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Concealing Costs
Doctors Know as Little as Consumers about Health Care Prices

Not even your surgeon knows how much your treatment costs. Kaiser Health News reports on a new survey in Health Affairs that found that a group of 503 surgeons were only able to guess the cost of implantable medical devices 21 percent of the time. More:

“In orthopedic surgery, we’re never told how much things cost. We never see the cost displayed anywhere, and even if you were interested, there’s no great way to find it,” says Dr. Kanu Okike, lead author of the Health Affairs study and an orthopedic surgeon at Kaiser Permanente Moanalua Medical Center in Honolulu (Kaiser Health News is not affiliated with Kaiser Permanente).

We’ve known for a long time that hospitals keep prices from consumers, but we talk less about the fact that hospitals do the same thing to the doctors and care providers themselves. Is there any other industry where neither the consumers nor the providers know how much a service costs? This is especially relevant because a lot of health care reforms place their hopes in the ability of providers to economize on care on behalf of the patient. Many reform ideas include incentives designed to encourage doctors to pass on savings to the patients, but if the doctors themselves don’t know the costs involved, they can’t be expected to make good decisions about price/quality tradeoffs. The solution is to introduce radical new transparency into the system. U.S. health care will never function optimally without that, no matter what other reforms we put in place.

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  • rheddles

    The insurance companies know.

  • free_agent

    Of course, as long as the insurers are paying and the deductibles are relatively low, neither the doctor nor the patient cares what the price is.

    You write, “The solution is to introduce radical new transparency into the system.”

    I don’t see this as working unless the patients are directly exposed to the prices that they are supposed to be able to see. But of course, patients hate that; the public wants economic security, not maximum productivity.

    At root, I’m unsure that the “transparent” vision of health-care reform will work well. I see no example of such transparency other than poor countries where only a minority get modern medical care. That’s not going to be an attractive model.

    All the other developed countries organize their medical industries around state-enforce monopsonies whose stated purpose is to drive down the costs of health care by reducing the incomes of providers. And all of those seem to be successful at providing health care of approximately the same success as the US system at roughly half the cost.

  • TommyTwo

    The “Pretty Little Heads” model.

  • Boritz

    if the doctors themselves don’t know the costs involved, they can’t be expected to make good decisions about price/quality tradeoffs.. -TAI

    One of the intents of the ACA is to take these decisions out of the hands of doctors. This is now a central planning function. What, you believe in some kind of empowered doctor model?

  • MarkE

    Hospitals feel that they must charge every payer the highest rate that the highest payer will pay. This usually results in bills being about 8 to 10 times what Medicare usually pays them. What they are actually paid depends on what they have negotiated with individual insurance companies as well as what the Medicare national or local standard is. I have occasionally negotiated rates with the hospital for patients who have no insurance but do have money to pay out-of-pocket. If the patientagreed to pay in advance this is roughly twice what Medicare pays. This can actually be a good deal for the patients because it is often less than the annual premiums would be.

    • Andrew Allison

      How (I decline to pay the outrageous premium for ACA and am self-insuring)?

      • MarkE

        You can do it yourself. It’s better if you can find a doctor to do it for you. You can also negotiate a fee with him.

        • Andrew Allison

          Many thanks!
          It looks to me as though Medicare is reimbursing my regular doc about 75% of his charges for office visits. Do you think offering an up-front payment-in-full with a 25% discount (thereby saving the overhead and getting the money) would be appropriate? Hospital charges are, of course a whole different can of worms. Any thoughts about post-treatment charges (I recently had end- & colon-oscopies for which my previous provider accepted Medicare as payment in full. This one is billing me for the difference — my bad for not checking first, but . . .)

          • MarkE

            If you have Medicare you’re getting pretty good rates at the present time. Legally a doctor is bound to bill you for the other 20%. This is supposedly to avoid moral hazard. To not bill Medicare or to bill at other rates the doctor would have to drop out of Medicare plan for two years before you could reenroll. Medicare pays just well enough so that very few doctors disenroll at this time. However if the rates fall much more this may be a more frequent occurrence.

          • Andrew Allison

            Thanks again. Sorry I wasn’t clear. My wife is losing her employer insurance and we are self-insuring. My question was really, “What sort of discount do you think it would be reasonable to suggest for payment in full at the time of service for her. Thanks again for your informative comments.

          • MarkE

            Commercial insurance reimbursement rates vary considerably by geographic region, by insurer and by specialty and subspecialty of Medicine. Sometimes the rates are higher and sometimes lower than Medicare rates. You might try asking for Medicare rates. If you know the doctor and are having financial trouble, the doctor might go lower to retain you until you get insurance again.

          • Andrew Allison

            Many thanks!

  • Jacksonian_Libertarian

    Exactly, it’s the “Feedback of Competition” that forces continuous improvements in the Quality, Service, and Price in free markets. Until the consumer is paying out of his own pocket for health care, Quality, Service, and Price will continue to suffer. The one good thing about Obamacare, is that since you can’t be turned down for pre-existing conditions, people can “Opt Out” and pay cash for their less than catastrophic health care. Unfortunately it is those over 65 which have the most time to research and shop for health care, and make up 60%+ of all health spending, but are covered by Medicare, that would have the most effect improving the system by paying cash.

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