Notes From Babel

Are Hospitals Really Getting Bludgeoned By Insurers?

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In this post, I joined the refrain of those who accuse the health care machine of manipulation and abuse by refusing to publish objective costs of medical procedures.  By so refusing, hospitals will charge insurance companies less (due to insurers’ strong negotiating position) and make up the costs on private payers (who have a lousy negotiating position).  My friend Tom left some numbers in the comments that are worth repeating.  In one instance, the hospital mis-billed him privately, sending him (rather than the insurer) a bill for $68,000.  When they corrected the billing and resubmitted to the insurer, the bill was $12,000.

I haven’t seen enough instances to know whether this is the norm.  But if price discrepancies are truly this great, it seems there’s a problem.  It is one thing to have the advantage of your own negotiating power.  An insurance company is an 800 pound gorilla, and it is its right to throw its muscle around.  On the other hand, if it has so much muscle to throw around that hospitals are truly sucking wind by the end of the negotiations that they’re left looking to private payers to make up the difference, that’s a problem.  My best to you to get the best deal you can, but if I wind up paying more than I otherwise would have, then that puts us at odds.  Specifically, I will want to either regulate insurers, or be forced to get insured—negotiating my own deal is no longer an economically viable option.  And another problem: if it’s no longer economically viable to be uninsured, there’s some credit to the idea that insurers should not be able to deny coverage.  None of this sounds like a free market scenario.

I must be missing something here.

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Written by Tim Kowal

September 1, 2009 at 8:25 pm

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