When No One Really Knows What Health Care Will Cost, Prices Skyrocket: Health care costs too much in part because no one can find out exactly what it costs — and few people have any incentive to do so.

The Federalist ^ | 12/05/2022 | Christopher Jacobs

[SeekAndFind]

Having spent decades as a health policy analyst, I know one thing for certain: Everyone has at least one personal story related to health care, either their own or a close relation’s, which often informs their opinions about the system.

In my case, an evolving mini-saga over the last several months confirmed my prior belief: Health care costs too much in part because no one can find out exactly what it costs — and few people have any incentive to do so.

Low-Ball Estimate

Over the summer, lingering discomfort from an ankle sprain prompted my orthopedic surgeon to suggest an MRI. I went and scheduled the imaging study at Washington Radiology, and the day before my appointment received the below text message:

Text message to author from Washington Radiology

Having done some research online into the price of ankle MRIs in the Washington area, I found the quoted cost reasonable and decided to go ahead with the procedure.

In late August, I received an Explanation of Benefits from CareFirst Blue Cross, my insurer, followed closely by a bill from Washington Radiology. Neither the amount Washington Radiology billed CareFirst ($1,503) nor the amount of out-of-pocket expense that CareFirst allowed, and which Washington Radiology billed ($518.22), matched the $466.39 estimated cost that Washington Radiology gave me ahead of the MRI. So, given my background in health policy, I decided to investigate why my charges exceeded the original estimate.

Bureaucratic Run-Around

I called Washington Radiology and asked someone to explain the discrepancy between the estimated amount and the charge on my bill. The customer service representative didn’t seem to know where the text I received had come from. She asked me to fax the information to her and pledged to get back to me.

I never heard back from the customer service rep. In early October, I received a follow-up bill from Washington Radiology, again seeking $518.22 from me, whereupon I called to ask about the status of the questions I had raised more than a month previously. This customer service representative told me Washington Radiology had finished its internal investigation over a month ago (how nice of them not to tell me).

This representative also couldn’t tell me where the $466.39 estimate that I received via text message came from. Instead, he suggested I contact CareFirst, my insurer, to inquire with them about my benefits — a suggestion that didn’t make much sense, as Washington Radiology and not CareFirst had sent me the estimate in the first place.

I followed up with several additional inquiries to Washington Radiology via their website, along with a call to the company’s corporate offices. I explained that I planned to write an article about my experiences, and what the discrepancy between the estimated cost and what I was charged said about patients’ ability to act as health care consumers.

Washington Radiology never responded to my online messages or my phone call. However, just after Thanksgiving, I received a new bill that included lines saying, “Per Provider Request — Reduced Rate,” which lowered my bill to the $466.39 amount I was originally quoted in the July estimate. Apparently, months of inquiries prompted Washington Radiology to lower its bill in my case — but not to provide an explanation as to why their charges didn’t sync with the estimate in the first place.

Snippy Customer Service

As for CareFirst, I did call them to ask about their policies regarding estimated costs and whether and under what circumstances the insurer (as opposed to a doctor or other provider) would provide that information to patients. During that conversation, a customer service representative told me that CareFirst “cannot guarantee any estimate we provide.” In response to my assertion that no other service or industry (e.g., auto repair, construction, etc.) will not give customers a guaranteed price in advance, the representative replied, “That’s because we’re insurance.”

I told the agent that her position effectively meant patients could get charged any amount by a doctor and insurer after the fact, notwithstanding any efforts they made to ascertain the costs of a procedure ahead of time. The agent reiterated that CareFirst would provide cost estimates prior to care as a courtesy to customers, which of course means little if those estimates are not guaranteed.

Following this conversation, I emailed CareFirst to ask for an on-the-record comment for my article. Spokeswoman Jen Presswood sent a reply:

CareFirst cost estimates may vary from actual costs as the unique individualization of healthcare care means that insurers do not know specifically which providers will be involved in the service and what exact items and services will be billed. Congress recognized this challenge by creating the Advanced Explanation of Benefits (AEOB) under Section 111 of the No Surprises Act, which CareFirst strongly supports. AEOBs have the promise of giving consumers meaningful, trustworthy, and actionable information to guide their healthcare decisions. CareFirst is actively partnering with the Federal government on AEOB implementation to ensure effective implementation. 

Presswood’s response ignores the fact that in my case, the procedure in question was very straightforward. In fact, an ankle MRI or other imaging study is among the most “shoppable” of health care services because 1) the procedure is standardized, 2) quality should not be an issue in most cases, and 3) I had time to select the provider I wished for the service. Yet despite the standardized nature of the procedure, I didn’t receive the same charge following the MRI that I did before it.

Presswood’s reference to Advanced Explanations of Benefits raises two additional concerns. First, federal authorities have yet to fully implement this provision of the law, despite a January 2022 implementation date spelled out in statute.

