Great article about insurance companies, PPOs, and hospital markups, Written by attorney and former hospital CEO Steven Weissman
Embodiment of corruption: Your health insurance network
As 2018 dawns insurers and providers celebrate their ongoing control of politicians who reduced the industry’s corporate taxes by 40%. Meanwhile, American families remain crushed by prices gone berserk with no relief in sight.
Because of networks, the U.S. has the highest priced medical care on earth by a margin of at least 50% per-capita. In 2016 we spent 3.3 trillion dollars ($10,348 per person) on healthcare. Based on costs in nations with better rated care and longer life expectancies, we were overcharged by 1.1 trillion dollars.
An insurance network consists of a group of hospitals, labs and physicians that agree on the amounts participants in an insurance plan are to be charged for any service.
Insurers routinely include provisions in contracts with network providers prohibiting disclosure of contracted prices. Network pricing is legally treated as a “trade secret” in nearly all States. For example, a Florida law prohibits physicians from disclosing HMO fee schedules: “. . . the provider shall maintain the confidentiality of the schedule.”
Secret network pricing helps render patients defenseless against price gouging. It’s as absurd as grocers being permitted to keep the price of milk secret.
Ask any hospital, lab or physician the price of anything and all you get is a question: “What insurance do you have?” If you are uninsured or out of network you may be charged 12X more than your neighbor for the exact same service. Obtaining an actual price is impossible because there is no real across the board pricing.
Insurers falsely tell patients that they saved them the difference between the “list price” and the “discounted” network price. List prices are approximately 4 to 12 times more than the real prices billed to the 91% of patients who are insured and should never be a factor.
For example, an insurer states you were charged $3,200 for an MRI (i.e. list price) but you received a discount price of $600 (a reduction of $2,600). The insurer claims it saved you $2,600 – even though it pays nothing if you have not satisfied your deductible.
Insurance company network “discounts” are a scam. As The Wall Street Journal, among others, have noted: “Many hospital executives dismiss those list prices . . . as meaningless and misleading, since few patients ever pay them.”
Make a few phone calls and you will quickly discover that the real cash price for an MRI is approximately the Medicare rate of $300-400; substantially below the network price in the example of $600.
Kiplinger’s illustrated how paying cash for a minor surgery cost a patient $1,700 versus the $6,400 it would have cost if the patient had “utilized” his insurance. The Federalist reported “. . . patients who don’t max out their deductibles would do far better for themselves . . . by paying cash straight up.”
The fact that individuals can obtain better pricing than insurance companies has been called “one of the dirty little secrets of healthcare.” Federal law perversely incentivizes insurers to pay high prices for medical services. Insurers are required to pay 80% of premiums collected for patient medical bills. To increase the 20% that insurers may retain towards profit, they need to constantly pay more for medical services.
Hospitals, labs and physicians are the only sellers of consumer goods and services in the U.S. permitted to charge every customer a different price for the same item. Insurance networks are the cover story for an immoral pricing system; crafted by the industry that spends more on lobbying than the defense, aerospace, and the oil and gas industries combined.
Medical providers should be free to set their own rates, but patients must be empowered with legitimate pricing information – meaning everyone pays the same price for the same service by the same provider. This fix would slash prices 33% overnight and we would still have about the most expensive healthcare on earth. A Google search would provide the price for any medical service. Network restrictions on patient choice would disappear; patients would be free to select any health provider.
This past week, the NY Times reviewed some of the research establishing that the reason our healthcare is so expensive is because of the obvious: unjustified rising prices. It is really simple, prices are skyrocketing because the industry and corrupt politicians built and designed our system to assure that there is no price competition and therefore no check on prices. As the Times stated “And lowering prices would upset a lot of people in the health industry.”