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Haggling for Health Care

June 5, 2013

I’m not a big fan of bargaining and my half-hearted attempts to get a better price for a used car, garage sale find or contractor’s service have been mostly unsuccessful. There’s always that nagging feeling that the seller is laughing with delight once I’m gone, thinking, “I really pulled one over on that rube!”

And so it has come as somewhat of a shock to me that medical care has become the new garage sale, as far as haggling goes.

First we found out that hospitals have “chargemasters” that hold the list prices for everything from knee replacements to aspirin tablets, and that these prices differ wildly between hospitals; even those in the same city. We also know that insurers, both private and Medicaid and Medicare, never pay these list prices but instead bargain with hospitals to pay substantially discounted prices. The only ones not getting in on the discounts are the uninsured or under-insured people who get hit with the full list price of hospital care.

The same thing happens with doctor bills. If you’ve ever compared what your doctor bills your insurer with what your insurer actually agrees to pay, it’s clear that there is a lot of bargaining going on. If the list price of an office visit is $125, the insurer pays $60; for a $200 lab test, the insurer reimburses $70, and so on.

A recent New York Times article, “The $2.7 Trillion Medical Bill,” focuses on the cost of colonoscopy to help explain how health care spending can be so much higher in the U.S. than other developed countries. In the article, patient bills for their colonoscopies ranged from a hefty $6, 385 to a whopping $19,438. Meanwhile, their insurers all negotiated the price down to about $3,500. As Elizabeth Rosenthal of the Times notes, this is still far more than the “few hundred dollars” that a routine colonoscopy costs in Austria or Italy.

Why do we have such price inflation here in the U.S.? Our for-profit health care industry has a lot to do with it, as does the maddeningly unregulated nature of the business. Rosenthal writes; “A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor.”

David Blumenthal, president of the Commonwealth Fund tells the Times; “In the U.S., we like to consider health care a free market.” He adds, “But it is a very weird market, riddled with market failures.”

Now back to haggling. In the last year, my family—like many others in the nation—has been covered by a high-deductible insurance plan. Before our plan kicks in to pay for doctor bills, prescription drugs or diagnostic tests, we must meet a $4,000 in-network deductible. After that, we still have co-payments and also face an out-of-network deductible of $8,000. Now responsible for so much out-of-pocket health spending, I’m face to face with Blumenthal’s “weird market.” It’s a market where no one tells you the price of office visits beforehand, doctors have no idea how much an MRI they’ve just ordered is going to cost, and you end up paying dearly for not being an aggressive shopper.

Here is an example of this new reality. I recently had a bike accident and ended up with a deep gash between two toes. Sewing this wound up was not simple; I had waited three days to address the problem (college graduation took precedence) and the cut was in a very tricky spot. The doctor x-rayed my foot to rule out a fracture, took a swab to rule out infection, cleaned the wound, gave me numbing injections and sewed it all up very thoroughly. He bandaged the foot and gave me a surgical shoe to wear to keep my weight off my toes. Then we talked money. I told the doctor that I had “crummy insurance” with a $4,000 deductible so would be paying out of pocket for his bill. He nodded knowingly and said something to the effect of “I’ll give you a good price…”

Into the garbage went the swab that had been destined for a diagnostic lab. (Saved $175). Down went the price of the surgical shoe; (“I’ll give it to you for my cost, $25.”) Into my bag (unfilled) went the antibiotic prescription. All the supplies, the surgery (also known as stitches), the anesthetic, and two follow-up visits were bundled into a single price of $650—a bargain, I was assured. I thanked my doctor, gave the office assistant my insurance information so the charges could go toward meeting my deductible and off I limped, feeling as though I had just scored a great deal on a used car. Or had I?