Second, the Good Faith Estimate regulations that federal authorities have already released only allow individuals to raise grievances where charges are “substantially in excess,” by at least $400, of the original estimate. (Good Faith Estimates apply to doctors, hospitals, and medical providers, whereas Advanced Explanations of Benefits apply to health insurers.) In other words, Washington Radiology could have billed me for nearly double the original $466.39 estimate it quoted me for my ankle MRI, and I would have had little legal recourse to file a complaint.

The Problem with Health Care

This story provides a good microcosm of the dysfunction within our health care system. Because most people have their health costs paid by a third party, patients don’t feel the need to investigate what a service costs. As arrogant as it sounded to me (and it was), the CareFirst representative claiming that — unlike practically every other industry — medical providers cannot stand by their estimates “because we’re insurance” represents the attitude within health care. Few people pay the full cost of their treatments, so why should they care about whether a particular price gets raised after the fact?

Of course, we all end up paying sooner or later through higher health insurance premiums and higher levels of taxation in the case of government-funded programs. But the attitude that providers don’t have any obligation to transparency remains pervasive throughout health care, as my experience showed.

Washington Radiology did lower its bill to the amount of my initial estimate — eventually. But strictly speaking, the $51.83 I “saved” probably didn’t make up for the months of emails and phone calls necessary to get that adjustment. And from Washington Radiology’s perspective, that’s probably the point; if they can charge more than their initial estimate, and 90-95 percent of patients don’t bother to complain, and/or give up when Washington Radiology gives them the proverbial run-around, then those higher charges go straight to their bottom line.

It shouldn’t take an act of Congress to get providers of a service to give customers an estimate of charges in advance of a medical procedure, and it shouldn’t take months of pestering to get a medical provider to honor that original estimate. If we had more people using their own money to pay for health care goods and services, perhaps patients could finally demand and receive a more transparent, and rational, health care system.

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Chris Jacobs is founder and CEO of Juniper Research Group, and author of the book "The Case Against Single Payer."

[Rurudyne]

When the buck doesn’t stop here people aren’t often concerned about the final costs. They imagine they will have passed tne buck, not been left holding the bill.

That’s true of medical bills as well as the politics as usual game.

[PGR88]

Just for fun, when you go to your doctor, medical group, or hospital - ask if you can pay cash, and what the price would be.

I have tried it, even for a regular and generic service like an X-ray - no one can tell you.

[Varsity Flight]

Zero competition of costs. Self regulated.

Blank check.

Brought to you by The Exempt Ones.

[MileHi]

You can never get a straight answer out of anybody what the cost will be before you have anything done. But afterwards they will send you a bill and turn it over to collection if you don’t pay it promptly.

[glorgau]

This is why I HATE, HATE, HATE dealing with hospitals and doctors. My basic method for medical bills has been to ignore them because the number will change for seemingly random reasons.

Also its why I’m going to fly out of the country to get some dental work done. Maybe get some optional medical tests done also. Pay once and be done.

[NWFree]

It’s a libtard racket designed to funnel tax money to their buddies just like in academia

[NWFree]

Disguised as “free healthcare”

[who_would_fardels_bear]

I've mentioned this before, but I think something like the following would keep prices at a reasonable level while still delivering decent health care:

1) Make it illegal for US citizens to purchase, or US corporations to sell health insurance. Since no price can be put on a person's health it is presumptuous to do so.

2) Everyone must pay for health care out of pocket. If they don't have the money they can use a credit card, get a loan, or beg for charity.

3) The US government MUST provide loans to citizens who request them to cover health expenses. The government charges low interest rates, and won't require any monthly payment on the loan beyond the person's ability to pay.

4) When a person dies any remaining loan payments are forgiven. They are not transferred to another family member.

In this system the only thing the government does is administer loans. The only costs would be the net difference between the profit made from interest on paid off loans, and losses from loans not paid off due to deaths.

Even if a person knows they might get away without having to pay off their loans (by dying before payout, heaven forfend), if they demand better prices, then they can get away without having to take loans, or with lower monthly payments.

The entire health system is incentivized to keep health costs low. The only downsides would be that this might discourage preventive care, and there may be ways to scam the system into doling out money for fake ailments without the loans ever being paid out.

But Medicare and other programs are already being scammed, so this will just require a reasonable amount of agents and oversight to keep the fraud to a minimum.

The government could also lower interest rates on loans for those people who can show they spent money on yearly physicals, teeth cleanings, etc. in order to encourage preventive care.

I realize such a plan would be anathema to libertarians who believe that the government shouldn't make a transaction between two willing participants illegal, but I think that is a reasonable step to take in order to make the system as a whole less subject to government controls and interference.

[alexander_busek]

"Because we are an insurance" is a "non-answer."

Comparable to "Because it's Tuesday" or "Because it is what it is."

Regards,

[unclebankster]

Imagine if every other sector of the economy behaved this way.

I’m thinking grocery store billing would be quite problematic under this system.

[fruser1]

The best thing to do is for the gov to stop dictating coverage. This was a prob even before commie care.

Insurance to cover routine care? Absurd. Like having insurance for oil changes.

