marc Cooper's detailed post.
If so, then my first comment is, indeed only in America would he have gotten this procedure without waiting twelve weeks or without traveling to, say, America to get it done more expeditiously,
Second, I wonder: Did he ask for a price estimate in advance? Did he ask, as most of
us do with all of our large purchases, for a written estimate or
quotation? Did he get such estimates from two or three competitors? Did
he shop around?
Of course not! Because in a system where someone else is paying the
bills, we have no incentive to shop around. So providers have no
incentive to compete on price or to worry about productivity and cost
control.
Sure, this looks like a rip-off. But if you went in to buy a car, concerned only with the quality of the
car, and never asked the price and then got a bill for $100,000 a few
weeks later, would you be surprised? Would anyone give you sympathy if you complained you paid $100,000 for the car but admitted you never asked what the price was?
So this is a dead-obvious outcome from the health care system we
have, where no one has the incentive to shop. By the way, I have a high-deductible policy which causes me to
shop around, because costs come out of my own pocket. I ask questions
like, is that extra CT scan really necessary?
It's incredible to me that given this situation, the solution for
this blog's author and most of his readers is not "we should find a way
to have individuals experience both the cost and benefits of care,
because only they can make these tradeoffs for themselves and shop
around for better options" but is instead "lets just turn it over to
the government, since they do such a good job with Iraq and the mail
and our schools."
Finally, I would point out that the author is making some wild assumptions about an insurance statement he probably does not understand (I say that with confidence since no one understands health insurance statements). His assumption that the walk-in poor would have had to pay $100,000 for the procedure or would have been left to die are demonstrably untrue, since there is just not that much evidence that either outcome is occuring with any regularity. That is why health care socialization supporters always talk about the number of people uninsured, which is almost irrelevant, instead of the number of people who don't get care, which is a much much smaller, almost vanishingly small number.
Larry Sheldon:
I think there is some mis-reading going on.
We don't have all of the salient facts presented, but by inference from my own experiences with things like cardiac catheterizations, stent-installations, and my wife's several hospitalizations here is what I think is happening.
If he had wandered in off the street unannounced the cost would have been $116,749.
Since he has insurance with a company that has a contract with the hospital which (I assume but do not know for sure) has a contract with the hospital involving some like a retainer the insurance company only paid and ADDITIONAL (See assumption above) $4,730.
That is the way "insurance" works--spreading the costs around.
September 6, 2007, 2:08 pmKyle Bennett:
I recently went into "Urgent Care" for a badly infected finger (DIY procedures failed to contain it, until one day, after hours, I bumped it lightly on the steering wheel and saw stars and nearly drove off the road). I asked the price and was told it would cost $375 to have it lanced, soaked in iodine, and bandaged up. When I was leaving and whipped out my credit card to settle it, they (once they overcame their shock), said "Oh, if you're paying now it's only $125". Add thirty bucks, also cash, for the antibiotics prescription, and I was good to go.
Cash is king. I've read that something like 60% of doctor/hospital costs are insurance paperwork and compliance overhead. There's approximately zero chance that he would have been billed over $100K if he was actually paying cash. That's almost certainly a phantom number that represents some theoretical full price that is then "negotiated" down by the insurance company. And Larry's probably right, the $4700 is not the only thing the insurance is paying, it's more likely the only cost directly associated with this particular patient.
Oh, and at Walgreen's, no ID whatsoever was required for the prescription, unlike for OTC allergy medicine.
September 6, 2007, 4:19 pmStephen Macklin:
I was taken by ambulance to the hospital several years ago following a sailing accident that left me sprawled on the deck with a few broken ribs and some very nasty rope burns. I got a statement from my insurance company stating that the bill for the ambulance service was $160. The insurance company paid them $90 and the balance due was $0.
I called the ambulance company to verify that I owed them nothing because I didn't want to get a surprise bill for the balance. (I was working as a freelance designer and was unable to work for several days so the $70 would have hurt.) It was explained to me that they new my insurance company would only pay a percentage of their bill, so they raised the bill to the point where that percentage would cover what they needed to get for the service.
September 6, 2007, 4:46 pmla petite chou chou:
Hmm. I went to the emergency room for some stomach thing (I didn't want to but this place routes all stomach stuff through the ER, so I had no choice). My insurance deemed that it wasn't an emergency, and only paid half. I was stuck with a doctor bill for $250, a hospital bill for just over $500 and some other kind of lab bill for around $150. When I went to urgent care for a finger I scalped on broken glass (which was a MUCH bigger issue than the stomach thing and resulted in the need for lengthy disinfection, liquid skin and a tetanus shot) I paid the $15 copay and that was it. QUITE a difference between going to the ER and the urgent care centers---both are walk in, too...
