A report in the May 27 issue of The Los Angeles Times describes something surprising: People with health insurance can sometimes pay substantially more out of pocket than people without.
In one example they cite, a hospital charged an insured patient $6,707 for a CT scan, of which her insurance company paid about 65%, leaving her to pay the remaining $2,336. But if she hadn’t had insurance, or simply hadn’t used it, the hospital would have charged her $1,054.
Even more remarkably, another medical center lists the cost of an abdominal CT scan as $4,423 on a website and has negotiated a discounted price of about $2,400 with Blue Shield, but it actually charges uninsured patients just $250.
(Note, incidentally, that “Blue Cross” and “Blue Shield” are names used by otherwise independent insurance companies operating in different states.)
Of course, some doctors and hospitals have always been kind enough to charge rock-bottom rates to indigent, uninsured patients, or even treat them for free. But we’re talking about something different here, since in many cases the lower prices are offered to anyone paying out of pocket, even if they’re well-off or have insurance. This isn’t necessarily meant to be the case. The California Hospital Association told the Times that the discounted prices are intended for people without insurance. But hospitals often don’t enforce that, in part because getting paid up front saves their having to fight the insurance companies to collect.
This stark difference seems to be a relatively new development. I recall reading roughly ten years ago a Wall Street Journal article about much higher prices being charged to people without insurance. In fact, the LA Times article itself says, “The cash discounts evolved over time after hospitals were criticized in recent years for charging the uninsured their highest rates and then hounding them at times with overzealous collection efforts.”
Part of what seems to be happening is that hospitals are negotiating with insurance companies to charge them the highest prices they can, in part to cover losses for treating patients who are unable to pay. In a perverse way, paying more for care can actually sometimes be to the benefit of insurance companies as well, since to an extent they operate on a cost-plus basis. This is likely yet another reason that health care costs in the United States are so much higher than in other advanced countries that offer comparable or in some cases even better levels of care but have a less Byzantine system of health care finance.
Note that while these “cash discounts” may apply in varying degrees to many different tests and procedures, for major illnesses and even much routine care, people still tend to be far better of with insurance. For example, insured people typically pay nothing at all for flu shots, and it’s hard to do better than that. Still, it shows the need for — at a minimum — more disclosure to the public. In the absence of regulations requiring it, patients and their families have to ask: Would it be cheaper if I paid in cash?