All you need to understand about healthcare costs as *paid* for under insurance you can learn by looking at a typical Medicare bill.
In the final years of her life I saw these kinds of bills come in for my Mom. (She didn’t have to pay them, I am just commenting on the numbers)
Billed: $1382.19 Insurance reinbursement: $72.44
Billed: $719.22 insurance reimbursement: $49.65
It is complete ridiculousness. The providers know that they will be typically reimbursed no better than 1/5th of their bill and that’s the exception, often the ins reimbursement is 1/12th, 1/15th. Thus there is an absolute compulsion for the provider to grossly overbill with an eye to what will be reimbursed. This drives up the “book” rate for procedures bigly.
The entire pricing structure of HC delivery is warped to the moon based upon the pitiful ins reimb rates. This is where you get the proverbial $50 aspirin. It is a complete scam and the primary beneficiary of most of HC spending in the US is the insurance industry.
I am lucky to be in good health so my visits to the doc are few. But I routinely get 30-35% discounts for paying in cash.
- Hospital sets a price for a procedure at $10k
- You buy insurance to protect against that expensive price.
- you pay up to your deductible for that procedure (up to 10k)
- if you are past your deductible, insurance covers $500 (the real price of the procedure)
- if you pay cash you can negotiate a similar rate
- hospital has to provide care for people with no insurance
- when those people don’t pay, they write off the full $10k as bad debt minus whatever they can sell the debt for ... usually that same $500
- collection agencies harass you for the rest of the money
But you only get the cash discount when no claim is submitted. So you never get anywhere toward the deductible.