Alison Kodjak of NPR Health Shots recently presented a very insightful segment on healthcare prices ( NPR Bill Of The Month: A Tale Of 2 CT Scanners — One Richer, One Poorer, April 9, 2018 ). In this presentation, she followed a patient who had two abdominal CT scans a short time apart at two different facilities and received two dramatically different bills ($268 vs. $8,897). Part of the story is the well known kafkaesque nightmare of incomprehensible bills, codes, insurance lingo, networks and various facilities. But also buried in this discussion are some real gems that provide clues to the healthcare mess and potential solutions.
First, the prices are all fake. Healthcare providers and facilities play a game of charging whatever they want for a service or a test. The healthcare insurers then “negotiate” the actual (ie, “allowable”) reimbursement price with that provider. That makes the insurers look like heroes for bargaining down the price for their customers. But both the insurer and the provider are supporting each other in a dishonest dance. Because the patient - who is the ultimate customer - has no easy way of figuring out what his real out-of-pocket payment will be. So both the insurer and the provider obfuscate the price to the patient’s ultimate detriment. And this really matters today: if you have insurance, more than 25% of Americans now have high deductible plans and will likely pay the full cost of the test. And if you have no insurance, then you will pay the full “fake” price, unless you personally engage with the provider in a new dance to get a charity discount. This is a corrupt system.
Second, the story exposes the dramatic variability in prices based on the type of facility: a free-standing, independent clinic and imaging center versus the hospital emergency room. Emergency Departments at hospitals have a litany of reasons for defending their high prices. But in the end, the reasons are self-serving: emergency departments are major revenue centers for the hospital. Their prices are really never challenged by insurers - who are too scared to take on the medical establishment - nor challenged by patients, who don’t have resources or time for protracted battles.
Finally, commercial health insurers have demonstrated no meaningful public policy insights or goals. They talk about health and coverage and customer service. But they are pure followers with no significant points of view beyond the next cycle of premium prices. By negotiating hard on the prices for small, independent providers as demonstrated in this NPR article, they drive competition out of the market and leave the field to the large hospitals that then set the price for the market and drive patients to the most expensive places for care, further fueling the cycle.
But it does not have to be this way:
Insurers, regulators and policy makers can foster the development of efficient facilities that can provide most of the care safely and effectively. ERs should be reserved for life-threatening conditions. Patients can and should get of their care outside of ERs and hospitals. The research supports this. Only dumb insurers and dumb governments would drive patients to the location of the most expensive care.
Pricing can and should be transparent to the end user. Insurers could make this happen. Stop the games with discounts.
Foster competition based on experience and results.