THE BIG SCAM: Understanding How Hospitals Price Individuals Versus Healthcare Insurance Companies

I see there is some confusion at my post, Beware Hospitalization Data, with regard to how hospitals charge individuals versus health insurance companies.

I wrote:

Just consider the outrageous fees they charge individuals without insurance and the significantly lower fees they charge insurance companies for the same procedure. This is nothing but a crony deal between hospitals and insurance healthcare companies to push individuals toward buying health insurance.

One commenter wrote:

I have experienced the opposite. I have paid for treatments that were not covered by insurance. I was charged less than what was to be charged to the insurance company.

Another wrote:

I was thinking the same thing. I thought that hospitals charge less to uninsured individuals, and more to insurance companies (third-party payers, which are a reason for rising prices).

In response to these two comments, I note that hospitals and insurance companies make things very complex so that it is difficult to understand what is really going on.

I recommend the book, The Great American Healthcare Scam: How Kickbacks, Collusion and Propaganda have Exploded Healthcare Costs in the United States by Drs. David and Paul Belk.

From the blurb:

The purpose of this book is to effectively untangle and expose nearly all of the deceptions that occur in medical billing, prescription drug pricing and the health insurance industry in the U.S. Throughout the book I use actual medical bills and receipts along with data I've obtained from the financial disclosures of hospitals, insurance companies, pharmaceutical companies and government databases to back up each and every claim I make.I guarantee this book will make your head spin because, as bad as you think our healthcare system is, it's actually far worse and this book will show exactly why and how that's the case. Also, even though many people think they know what the health insurance companies are attempting to do, they're probably wrong.David Belk got his medical degree from the University of Southern California School of Medicine and has a solo practice in Alameda California. He began exposing irregularities in medical billing and prescription drug pricing with his website The True Cost of Healthcare in 2011.His brother Paul Belk got his PhD in medical physics from a joint program at the Massachusetts Institute of Technology and Harvard Medical School. He works as a senior scientist in the medical industry.

They write (with bills and data to back it up):

An insurance company will happily ignore the things it doesn’t intend to pay, but will never add anything the hospital leaves out. It will also happily pay less than the hospital asks, but certainly will never pay more....

When a business sends a bill, to you or to another business, you pretty much expect the bill to show the value of what they provided, and therefore what they expect to be paid. But an insurance company pays the hospital based on pre negotiated rates, no matter what the bill asks for. The hospital can turn away all patients with that insurance, of course but, for each insurance company, that would mean turning away a lot of patients...

So because the hospitals know that they’ll only ever get less than what they bill, the process of hospital billing has stopped being a normal business transaction, and turned into something more like a kid daydreaming about his Christmas list. But it works, (well, not really), as long as it’s just a game between the hospital and the insurance company...

Hospitals see no problem in sending bills to insurance companies for five to ten times the amount that they actually expect, because they are simply playing the game that the insurance companies fashioned...

This problem of excessive mark-up doesn’t just apply to people who are hospitalized. Hospitals charge the same amount for a service regardless of whether or not the patient is in the hospital. Anyone getting routine tests or a diagnostic workup from a hospital is likely to be charged five to ten times what an insurance company would pay for it (five to ten times what the service is really worth)...

 As I said at the very beginning, one of the biggest problems with medical costs is that the real costs are so well hidden in all these games that almost no one even knows what they are, let alone what to do with them.

-RW