What has our health care system come to when people are punished for carrying insurance? The market for health care has become so distorted that it can cost more out-of-pocket for patients who have health insurance than for those who simply pay cash. That's right, patients are spending more on co-pays after their insurance kicks in than are people who pay cash up front.
This story was blown open by veteran journalist Chad Terhune, who has already won one National Press Club award for his coverage of abuses in the health insurance industry. In a recent article for the Los Angeles Times, Terhune tells of the ordeal of Jo Ann Snyder, who would have paid less than her co-pay if she had only paid cash:
A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336. Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn't used her insurance, her bill would have been even lower, just $1,054.
How does this happen? Terhune's investigation also uncovered CT scans that list for upwards of $4,400 which the same company performs for $250 cash, and blood work billed to insurance at more than $750 that is available for $95 cash. He blames the lack of transparency in health-services pricing and distortions caused by the lengthy insurance reimbursement process.
Market forces applied to heath care services could find solutions to many of the problems caused by government intervention and the convoluted process of medical payments. According to Terhune:
Health-policy experts say the growing awareness of cash prices should accelerate the trend toward increased disclosure of all types of medical costs. But entrenched interests are likely to resist.
The "entrenched interests" are indeed resisting. A bill to require health care providers to publish a price list for their most popular services easily passed the Republican-led Arizona Senate earlier this year, only to be bottled up in a House committee by Republicans representing some of those same entrenched interests.
Who killed the bill? Nancy Barto, a Republican who chairs the Senate's Health Care Committee and the sponsor of the bill, blames "legislators succumbing to lobbyists on issues that should be rather plain."
Analyzing the causes for the bill dying in committee, Avik Roy of Forbes shows how the confusion and complexity of health services pricing benefits those entrenched interests:
Most doctors and hospitals would rather not post their prices, because then patients would shop around, placing pressure on their incomes. Insurers don't like price transparency, because they view the rates they negotiate with hospitals and doctors as proprietary trade secrets that give them an advantage over their competitors. Suppliers of medical products, of course, also benefit from high prices.
Why does health care cost so much more in the United States while providing worse outcomes than in less expensive countries? Blame a convoluted cadre of insurance companies and health care providers working the regulatory system to increase their compensation, while making it nearly impossible for anyone to figure out exactly what anything costs.
It is a shame when the market distortions have become so great that those who purchase insurance pay more for their medical care than those who don't. In the new world of national health care, the best advice may be to bypass the system and pay cash.
Source: "Many hospitals, doctors offer cash discount for medical bills," Los Angeles Times, May 27, 2012.
Source: "Why do Hospitals Charge $4,423 for $250 CT Scans? Blame Arizona Republicans," Forbes Apothecary Blog, May 27, 2012.
Image courtesy of stevendepolo used under its Creative Commons license.
Steve O'Keefe is a freelance writer, author and book editor.