With the dawn of “consumer-directed care,” patients are being asked to take an active role in seeking out medical bargains. Those of us thrown into this mess know that we are woefully unprepared for this task. My husband was prescribed an MRI-guided cortisone injection into his hip not long ago. He asked the orthopedist how much this procedure would cost and the doctor had absolutely no idea but recommended an imaging center he is affiliated with. When my husband called the center and asked how much the procedure would cost, they told him it would run about $2,000. This seemed really high (and again, it would be coming out of pocket) so he called the doctor’s office and got a referral to another imaging center from the office assistant. The price of the same procedure was just over $800. Seemed like a bargain, right?

This anecdote will no doubt warm the hearts of conservatives who sing the praises of consumer-directed care and the power of market forces to drive down prices. My take on it is that my husband and I were just lucky that we had enough knowledge about pricing and had the time to haggle. Most people don’t have the wherewithal to compare prices—they are sick and need immediate treatment, get admitted to a nearby hospital or get sent to a particular imaging center and find out later how much things costs. Prices are not listed on the wall; you can’t find them easily online and NOONE EVER TELLS YOU HOW MUCH THINGS COST. When we do bargain or seek out cheaper providers we never really know if the deal we’ve gotten is really that great.

I’ve got to say that the idea of turning health care into a giant used car lot doesn’t hold much appeal for me. I’d much rather know that my providers are working from a standard price list—much as they do for Medicare and in virtually every other developed country. “Let’s Make A Deal” is a television program; it shouldn’t take place in a doctor’s office.

  1. Doctors are in no position to know what any service or piece of equipment costs except when they actually write the dollar amount on the routing sheet themselves (very rare). Even small offices may service 1000 insurance programs — all with different prices. Plus Medicare demands the lowest price charged. They do know what type of business makes them the most money (or the opposite) and they tend to follow the compass accordingly — like the magnetic attraction to huge profit from colonoscopy. The French system seems very appealing. Many years ago French hospital prices were totally inclusive at $200 per day except $400 per day for intensive care. As an outpatient the charges are posted and it is a short list. Setting prices nationally is a very effective way to control cost but can you really imagine the US Congress passing that? No, they would rather spend a zillion dollars snooping your phone records — uhoh, you didn’t call the doctor’s office did you?
    Take a look at the following article on suturing wounds:

  2. Detroit Central City Community Mental Health, Inc (DCC) is about to open an all new Health Care Center this fall using a nurse practitioner model. The Health Care Center will be located in one of the Woodward Avenue storefronts on DCC’s Detroit property.

    Nurse Practitioner staff will be hired from Detroit Mercy’s McAuley Health Center which provides health care to the community and trains Board Certified Nurse Practitioners, a Health Resources and Services Administration (HERSA) requirement, to fill the much needed role of physicians. Certified Nurse Practitioners can operate autonomously, prescribe medications and do everything primary physicians can do, except surgery.

    Detroit Central City’s Health Care Center will provide integrated health care not only to their own consumers but to the general population as well. All are welcome. Health care for the community is the direction many health care clinics are taking today providing mental health services, primary health services and speciality services, a significant, one stop convenience for patients who often face transportation and economic challenges.

  3. All points are very true and to be strongly agreed. Thanks

  4. A very thought-provoking article, Naomi. The example of healthcare in the US, is suppose, is a very good example of the problems with a free market. And regarding your visit to the doctor- what if your wound had been infected? It would’ve gone unnoticed until a bit too late, thanks to the bargaining. Doesn’t seem like much of a bargain at all.

  5. Scott permalink

    Your doctor can’t bill your insurance company for what you “bargained” for. Your doctor has a set fee for services rendered – a fee that is billed the same to all carriers. Typically, anything bargained for is a cash payment, averting the insurance cycle. Even that is a gray area, because if your provider is participating (in network) with your insurance carrier, he/she is technically bound contractually to submit a claim on your behalf.

  6. Get used to the haggling, and I expect more and more as Amercians come to realize that if they are responsible for their costs, then high deductible plans with HSA accounts are by far the cheapest way to pay for health care. Then comes the negotiations.

Trackbacks & Pingbacks

  1. Same Drug, Wildly Different Price: Generic in Name Alone | Reforming Health blog
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