Secret Revealed on Pricing Practices of Health Insurance Companies & Hospitals

The actual price of what a medical test, procedure, exam and often prescription cost and how charges are assigned is not based on the free market. Instead, prices are agreed on via secret agreements between hospitals and insurance companies. This is the subject of the Houston Healthcare Initiative podcast with Dr. Steven Goldstein. To hear the Houston Healthcare Initiative podcast, please visit: SoundCloud, Apple Podcasts, iHeart, PlayerFM, or the Houston Healthcare Initiative web site. Secret Revealed on Pricing Practices of Health Insurance Companies & Hospitals.

Pay More Attention

Price Transparency
Price transparency from insurance companies and medical companies is a rare thing.

Most people get health insurance from their employer which is the reason, so few pay much attention to the price of the medical services and pharmaceuticals that Americans purchase. Employer funded insurance pays for most of what is charged with individuals picking up a smaller deductible. But according to neurologist Dr. Steven Goldstein, it is past time to start devoting attention to not just what is charged but how the health insurance companies, and the medical community decides what to charge and why. Spoiler Alert: it is not based on the free market.

The idea that pricing for medical services as paid by insurance companies are artificially set and not competitive at all. They are agreed to in advance by the hospital and the insurance company, not disclosed to the public, and we are all led to believe that our insurance providers were negotiating on behalf of the people that pay the premiums.

It Is Expensive But…

The fact that the charges for visits to the doctor, hospital and pharmacist are mostly paid for by employer funded insurance does not make us any less likely to get both overcharged and underserved. It is a lack of transparency that makes medical costs so high. It was not wrong to believe that research, new equipment, and pharmaceutical discovery were what was behind the increase in healthcare prices; they account for some. “The issue is that patients do not know the actual price of services,” Dr. Goldstein told his listeners. “The list price is the price charged to patients without insurance. Each insurance company negotiates a discounted price.”

Thus, there are multiple discounted prices depending on the insurance company plus a different price for Medicare and Medicaid. These prices have traditionally been secret. There is no competition between hospitals based on price. “Medicare sets the price standard based on costs,” he said. “Thus, hospitals are cost plus operations with little incentive to reduce costs.”

Why Not Just Pay Cash?

Cash prices are often much less than what is charged even to the insurance companies. People often can secure better deals if they don’t use their insurance. A 2016 Wall Street Journal investigation found that hospitals frequently offer far better deals for people who pay in cash rather than use their insurance. “Price transparency allows individuals to shop for the best nonemergency deal. It would also force hospitals to compete, thus saving consumers money. It gives them a choice,” Dr. Goldstein said. The way any of us chooses to spend our money is the most democratic thing anyone can do.

Price transparency allows individuals to find the best non-emergency deal. It would also force hospitals to compete, thus saving consumers money. “If prices were known, posted in public, people could shop for the non-emergency services,” Dr. Goldstein said.

About Houston Healthcare Initiative

Dr. Steven Goldstein is a Houston based neurologist. He founded the Houston Healthcare Initiative and is an advocate for common sense solutions to the healthcare crisis that confronts the citizens and residents of the United States of America.Secret Revealed on Pricing Practices of Health Insurance Companies & Hospitals