Prices for common medical tests like mammograms and MRIs are notoriously opaque. Negotiated rates between insurance companies and doctors or hospitals are sealed tight by contract. We know there's price variation, but comparing what one insurance company pays versus another is virtually impossible. That's why we here at KQED in San Francisco turned to members of our audience to help us find out what medical tests and devices cost....How can market functions hold costs down if we have no way of comparing the costs? Competition doesn't work at all in an environment like this.
We thought we would find variation, and indeed we did. In California, commercial insurers paid from $128 to $694 for a screening mammogram. In Los Angeles, one woman's insurer paid $600 more than the lowest-cost screening mammogram reported in the area. "I'm sure every woman who's had a mammogram had the exact same experience I did," this woman said. "It was a friendly technician, but I don't think that's worth maybe 600 extra dollars."
In lower-back MRIs, we found that for CPT code 72148, insurers paid from $467 to $1,567. But when we looked beyond commercial insurers, we found even greater variation — from a low of $255 to a self-pay price of $6,221 at an academic medical center. That $255 MRI was paid by Medicare, and was just a fraction of the facility's charge of $2,450.
Price Signals Work
At least, they work if they aren't entirely hidden from the consumer.
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Here in the Milwaukee area, there's a business known as Smart Choice MRI. From what friends have told me, they charge approx $600 for the same MRI that an Ortho clinic charges 2500 for. When i was with another insurer, my Cpap supplies, covered by insurance cost twice as much as the local cpap2go store. Now, cpap2go will work with insurance, but it adds another 30% onto the cost. I just pay cash. My insurance sucks anyway. I only keep it for possible major stuff.
" In California, commercial insurers paid from $128 to $694..."
What insurance company pays three times what another company is paying? How do they stay in business? They ought to know what these tests should really cost- that's what I never understood about the inscrutable pricing of tests.
If the government didn't make doing these test so onerous, I'm sure we'd actually see some competitive pricing. In fact, I don't understand why some insurance company doesn't just start reimbursing the patients (a fixed amount- and if you find it cheaper, you keep the difference), and before you know it, test costs would be plunging as testing companies work to be more cost effective to get your business.
Most of the time, the insurer has made some 'package deal' with the provider such that something rather closer to the medicare rate is actually paid.
Saw this for real a few years ago: A laser turp (google the video for extra queasiness) was billed by hospital for $25,000USD. Insurer paid about $4000USD. Subscriber paid a $50 co-pay. Subscriber's insurance premium at the time was about $150USD a month for an HMO. No deductible. (This was all before Obamacare).
Don't ask me to explain what it really cost to do the procedure. I have no idea.
I gather from last year's somewhat expensive medical procedures for the wife (total cost to me: $10,000) that having insurance was good and bad. They billed several times what it's going to end up costing me, but the hospital is totally unwilling to negotiate on the ten grand because it's an insurance bill. If I were paying out of pocket, they'd be very flexible.
Am I better off with insurance? With different insurance? How could I possibly know?
Mr. Karl Dennnger has written extensively on this. His conclusion is that the entire field has managed to write themselves an exemption from the federal antitrust acts. I see no reason to disagree. My sister was unable to get a price for a knee replacement at any DC hospital- they refused to tell her what the cost would be- I think this is endemic.
Open pricing and the removal of cartel type protections would drop our medical costs faster than anything else.
I've written here before, I think, about how hard it can be to negotiate a cash price, or even to find out what the price is, before a procedure is done. I'm afraid that just about any third-party payor system leads to this problem. Of course, as we all find to our sorrow, what we have isn't quite a third-party payor system; we start getting bills for the part that wasn't covered, somehow, and it's nearly impossible to find out ahead of time what that will be, either.
I have never heard a good proposal for a solution to the problem that we want two mutually incompatible things: (1) individual discretion in choosing (and pricing) medical care and (2) collectivized risk for its cost, combined with an assurance that no one will ever be unluckier than anyone else in his medical expenses. The best feasible solution, I think, is high-deductible policies combined with health savings accounts. It's the only part of the ACA that makes any sense, but they did their best to obscure it and screw it up. People who really were hoping that the ACA would morph into single-payer hate HSAs with a vivid passion.
All I have ever wanted from medical insurance was the ability to hedge against extraordinarily high bills that would threaten our net worth and savings for old age. I'd prefer to negotiate prices on the year-after-year stuff myself, and pay cash. But every policy I've ever been able to buy has relentlessly pushed me back into a first-dollar mold to some degree. Insurance companies did it because that's what sells; HHS now does it because it's politically popular to "protect" people from the bills that they apparently can't be expected to save for, even if they represent a statistically average probability of the slings and arrows of everyone's medical luck every year.
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