Cut-Rate Surgery

A bunch of new companies are helping people who pay out-of-pocket for hospital services get better prices. To date, those people have been getting completely screwed:

Extrapolating from federal Medicare data, Vimo (vimo.com), a small Web start-up in Mountain View, Calif., tries to estimate the fees negotiated by insurers for a variety of hospital procedures.

While the price for a cornea transplant at Wills Eye Hospital in Philadelphia is an estimated $15,000, for example, the reimbursement rate negotiated by insurers is likely to be closer to $4,700, according to the Web site.

The reimbursement rate nationally is still lower: $3,900, by Vimo's calculation. "We were shocked," said Chini Krishnan, chief executive of Vimo. "We had no idea that the pricing inefficiencies could be so extreme."

The eventual goal--some minimum level of transparency:

The varying reimbursement schedules, negotiated between the nation's 850,000 providers and more than 6,000 health plans, have been kept all but secret. Consumers almost never get information on prices before treatment. Even insurers do not know what other health plans are paying.

Comments

[No biggie]

$4700 in hand is worth $15000 in the bush.

[Warren]

Excellent point. As someone who has paid for his own medical services from time to time, I think this needs a lot more attention. As someone who's moved several times, finding a doctor is like buying a lottery ticket where the wining tickets have already been sold. The only way to get decent medical care is through nepotism or some old boy network. Even if you can afford quality care, it's almost impossible to compare prices, and completely impossible to compare quality.

[Art]

Negotiating for hospitals with healthplans is what I did before this latest gig. It is absolutely amazing the amount of money the not-for-profit, "caring and community minded" hospitals will screw a self pay patient out of.
The overall charges have almost no bearing on the service provided and are only designed to maximize Medicare reimbursement, not represent the cost of services.
And in many areas the PPO and Indemnity customers are also getting screwed by these "community minded" hospitals who balance bill the patient for the difference between the hospitals charges and what the insurance company paid.
It is absolutely disgusting. No one who runs a not-for-profit hospital has ever had to pass business 101, yet they operate organizations that bring in 100's of millions of dollars a year. And no matter what, it is never enough money.
When people say they want to take the profit out of health care, I shutter. Profit means you get the job done and have some money left over. A not-for-profit hospital will never admit to a profit but alsways admit they need more money to get the job done.

[The Wine Commonsewer]

This is a very significant problem and from time to time, even though my co-pay is more than Doc Jones used to charge for an office visit 20 years ago, I often appreciate how much Blue Cross whittles the bill down.

We all know that the bills get padded to start with because doctors know the insurance company is going to chisel it down. But every once in a while somebody without insurance, or somebody with a Medical Savings Account pays the full, undiscounted fee, and that's just gravy. For the medical people that is.

[Christopher Monnier]

The most straightforward thing to report is price, so that's what companies are starting with. Hopefully, someday there'll be sites like tripadvisor.com for hospitals and doctors, where users will be able to compare both price and quality of service.

[MP]

Practically every single person who pays directly for medical services is getting completely screwed. Are there any other major industries where the only time you know what the price will be is when you receive the bill?

If there was ever a pro-market regulation I'd get behind, its this one...publish your damned prices!

[Warren]

While I'm thinking about it. How did you get your doctor? Are you happy with her?

[MikeP]

While I'm thinking about it. How did you get your doctor?

1-800-DOCTORB! The 'B' is for 'Bargain'!

[thoreau]

Anything that can bring more transparency to pricing is good. When I see medical bills they usually look like this: (only small exaggeration)

Blood drawing: $29,800
Blood testing: $12,200
Insurance discount: -$30,000
Exempted charges: -$11,900
------------------------------
Covered benefit: $ 100
Applied to deductible: -$ 25
Patient co-pay: -$ 10
------------------------------
Paid to provider: $ 55
Patient responsibility: $ 45

Yeah, the starting amounts are somewhat exaggerated, but I still wonder how anybody without insurance gets a straight answer on what something will cost before it's done. They probably don't.

[Mo]

The worst thing is these pricing differences and inefficiancies only strengthen the calls for socialized medicaine. Publishing prices would greatly reduce the need for socialized medice. It's bad enough the tax system leans on the scale for those who work for big companies over the self-employed and small businesses. When the cost of self insurance is 3 times as much, on average, for a procedure than group insurance, it only makes the cries for socialized insurance louder.

[MikeP]

One wonders if you could have a relationship with an insurance company that makes it effectively your "health agent".

It would work like this... You have a catastrophic policy with the company. But, for a nominal additional fee, the insurer pays all your medical bills. At the end of the month or out of some common account, you reimburse the insurance company for all costs below the catastrophic deductable.

Thus you have the bargaining power of an insurance company while not actually insuring the small health expenses that don't require it.

[JD]

MikeP - What you've described is kind of like how regular insurance works, which would be a big improvement over "health insurance" today. Think about car insurance - they don't pay for you to put gas in your car, or to get new tires. Or homeowner's insurance - you make an insurance claim for catastrophic stuff, not every time you paint a room or replace a lock. With "health insurance", OTOH, people expect it to pay for everything. And they kind of have to, because it's so expensive not to...but I think we're in a vicious circle here.

