Have you ever bought a car? Did you pay full sticker price or did you bargain with the dealer? Most people realize that the price is negotiable. If you drive a hard bargain, you can often save thousands of dollars off the listed price. Only a chump would pay the full asking price.
If you have to go to a hospital, the price of almost everything is marked up way more than a new car. An aspirin pill that costs a few pennies in the drugstore could cost anywhere from $5 to $20 per dose depending on the hospital.
Most people never notice such inflated prices because they never look at the itemized bill. That’s because an insurance company pays the lion’s share first. The patient may be responsible only for a modest co-pay.
Insurance companies and the government (think Medicare or Medicaid) arm-wrestle hospitals over costs. These big players have enough clout to negotiate a steep discount on the “list price.” Research published in the journal Health Affairs (May/June 2007) spills the beans [http://content.healthaffairs.org/cgi/content/abstract/26/3/780]. In 2004, Medicare paid only a third the amount hospitals charged individuals paying out of their own pockets. Insurance companies get almost as much of a discount.
This is the most unfair system ever devised. People who cannot afford health insurance and are not eligible for Medicare or Medicaid must pay way more than anyone else.
Think of it this way. A small businessman, say a painter or a garage mechanic, who cannot afford $500 a month for health insurance premiums, suddenly develops a life-threatening heart valve problem that requires surgery. Medicare would pay roughly $38,000 for this hospitalization. But our hypothetical middle-class tradesman could be charged $115,000 for the same care. Where is he going to find that kind of dough?
Those without insurance who must pay out of their own pocket get stuck with the biggest bills. Does that make any sense at all? Some hospitals will negotiate small discounts, but they may not go out of their way to inform prospective patients that this is an option. Very few will offer individuals the same kind of deal they routinely give big insurance companies.
How would you feel if you discovered that people who worked for IBM only paid $12,000 for a Toyota Camry that you had to pay $36,000 for? A car is not a matter of life and death. But a heart valve replacement is not optional.
Nearly 50 million Americans have no health insurance. There is something very wrong with a system that charges these folks so much more than everyone else.