Medical pricing a mystery even to the experts

If you're confused about how health care pricing is determined, take heart — or despair — in knowing that even experts have trouble getting straight answers.

"It's complete chaos," says Uwe Reinhardt, a health care economist at Princeton University. One constant, he and other experts say, is the delicate dance of health care provider and insurer to control pricing, with hospitals and doctors groups trying to push prices up and insurers trying to knock them down.

Private insurers often take their reimbursement cue from Medicare, the largest of all insurance programs. Medicare uses a formula estimating physician work, staff salaries and malpractice insurance rates, and considers outside factors — such as government budgeting — to establish what it will pay providers.

But it’s not uncommon for providers to bill at a much higher rate to recoup maximum reimbursement. "In general, the fees we come up with are fantasy numbers," says Dr. Karl Spector, a highly rated internist in Bel Air, Md. "We make it up."

Patients rarely pay these "fantasy" fees, Spector says, because a doctor's office has contracted with an insurance company to accept a reduced amount. But, experts say, providers can bill uninsured patients for the full amount or insured patients for the balance if they use an out-of-network provider.

Cost shifting is also common. The $20 a hospital billed you for a Band-Aid has very little to do with the Band-Aid, says Charlie Whelan, a health care market analyst with business research and consulting firm Frost & Sullivan in San Antonio, Texas. A pricey charge for supplies could help pay for a hospital's bad debt or building maintenance.

Still, a pricing system shrouded in mystery is also ripe for abuse. One insurance industry study found providers charging eight to 10 times what Medicare reimbursed. "It's really the Wild West," Reinhardt says.


Comments

Angie's list is a joke when it comes to medical knowledge and pricing. It's amateur hour over here. Please stop pretending to know anything, it's dishonest to your consumer.

This article was exactly what I was looking for and answered all my questions & concerns.

Costs are crazy and make getting our roofers insurance almost unaffordable.

This is a GREAT article. It really helps explain the outrageous medical bills a person gets when they are hospitalized. NOW, What do we all DO about this

Rich you couldn't be more wrong. I come from a family of doctors and healthcare administrators. Price shifting and billing at roughly double the accepted amount is exactly what happens. The difference is everyone's view of it. When you work in a price controlled industry let me know how it works out for you.

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