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Keep in mind that hospital "costs" are largely fictional. When the bill says $45 for a sponge, the insurance company has negotiated a much lower rate for the wh

by jleader 12y ago

Keep in mind that hospital "costs" are largely fictional. When the bill says $45 for a sponge, the insurance company has negotiated a much lower rate for the whole procedure, and if you go to the hospital and say "I'm a cash patient", they'll typically also give you a substantial discount (though probably not as low as the insurance company gets, and only if you're able to pay the whole amount right away). As far as I can tell, the inflated prices (that almost no one pays) are mostly just so the hospital can report how much they're "losing" treating uninsured patients who can't pay.

chimeracoder 12y ago
> As far as I can tell, the inflated prices (that almost no one pays) are mostly just so the hospital can report how much they're "losing" treating uninsured patients who can't pay. Actually, it's because they lose money (on average) on patients on public insurance (Medicare[0] and Medicaid patients), so they need to charge private insurers more to cover the gap[1]. Insurers negotiate "discounted" rates with certain "preferred" hospitals in exchange for sending them more volume, but in this case "discounted" means "still overpriced, but closer to the actual marginal cost". The other private insurers still pay the exorbitant rates. This is why hospitals are completely willing to lower your bill if you are uninsured and paying cash if you ask - they don't care about the money they're getting from you; they care about the money they're getting from the private insurers. The amount of money they make off of patients who are uninsured and paying out of pocket is negligible in this calculus. Many hospitals are not at all secretive about this; executives talk about this pricing model fairly openly. [0] For simplicity, I'm ignoring Medicare Advantage plans here. [1] The ratio of this is HIGHLY dependent on the patient demographics of the particular hospital, but the general trend holds throughout.
- cordite 12y ago
  Often private insurers will say "We will pay 1XX% of what Medicare pays" and the like, though not across the board. Generally from procedure to procedure.

by jleader 12y ago

chimeracoder 12y ago

> As far as I can tell, the inflated prices (that almost no one pays) are mostly just so the hospital can report how much they're "losing" treating uninsured patients who can't pay. Actually, it's because they lose money (on average) on patients on public insurance (Medicare[0] and Medicaid patients), so they need to charge private insurers more to cover the gap[1]. Insurers negotiate "discounted" rates with certain "preferred" hospitals in exchange for sending them more volume, but in this case "discounted" means "still overpriced, but closer to the actual marginal cost". The other private insurers still pay the exorbitant rates. This is why hospitals are completely willing to lower your bill if you are uninsured and paying cash if you ask - they don't care about the money they're getting from you; they care about the money they're getting from the private insurers. The amount of money they make off of patients who are uninsured and paying out of pocket is negligible in this calculus. Many hospitals are not at all secretive about this; executives talk about this pricing model fairly openly. [0] For simplicity, I'm ignoring Medicare Advantage plans here. [1] The ratio of this is HIGHLY dependent on the patient demographics of the particular hospital, but the general trend holds throughout.

cordite 12y ago
Often private insurers will say "We will pay 1XX% of what Medicare pays" and the like, though not across the board. Generally from procedure to procedure.