Updated: May 3, 2013 12:14PM
Originally published: September 25, 2006
Can you imagine going out to buy a new car without any idea of the price you should pay? Few, if any, buyers pay the “sticker price” on the window. But when it comes to health care and hospitalization, we just accept the bill that is presented to us -- in effect, paying the “sticker” price.
If you need to go to the hospital for treatment or surgery, you probably never ask about the costs. Why should you care? Your health insurance coverage will take care of most of those huge bills, except for your deductible and co-payments. And even those co-payments have a limit. For those covered by employer-provided health care, the cost of a hospital stay is usually the last thing on your mind.
The same holds true for seniors who can rely on Medicare to cover the huge costs of hospitalization, especially if they have purchased a supplemental policy that expands on the basic Medicare Part A. And if you qualify for state Medicaid programs by virtue of your low income and assets, you have access to the same high-quality hospitalization treatment as if you had private health insurance.
Insulated from costsPerhaps this insulation from rising health care costs contributes to the upward pricing spiral. If consumers aren’t searching for the best deals, why should anyone offer them?
But for the estimated 46 million Americans who do not have health insurance -- either because they can’t afford a policy, don’t understand how to find a basic high-deductible catastrophic policy, or think they’re young and invincible -- the cost of an unexpected hospitalization could devastate their finances and force them into bankruptcy. It’s happening all the time.
That’s because those without knowledge or bargaining power are truly at the mercy of a system that doesn’t reveal its pricing anyway. Now, all that’s about to change.
More companies and individuals are turning to “consumer-driven health care plans,” typically a form of Health Savings Account in which the consumer gets to keep, and grow, the money set aside for health care expenses, if the money isn’t spent in any given year. Suddenly, there’s a huge incentive for consumers to “shop around” for the best prices. But where would you turn to actually find those prices, and compare them, and even negotiate them, before you get that huge bill for your treatment?
Starting today, you can go to www.HealthGrades.com to get medical cost reports that provide the regional, average “list-prices,” average health plan payments and out-of-pocket costs on all expenses related to 56 common procedures, including hospital, physician, drug and laboratory costs. Plus, HealthGrades will reveal the dollar amounts that Medicare pays to reimburse both hospitals and doctors.
The differences in payments can be startling. For example, in the Midwest having a baby with a normal delivery procedure has an average cost of $10,249, including physician and hospital cost. If you have a health plan, it probably has negotiated a payment of only $5,150, of which the patient will pay only about $940. Uninsured patients are often charged the full list price.
In Chicago, the list price for a heart bypass averages $101,184 but the average health plan negotiated to pay only $45,878. And if Medicare foots the bill in Chicago at Stroger Hospital, the bill is only $43,579. One other surprising fact: In the Chicago area, Medicare reimburses the heart surgeon only $1,667 for the procedure, while private insurers pay an average of $5,791.
Clout for the individualBottom line: HealthGrades shows that almost all hospital and physician-related charges are discounted if you have the clout of an insurer or medical plan. Now individuals get that information, so they can either negotiate or make better choices when their own money is being spent.
Many employers are offering this service free to employees to help them make wise decisions about cost and quality. Individuals can get medical cost reports for $7.95, based on your choice of three hospitals in your area.
It’s worth a try, considering the huge amount of money at stake. And that’s The Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.