[riverrunner]

I went to a clinic for some PT paid cash.

Knew what the cost was for each visit.

At the first one they wanted me to fill out all kinds of paper work.

I said I am paying with hundred dollar bills do you want them or not.

They said You don’t need to fill out the paper work.

I had great care.

[ExTxMarine]

I’m thinking grocery store billing would be quite problematic under this system.

Have you been to the grocery store lately?!?

It is QUITE PROBLEMATIC under the CURRENT system! LOL!

[MrRelevant]

What ever happened to the legislation Trump initiated to itemize the true cost of medical procedures?

[armydoc]

Not true at my practice. We charge the Medicare allowable rate for cash payers. Which is significantly less than most private insurance payments

[noiseman]

Relying upon third-party money to pay for things that you otherwise wouldn’t be able to afford always causes problems. Just look at what it’s done to the cost of “higher education” and to health care. And of course, the mortgage industry almost sank the entire global economy by giving people money they had no business having and in the process created a gargantuan price bubble.

I know there’s probably a proper place for medical insurance, just because often the need for medical care can’t be anticipated, but the way the system works now just encourages collusion between insurers and providers, and the patients get fleeced in the process. It used to be that an argument could be made that illegal aliens were the primary reason for rising medical costs, due to cost-shifting, but these days most of the insane costs are just due to plain old greed. Ever wonder why so many new hospitals were built in recent years that look like 5-star resorts inside? They have all these luxurious public spaces that have virtually nothing to do with patient care, but which obviously add a tremendous amount to the cost of building the hospital. My understanding is that it’s because regulations allow healthcare providers to bill on a “cost-plus” basis, meaning they can charge whatever their “costs” are plus a certain percentage of that amount as profit. Well obviously, that arrangement only encourages them to use every excuse possible, including building luxurious hospital lobbies with piano players and resort-style decor, in order to boost their costs as high as they can, because a percentage of a bigger number means more profit than the same percentage of a smaller number.

Consolidation of most hospitals into a cartel of health care consortiums has had a terrible effect on pricing and on deceptive billing practices. CEOs of these monstrosities are now making tens of millions of dollars, and many of the other administrators are similarly living high on the hog. Our daughter in law is the deputy VP of finance for one of these companies, and she has actually told us that she makes so much money that she’s embarrassed to say how much. Let’s just say that they live EXTREMELY well.

I once got railroaded by my “insurer” into visiting the ER to make sure I wasn’t having a heart attack. It was absurd, because all that was going on was that I had an ear infection (which the doctor had already diagnosed) that was causing some dizziness. The dizziness had gone on for a week or so and not gotten worse, but I simply called to see if they could prescribe antivert to make it a little more bearable (this was Kaiser Permanente, so kind of combined insurer-provider). They refused to do anything unless I immediately went to the ER to make sure I wasn’t having an heart attack (in other words, they were really just doing a ridiculous level of CYA). So, thinking that the cost couldn’t be too bad anyway because they had forced me to do this, I went and 45 minutes later, after doing nothing but giving me a saline IV (in case it was caused by dehydration - I tried to tell them what was happening, but they wouldn’t listen either) and administering an EKG, I was on my way back home. A few weeks later I was stunned when I received a nearly $8,000 bill (not including the doctor’s fees, by the way). My portion was nearly $3,000.

Needless to say, I was both shocked and furious. So next time we saw our daughter in law I took the bill with me to see what she thought. I presumed there must have been some type of mistake, but she just glanced at it and without even blinking nonchalantly said, “Yeah, that looks about right. Pretty standard.” It was so obscene that I did something I have never done before and just refused to pay. It was like dealing with the mafia, and I just refuse to reward their cravenness. Of course, they sent it to collections and it dinged my credit for a while, but eventually it just went away and I never felt even the slightest twinge of guilt. This problem is so out of control that the credit rating agencies have even created new versions of their rating formulas that de-emphasize the effect of unpaid medical debt.

The medical industry has become in essence, even if not technically from a legal standpoint, a criminal cartel. It’s as bad as the utterly corrupt federal government.

[Ex-Con777]

I dislike people using the word “cost” when they really mean “price”. The cost of a cup of coffee is 10 cents but the price is $3.95.

I can go to my local clinic in Honduras, with no referral or appointment for an MRI, and walk out in less than an hour with the results in hand for a whopping $50.

So what is the “cost” of an MRI?

EC

[neverevergiveup]

So what is the “cost” of an MRI?

It's the capital cost of buying an MRI system. It's the cost of ongoing upkeep and service contracts. It's the cost of whatever facilities upgrades etc. that were required to allow the MRI to be installed. It's the cost of the technicians running the MRI. It's the cost of the radiologist reading the MRI. In the US it's also the cost of product liability insurance, the cost of facility liability insurance, and the cost of malpractice insurance. etc. By the way, $50 buys a lot more in Honduras, not just MRIs.

[sergeantdave]

Need an explanation why health care costs in the US are unknowable and expensive?

It’s a criminal enterprise.