By David Lazarus
Los Angeles Times
WWR Article Summary (tl;dr) Reporter David Lazarus contends, “The near-total lack of transparency in healthcare pricing is a key reason we have the highest costs in the world, roughly twice what people in other developed countries pay.”
Los Angeles Times
Fountain Valley, Calif., resident Jennifer Moore makes a really good point.
“When you take your car to the mechanic, they give you a written estimate before they touch it,” she told me.
“So why is it that when you go to the hospital, you have no idea how much something will cost until the bill arrives?”
Moreover, why are prices so completely different from one healthcare provider to another?
And why is it that when patients try to find out in advance how much something will cost, they’re treated like unwelcome guests rather than equal partners in their own treatment?
The magnitude of reforming the $3.6-trillion U.S. healthcare system is so daunting, it’s hard to even know where to start.
Here, let me help.
Open a window and let in some sunlight.
The near-total lack of transparency in healthcare pricing is a key reason we have the highest costs in the world, roughly twice what people in other developed countries pay.
Simply put, drugmakers, hospitals, labs and other medical providers face no accountability for their frequently obscene charges because it’s often impossible for patients to know how badly they’re being ripped off.
What happened to Moore, 63, and her wife, Mika, 48, is a perfect example of what we’re up against.
Mika recently went in for a pair of ultrasounds at an Orange County medical center that Moore would prefer I didn’t name in case future visits are needed. Mika’s doctor had detected internal bleeding and wanted a look at possible causes.
A few weeks after the hospital visit, the bill arrived.
Moore’s insurer, Cigna, was charged $2,758 by the medical center for the two ultrasounds. However, Cigna gets a contractual discount of just over $1,000 because it’s, well, Cigna. All insurers cut such sweetheart deals with medical providers.
That lowered the bill to $1,739. Cigna paid $500. That left a balance of $1,239, for which Mika was entirely responsible because she hadn’t met her $1,250 deductible for the year.
Moore quickly ascertained online that the average cost for a pair of ultrasounds is about $500, meaning the medical center’s original $2,758 charge represented a more than 400% markup.
Cigna’s lower contractual charge of $1,739 still meant the bill had been marked up more than 200%.
And the $1,239 Mika had to pay was more than twice the national average.
Wait, it gets even worse.
Moore said that after working her way through various levels of customer service in the medical center’s billing department, she learned that the cash price for the two ultrasounds was $521.
In other words, if Mika hadn’t been insured and was paying completely out of pocket, she would have been charged a fraction of the insured cost.
“If we had known that,” Moore said, “we would have paid cash.”
Mark Slitt, a Cigna spokesman, said some healthcare providers “charge exorbitant fees, and then send a surprise balance bill to the patient for whatever the health plan does not cover.”
This is, of course, insane.
Health insurance is meant to make treatment affordable, not inflict a psychotic price that in no way reflects the reality of actual costs.
Moreover, no one should have to struggle to find out what’s being charged, and to learn that the insured price and the cash price are so far apart.
“The patient should be able to decide if she wants to pay $1,239 toward her deductible or $500 out of pocket,” said Jason Doctor, chairman of the Department of Health Policy and Management at USC’s Sol Price School of Public Policy.
“This is all opaque to her because prices are not transparent and no one explains these things to the patient,” he told me.
The healthcare industry has steadily opposed efforts to bring pricing out of the shadows.
Most recently, drugmakers sued the Trump administration to block a requirement that they include prices in TV ads. They said people would be “confused” by such disclosures.
The reality is that by keeping such matters behind closed doors, healthcare companies are able to perpetuate a system that both accommodates and encourages exorbitant prices.
Perhaps the most egregious practice is for drugmakers, hospitals and others to maintain “chargemaster” lists of prices that are typically way above the amounts actually paid.
They do this to start negotiations with insurers at ludicrously high levels so that final prices still deliver the fat profit margins the industry has grown accustomed to.
Fun fact: Sixty-two healthcare chief executives made a combined $1.1 billion in compensation last year, according to Axios.
That’s tens of millions of dollars more than what the Centers for Disease Control and Prevention spent on preventing chronic diseases.
“Chargemasters have grown increasingly unrelated to hospital costs,” said Jack Needleman, a professor of health policy and management at UCLA.
He said he routinely sees chargemaster prices that are “two or more times” the actual cost of treatment.
The need for greater price transparency has grown amid rising insurance deductibles, which have more than tripled in the last decade. It’s now crucial for patients to shop around for the best deals.
In the current healthcare marketplace, however, apples-to-apples comparisons are impossible. That’s what needs to change.
On Monday, the Trump administration proposed a rule requiring hospitals to post online the healthcare prices they’ve negotiated with insurers. That would be a step in the right direction.
But we can do better.
What’s needed are uniform chargemasters that accurately reflect average prices. If a provider can come in lower than a competitor, great. That’s how markets are supposed to work.
All healthcare entities should provide clear pricing information to patients ahead of treatment. If auto mechanics can do it, so can doctors.
How should prices be set? In other developed countries, state-run insurance programs use their bargaining power to lower prices to fair levels. Some also rely on panels of experts to determine if a particular drug or procedure is worth the money.
The first step toward greater transparency in this country would be to empower Medicare to negotiate drug prices on behalf of its 60 million beneficiaries.
At the moment, Medicare is forbidden by law from exercising its market power. Republican lawmakers have blocked all efforts to reform the system.
Healthcare providers and insurers should be required to display Medicare reimbursement rates alongside their own charges, thus establishing a “fair value” baseline from which consumers can make informed decisions.
If a provider wants to charge more than what the country’s largest health insurer sees as reasonable, it would have to demonstrate why a higher rate is justified. There will be certain standards of care that warrant higher prices.
The point is, healthcare providers should compete on their merits, not on sneaky backroom deals that leave patients in the dark.
Greater transparency wouldn’t fix all our healthcare woes. It wouldn’t, for example, provide universal coverage (“Medicare for all” would do that).
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Still, it would represent a giant step toward bringing U.S. healthcare prices in line with the rest of the developed world.
You know who else charges less if you pay cash? Gas stations. And they post signs saying as much.
It doesn’t seem unreasonable to hold hospitals to the same standard of transparency.
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ABOUT THE WRITER
David Lazarus, a Los Angeles Times columnist, writes on consumer issues.
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Distributed by Tribune Content Agency, LLC.
