Hospitals inflate prices for insured patients: sometimes a medical service without insurance is 3 times cheaper

The price a hospital charges a patient without insurance for a procedure is often lower than the negotiated price a commercial insurance plan would cover, reports Washington Post.

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This conclusion, based on the pricing information that hospitals were forced to provide under Hospital Price Transparency Rule, runs counter to conventional wisdom that insurers use their bargaining power to drive prices down.

The study looked at general hospital services that patients can purchase, including check-ups, laboratory tests, and surgeries that can be scheduled in advance. In almost half of these cases, hospitals, especially large ones with market power, set their prices for uninsured patients lower than their average contract prices for insurers.

The findings support previous research that found that about one-sixth of hospitals charge prices for uninsured patients below any negotiated price.

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Hospitals are willing to charge competitive prices for uninsured patients because such patients tend to be more price sensitive. And hospitals can avoid the administrative costs associated with processing insurance claims.

In many of the hospitals included in the previous study, the average contract price for a colonoscopy was often in excess of $5000, more than three times the national average uninsured price of $1635 for such a procedure. These prices can be especially annoying for patients who are enrolled in high deductible plans. Before reaching a franchise, they must pay every dollar out of their own pocket.

Opinions on healthcare

Well-insured patients with little out-of-pocket spending may not care about their insurance companies' limited ability to negotiate lower hospital rates. Ultimately, however, all beneficiaries and plan sponsors (often employers) cover the high contract prices through higher premiums.

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Many employers are not aware of the difference in hospital prices. And health insurance companies, which can earn more by covering more expensive treatments, often prioritize their own financial interests over their responsibilities to clients and beneficiaries. That is, they protect the money paid for medical care from the wages and savings of employees and the income of the employer.

Theoretically, insurance creates value by pooling risks. But when patients and employers pay more for conventional fee-based services, their risk-pooling benefits may not be enough to offset the financial losses from higher prices.

Many health care providers are currently challenging the role of health insurance. Some ambulatory surgery centers, for example, only serve uninsured patients, and many physicians offer direct primary care, bypassing health insurance intermediaries entirely. The emergence of platforms such as Goodrx и Mark Cuban's Cost Plus Drug Co., allowed insured patients to receive prescription drugs at a lower cost without insurance. These innovative models provide even greater price competition and benefit to patients.

Any patient should have the right to pay below the negotiated prices. Employers must contractually require insurers to reimburse patient cash payments and, when applicable, allow them to account for deductibles.

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By dictating what benefits are available and at what cost, commercial insurance companies limit the ability of patients to save money through comparative purchases. A more efficient approach would be to define employer contributions, such as contributions to health savings accounts, and give employees control over how they spend their money.

Medical costs are rising because most Americans have insurance. If everyone had food insurance, food prices would skyrocket too. Covering all health insurance has resulted in high costs and suboptimal health outcomes. Remove intermediaries for routine services, and prices will drop.

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