Health care pricing: Murky, confusing, frustrating

You’re having dinner at a restaurant. You decide to order shrimp, listed on the menu at $15.95. The waitperson brings your entree, you enjoy a nice meal, then you ask for the bill and – surprise! – you’re charged $25.95, $10 more than the price you thought you’d be paying. When you ask for an explanation, you’re told: The chef who prepared your shrimp used a special saute pan that drove up the cost. Furthermore, the price on the menu didn’t include the higher-grade tableware and table linens on which you dined.

Restaurant customers would probably be outraged by this situation. Yet it occurs all the time with health care charges, particularly hospital bills.

Consider the story of Bill Rose, a temporarily uninsured salesman in Ohio, who broke his leg in a motorcycle accident. Rose negotiated a deal with the hospital: $8,260 for the surgery to fix his leg and a 30 percent discount in exchange for paying up front. But when he got the final bill, Kaiser Health News explains, he discovered he owed another $10,000:

One reason for the bigger bill was his surgeon’s decision to use a $7,500 bone graft product that is only used sometimes in such procedures, and was clearly not anticipated in the hospital’s estimate, according to documents provided by Rose.

Rose’s story shows the difficulties faced by consumers – especially the uninsured – when they try to shop for the best price or negotiate. More than 30 states, including Ohio, require hospitals to disclose at least some of their charges, according to the National Conference of State Legislatures. Congress included such a provision in the new health overhaul law and similar proposals are pending in the House. But many experts say these efforts don’t help much.

Paul Ginsburg, president of the Center for Studying Health System Change, a research organization in Washington, says published hospital charges are “useless for consumers.” One reason, as Rose discovered, is that hospital prices are moving targets, varying with patients’ needs and doctors’ treatment strategies.

There’s been a considerable national push toward what’s known as transparent pricing – in other words, being clear with consumers up front about what they’re going to be paying for and how much it’ll cost. As this article demonstrates, though, this is far easier said than done.

Even when consumers do their homework ahead of time, as Rose did, the final bill can still be a shocker. Critics can argue that Rose should have known the expensive bone graft product was a possibility, and that he either should have taken it into account in his cost estimate for the surgery or should have talked to the surgeon about using a cheaper product. This assumes a level of knowledge and foresight, however, that few consumers possess. When even the experts concede that health care pricing is confusing and opaque, it seems unreasonable to think the average person will be any better at figuring out how to navigate this maze and ask the right questions.

At a restaurant, of course, customers upset at being overcharged for their shrimp might simply decide not to go back. In health care, though, this often isn’t an option. And consumers who get walloped with a bill that’s way higher than the original quote usually have little recourse, other than to pay it or try to negotiate with the hospital.

Single pricing might make costs more transparent, the Kaiser Health News article suggests:

Price information could be made useful to consumers by requiring hospitals to publish prices for set diagnoses or procedures, rather than the charge lists of individual items, experts say. That way, there would be a single price for a gall bladder removal or a hip replacement.

“If the goal is for Americans to understand it,” and be able to compare prices, “then one number is the only way to go,” said Gerard Anderson, a health policy professor at Johns Hopkins University.

To be sure, health insurance has contributed to the problem by shielding consumers from the true cost of care and giving them a disincentive to be cost-conscious. I’m not convinced this is the only factor, though. Even people who are insured are often shocked at the size of their medical bills. Nor are they any less likely than the uninsured to be subject to complications, physician treatment preferences and other unexpected add-ons that can significantly inflate the final bill.

How can pricing information become more meaningful and more usable? There doesn’t seem to be an answer. When it comes to transparency, talk is cheap, but in a system as complex and intricate as health care, solutions are far from simple.

Photo: Wikimedia Commons

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