'Inscrutable' System Used To Price Medical Services Leads To Inflation, 'Spells Doom' For Uninsured, Op-Ed States

Main Category: Health Insurance / Medical Insurance
Also Included In: Primary Care / General Practice;  Public Health
Article Date: 09 Sep 2008 - 12:00 PDT

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The "inscrutable way that health care providers and insurers put a dollar value on medical services" leaves patients "unable to determine a fair price for treatment," Los Angeles Times columnist David Lazarus writes. According to Lazarus, hospitals use a "cost-plus" system in which they charge patients and health insurers a portion of general overhead in addition to the cost of medical services. Meanwhile, private health insurers, as well as public health care programs, "negotiate lower rates in return for delivering thousands of patients to a particular clinic or hospital," Lazarus writes.

"The upshot is that providers are overcharging insured patients because they have no other way of meeting total expenses, while insurers are paying significantly less than the billed amount because they know they're being hit up for unrelated costs," he writes, adding, "Insurers' underpayments, in turn, only force providers to increase bills even more." Lazarus writes, "It's a system that both condones and perpetuates inflation while all but eliminating transparency in the marketplace," adding, "It also spells doom for the 45 million Americans lacking health coverage, who have no choice but to pay the full amount of a hospital's cost-plus charges and thus can be wiped out financially by a major medical problem."

Lazarus writes that, although California lawmakers passed some health care reform bills this year, they "came up well short of their goal of reforming the system to make it friendlier -- and more accessible -- to patients." He adds, "What's needed is a massive infusion of political courage to tackle genuine health care reform" (Lazarus, Los Angeles Times, 9/7).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

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