How-to Save $17,000 on a $20,000 hospital stay in the US

So here’s the story of a guy with a funky insurance plan and the doctor that figured out if the patient did some wheeling and dealing with the hospital directly, he could save $17,000. Take a second and read the story, written by Dr. Jeffrey Singer for the WSJ. Few articles better demonstrate the disconnect between the wealthy and everyone else, and how that disconnect has thoroughly broken “conservative” ideology.

The gist of it is, hospitals price things one way for insurance plans, and another for individual patients self-funding the procedure. In this case, due to the nature of the patient’s insurance, it was cheaper for him to “self-fund” and not use his insurance coverage. As Singer points out (I mentally say this in a very condescending tone), “After all, when people have a minor fender-bender, they often settle it privately rather than file an insurance claim. ” In this case, the price to the insurer would have been $23,000, of which the patient would have had to pay $20,000 (due to the type of coverage he had); negotiated individually, without going through the plan, the patient got is hernia fixed for $3,000.

What Singer takes away from the experience is that health insurance should be catastrophic coverage only, and that health plans should leave the “…everyday expenses to the consumer—just like auto and homeowners’ insurance.”

Singer concludes with this:

“Let consumers and providers interact through market forces to drive down prices and drive up quality, like we do when we buy groceries, clothing, cars, computers, etc.  Sadly, we are heading in the exact opposite direction. ObamaCare expands the role of the third party and practically eliminates the role—and the say—of the patient in the delivery of health care. Will they ever learn?”

Singer is a surgeon, and moonlights writing articles for the Wall Street Journal. For Singer, an unexpected $3,000 expense is neither here nor there. The average American, on the other hand, does not have the money to afford surprise $3,000 dollar expenses, the time or know-how to “shop around” for medical care, or the luxury of doing either when dealing with a hernia, broken wrist, or other non-catastrophic “day-to-day” medical issue.

Singer has leveraged his ignorance of the average person’s circumstances into a Ayn Randian “free-market” stance against ObamaCare, placing a target on the back of everyday Americans.

What I don’t understand is why Singer doesn’t acknowledge the conceptual elephant in the room: why is the hospital charging insurance plans an extra $17,000 for a simple $3,000 outpatient procedure? Health insurance could cover more than just “catastrophic” events if it wasn’t paying ridiculous hospital mark-ups. Why can’t Singer’s “free market” quip apply to the relationship between insurers and providers?

Singer solved the wrong problem in his article. Its not consumer ignorance or complacency  that’s breaking healthcare, and stripping insurance coverage isn’t the answer. Rather, its hospitals that either use insurance for profit-taking or inappropriate subsidization of other expenses. I mean, what does the hernia operation in Singer’s article really cost, when you factor in the overhead of the hospital, the administration, etc.? Is it $3,000? If so, where would the extra $17,000 charged to the insurer have gone? Right to the bottom line? Or, is the cost of the procedure actually higher than $3,000, and that price is only possible because insurers are paying ludicrous rates for other’s procedures?

Do you see what I’m getting at here? The problem that Singer has missed is transparency. When prices are wildly different for the same procedure depending on who is paying the bill, there’s no way to devise a rational healthcare policy that is cost-effective and fair.

 

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