September 6, 2007, 6:19 pmMark:
Medical costs are all allocated costs, which includes fixed asset allocation.
The real fact of life for health care costs is that all of the costs are "paid" by the payments. That is, insurance premiums, private payments, and government payments.
September 6, 2007, 7:14 pmJon:
Just curious... anyone know of a website that shows you average costs for various treatments? Maybe price comparisons of different clinics, states, etc.? If not, anyone want to partner on a new site? :)
September 6, 2007, 10:25 pmtribal elder:
The problem with health care is since nobody pays retail. Maybe health insurance isn't as much risk spreading as, perhaps, like joining a health care buyers club. The 'spread' between a claim's nominal prices, amounts paid by insurers and the consumer's out-of-pocket is stunning. If I could just get the BC/BS price on procedures, I wouldn't need insurance.
September 7, 2007, 5:40 amJorgXMcKie:
You can also negotiate after the fact. A few years ago, when my wife and I were poverty-stricken graduate students (redundant, to all intents and purposes) we were covered by truly crappy required student insurance (and we couldn't afford other), she was rushed in for an appendectomy. Three days later we were informed that our deductible + co-pay costs amounted to just over $4500. It took me two weeks to work my way up the food chain, but I finally got told that had we paid cash ourselves originally, the remaining cost would have amounted to around $1500, but the $4500 was figured by how they billed the insurance. I got them to sign a release for $1500 and borrowed the $1500 and paid the bill. Billed cost has approximately zero correlation to actual cost.
September 7, 2007, 5:15 pmAlways Skeptical:
Hospitals know very well their billings do not relate to what they will accept, so why do they do it? I bet it is so they can say what a great public service they are rendering to the few that are willing to lie about who they are and so avoid the lawyers. The higher the bills, the greater the service contributed to the community.
September 8, 2007, 1:30 pmCharles D. Quarles:
Post HIPAA, Always Skeptical, your comments are not quite correct. Hospital billings do relate to what they will accept. The relation is "retail" price high enough to get enough cash flow to survive because *no* third party plan will do so if you billed "retail" at your cash flow price and the government plans set the floor (and ceiling), so to speak. All Medicare and Medicaid billing entities *MUST* bill everyone at the same "retail" price and *MUST* aggressively try to collect it, even if said collections are not 100%. Failure to do so *WILL* result in prosecution under the False Claims Act and a felony conviction if you lose with each claim being a separate criminal charge. Compliance with the HIPAA requirement for aggressive collections *WILL* get your bad debts partly covered by Medicare.
But wait, there's more. Medicare pays regional differentials (Urban/rural & High cost area/low cost area & no, the two are not equal sets). IOW a covered service will pay better in New York, New York than it will in York, Alabama. Medicare is a price controlled system. You get 80% of your "allowed" charge if you take assignment or a lower percentage of your "maximum allowed actual charge" if you don't. Consider yourself lucky if Medicare pays 50% of your bill (so if you need $40 for a service on a cash flow basis, you will charge $75, get $50 as your allowed charge, get an actual payment of $30 from Medicare and maybe you'll get the $15 copay from your patient (not every Medicare patient will pay their copays and deductibles & it costs you to try to collect but try you must). Covered lab tests will get paid in full at the allowed charge rate, but you will have substantial paperwork and other administrative costs.
September 8, 2007, 10:02 pmAlways Skeptical:
Thank you Charles D. Quarles. Your very interesting response makes some sense, and you seem to know about the system, but something is left out. Payments on my behalf have not exceeded 1/3 of the billed amount for any of the last two insurers I have had, yet as far as I know none of them have been sued. Apparently *WILL* did not. Who is it that decides when *MUST* becomes *GOOD ENOUGH*? If that entity started enforcing the *MUST* part, billings and payments would come into line. Inflation of bills is not good for the health care system any more than inflated money is good for the economy. How do we stop it? I suggest that non-profits at least should bill allocated cost of services (COS) net of donations, which would allow us to figure out which providers should be shut down, and which allowed to continue. As I understand Charles, current billing is something like COS/(payout fraction), and as the payout fraction diminishes, inflation gets higher.
September 9, 2007, 6:54 am