I have a friend who does medical billing work sometimes, so I've heard some of these stories about how it works. Apparently a large part of the problem is that when you start socializing health care (like Medicare, for example), the government has to put its foot down about how much certain things cost: Medicare will pay X dollars for such-and-such procedure, no more. But then other insurers don't see why they should pay any more, and it becomes a de facto price control system.

[The Wine Commonsewer]

Warren, I got my doctor by throwing darts at the phone book. I got lucky. She's the best doctor I've ever had, bar none. Except for that nonsense about how one glass of red wine per day is enough I mean. She's kinda cute, too.

[The Wine Commonsewer]

Thow-row, your post made me chuckle. I looked up the charges for my last blood test. It was just shy of $300.00.

[MikeP]

With "health insurance", OTOH, people expect it to pay for everything.

As you note, they shouldn't.

Nonetheless, as things stand today, you could get a better price for medical costs you cover yourself if you had the insurance company gorilla on your side in the negotiation.

Medicare will pay X dollars for such-and-such procedure, no more. But then other insurers don't see why they should pay any more, and it becomes a de facto price control system.

As support for this notion, notice how prices for medical procedures not covered by Medicare -- e.g., elective cosmetic surgery, lasik -- are reasonable and well advertised.

[grumpy realist]

The other problem is I never know what a routine test is going to cost. I pay something at the hospital, ok, fine, it's done. Then a month later I get a whopping bill from a "medical laboratory" that somehow for some arcane reason is connected with the test even though no one ever told me beforehand I was going to be charged. Then there's another extra languippe of a $30 that the hospital charges me on top of what I was already charged (no explanation as to why.)

I think they just spin the wheel on their patient list and decide to send out mystery invoices each month to 10%.

Guys--fix this, otherwise you're going to get socialized medicine.

[Chis L.]

Ahhh, unions. The American Medical Association is the strongest among them.

Run widit-

[sam_h]

"The most straightforward thing to report is price, so that's what companies are starting with. Hopefully, someday there'll be sites like tripadvisor.com for hospitals and doctors, where users will be able to compare both price and quality of service."

My uncle-in-law had just such a website and got sued by the AMA. He gave up and shut it down. I don't blam the docs, they are stuck in a hybrid socialist/freemarket system.

[Genghis Kahn]

I don't un-blame them either. They like the obscurity.

I'm convinced that the average doctor does not want medical services subject to free and open market forces. They might find it so easy to drive a Rolls anymore.

They'll risk a fully socialized system long before they'll risk a free and open market.

Hey grump, if you got any practical-workable ideas on how to fix it, I'm all ears.

California is basically ungovernable, as the UnTerminated has learned to live with. What the rest of us need to learn is that DC is the same thing. Nobody and nothing is going to fix it, short of a) bankruptcy or b) an invasion of by the Mongolian Hordes.

Sadly, the Mongolian Hordes haven't been worth much since the development of decent artillery. And they were never very good at crossing oceans in the first place.

🙁

[Col DuBois]

Mongolian whores, though, are the finest in Central Asia.

[JohnJacksonIII]

My wife had a miscarriage without insurance. At a Charity Hospital..We got the bill and it said "Self Pay Uninsured DISCOUNT" the Discount was ADDING 20% to the bill.

[Gray Ghost]

As far as health care finance discussions go, I haven't seen the essential problem better stated than Morat20's year-ago comments on the problem. (I'm surprised I've remembered them---it doesn't seem like I read them that long ago---and I hope he/she doesn't mind my quoting them):

Here's the problem you guys have with this: You're not going to have a pure free-market system -- which brings in all the free-market magic that makes this all cheap and plentiful and farted from unicorns and such -- unless you have a free-market system.

And having a pure free-market system means one thing: You turn away the dying if they can't pay.

That's the REAL problem. That's the drag on the system. The American public is currently UNWILLING to allow hospitals to turn away the dying if they can't pay. The public is unwilling to make the critically ill or injured wait for treatment until their ability to pay is determined."

A longer treatment from him (her?) can be found here.

When trying to decide whether to apply to med school or not ~1994, I spoke with several doctors: did they like the profession, where was it going, etc... They were unanimous in recommending that I not try to become a doctor. One of the more memorable quotes from a cardiologist was, "Why would you go to school all those years, just so you could go work for the post office?"

Now, they may have been scared/bent that Hilarycare was right around the corner. However, Morat's observations on why we will not ever adopt a pure market system for health care, coupled with BabyBoomer demographics/staggering costs for geriatric care, suggest that we will be adopting a form of socialized medicine very soon. (Perhaps from President Hilary?) Then medical charges and costs will be as transparent as every other government expense.

[van]

>>As support for this notion, notice how prices for medical procedures not covered by Medicare -- e.g., elective cosmetic surgery, lasik -- are reasonable and well advertised.

Sure, you can get good ballpark estimates for procedures on physician websites.

Veterinarians are also able to generate estimates for services before they are rendered -- even for emergency procedures.