Health Care Pricing – What Do We Want?

One of my least favorite things to do is shop for a car. The industry is infamous for lack of transparency. Prices may be different if you buy it in a different city. Sometimes it’s an emotional purchase because we like the bells and whistles. In any case, I don’t like car shopping!

There are certain similarities in the process of purchasing health care services. Transparency is almost nowhere to be found. There is often an emotional component to the decision. We likely have neither the expertise nor the time to try to confirm the recommendations before we proceed with the purchase.

The most common feature between car buying and health care purchases is the pricing differentials. Car pricing may differ due to location, taxes or environmental requirements that add to the cost. Or it may simply be the socioeconomic profile of the buying area.

In health care, it may be a function of supply and demand. The oddity in health care is that supply creates demand. The more MRI machines you have in an area, the more MRI seems to be the diagnostic tool of choice. The more hospital beds in the area, the more hospitalizations per thousand persons.

At first blush, that sounds logical. But it really isn’t. Health care utilization may be driven by environmental factors such as high risk jobs or pollution in a given area. Some data shows it’s simply the doctor’s pen, i.e. some docs recommend more surgery than others. But why would the cost of a colonoscopy be significantly different just a few hundred miles apart, in the same state?

There are websites that report price data. FAIR Health, is a national, independent, nonprofit organization that does just that. In 2016, the site earned a place on Kiplinger’s Personal Finance Best List as the “Best health care cost estimator.”

Comparing the cost of a simple colonoscopy in Redding and San Francisco yielded interesting results. For the base procedure in and out of network, Redding showed as $566 and $ 1155 respectively, while in San Francisco it was $999 and $2414. Of course, we all know it’s not that simple. There are other charges for anesthesia and biopsy if a polyp was found. Look at your insurance explanation of benefits for your last colonoscopy. If you are so inclined, email the billed charges vs. allowed amount and the name of your insurer to me. It will be fun to look at the variances and report back to the readers.

A few years ago I was shocked to see the difference in allowed amounts from Anthem to two different free standing facilities that were only blocks apart in Redding.

Let’s see what happens if we go to Reno for our colonoscopy. Fair Health says that the procedure price in and out of network would be $359 and $870. If you are a country music fan in Nashville, you are really going to want to stay in network with prices of $380 in network and $1080 out of network. (Fodder for new country song?).

At the risk of sounding like a broken record, if we want to fix the cost of health care in this country (which translates to lowering health insurance premiums), we must address the cost of care.

Should we use some multiple of a base line pricing structure? Or do we simply use the Medicare allowed amounts? The newest trend for self-insured plans is to use an approach called “Reference Based Pricing”. In this case, the plan pays the provider on a multiple of the Medicare allowed amount.

Again, no transparency and the patient really doesn’t know what that means until they have a procedure. I find it intriguing that the industry is enthusiastic about this type of approach, but opposes Medicare for all.

Clearly, this is a complex issue. The health care financing system in this country is one of the most complicated on the planet. It’s time to ask the questions: Does it have to be this complicated? How do we fix it?

My advice: Don’t latch on to sound bites. Take some time to think about this and consider the following questions:

Should health care be a “right” in one of the richest countries in the world or should it only be available to you based on your ability to pay what the capitalist market will charge?

Should there be a public option, regulated by a government authority? Should access be based on income, assets or a combination of those?

What do you want to have available for your children at each stage of their lives? What about for yourself in old age? How much do you want to be required to budget for health care?

It’s a start. Good luck!

Margaret R. Beck
Margaret Beck  CLU, ChFC, CEBS started her insurance practice in Redding in 1978. As an insurance broker/consultant,  she represents businesses and individuals as their advocate.  She assists in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed. All information in her column is provided to the best of her knowledge, subject to final regulation by the respective agencies. Questions to be answered in this column can be submitted to info@insuranceredding.com. Beck's column is also published in the Redding Record Searchlight.
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1 Response

  1. Avatar Candace C says:

    Margaret, You raise a lot of good questions coupled with good advice. Thanks for this. And Happy Mother’s Day!