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When Paying Cash Is Cheaper Than Health Insurance

When it comes to health care, paying upfront in cash instead of through your insurance could save you money. Here’s the WSJ, h/t Tyler Cowen:

Not long ago, hospitals routinely charged uninsured patients their highest rates, far more than insured patients paid for the same services. Now, in the Alice-in-Wonderland world of health-care prices, the opposite is often true: Patients who pay up front in cash often get better deals than their insurance plans have negotiated for them [. . .]

“My favorite was the $5,400 MRI at an academic medical center in California,” Ms. Pinder says. “Insurance paid about $2,900 and the patient paid about $2,500. It looked like he got a great deal—but he could have paid $725 cash down the street.” When people see this data, she says, “they don’t behave the same way in the marketplace again.”

The WSJ chalks up the change to, in part, the ACA, but the cash discount is also not new, according to many of Cowen’s commenters. “As someone who has always had high deductible insurance, doctors offices would routinely give me cash discounts even prior to the ACA, charging rates well below what would have been billed to the insurance company,” wrote one commenter. That accords with what others have written about negotiating prices with hospitals; the option was there, if you knew about it.

Though it’s not a new phenomenon, the cash discounts the WSJ highlights point to the importance of empowering consumers to shop smartly. There are obviously key macro questions about health care policy and prices, but for the individual user, $2,500 versus $750 makes a huge difference in most people’s budgets. And for some health care spending, people can shop around for the best deal when it comes to health care, just like they can in other markets. Giving consumers more tools to do so, such as price transparency, could make a big financial difference to many Americans.

And given a number of factors—the ongoing trend of disintermediation in the U.S. economy, the growing impatience with America’s technocratic class, new technological developments, and intense media focus on health care prices—the odds are good that the space for consumer choice will grow. Public policy should do everything it can to help that process along.

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