Having a baby at a UT Health Tyler hospital in Tyler, Texas, will cost a family $19,147.11, according to that facility’s newly posted price transparency guide. That’s a vaginal delivery with no complicating diagnosis. For a caesarian section, the price goes up to $31,644.38.
Of course, that’s not what people pay. It’s just what the hospital has posted, in order to comply with a new law that went into effect Jan. 1. As the hospital notes on its website, “billing for medical services is a complex issue and the charges listed in our hospital chargemaster do not provide a complete picture of what you may actually pay.”
Yet the new law, which is a first step toward greater transparency, is a good thing. Prices matter, and the more transparency there is in health care, the better for patients, providers and families.
An important question here is whether price transparency affects the way a patient — the consumer — chooses services provided by a physician or hospital — collectively the provider. If a third-party payer is involved, like a government agency or an insurance company, then the answer is likely to be no.
In a free market, price is considered to be like the central nervous system. It responds with great immediacy to market forces, and adjusts to fluctuations in supply and demand. But because of the presence of healthcare third-party payers and their payment agreements, prices are fixed and cannot fluctuate in response to the usual forces of supply and demand.
In an arranged and fixed-price system, the healthcare delivery market has, in effect, had its central nervous system removed. This eliminates consumer choice, as patients are no longer able to decide rationally what services they want and what they’re willing to pay.
When insurance companies got involved in the business of selling pre-paid medical care nearly 60 years ago, they put themselves between the doctor and the patient. It’s at that point in time when we saw the exponential increase of healthcare costs in this country.
The result is something unique in industry; consumers use services they have no responsibility of paying for (at least the bulk of the bill), and the agency paying the bill isn’t the one using the service.
Put simply, the health insurance industry’s intervention into the doctor-patient relationship, coupled with governmental overreach, has resulted in most of the fundamental rules of economics being broken.
And it’s not healthy.
For most of us, our health insurance companies interact with us via our employer, and with the doctor separate and apart from its interactions with us.
The way this works out in real life is complex and inefficient. The medical provider is considered “in network” if it agrees to accept what the insurer proposes to pay (that’s called the “allowable rate”).
But the insurance company doesn’t pay the full allowable rate to the provider — the cost is shared with the patient, and that’s only after the patient has met a deductible.
Even after the deductible is met, the patient is usually responsible for paying some part of the bill — usually about 20 percent, though that figure can go much higher if you make the mistake of going out-of-network.
Oh, there’s one more complicating factor. Most, if not all, insurance contracts say the insurance company will pay the contracted allowable amount or the provider’s charge, whichever is less. This particular language compels the providers to hyperinflate their charges to a rate that will allow them to capture as much reimbursement as possible.
At what point in this process did the patient see a list of prices and given a set of choices? You’re right; too often, the answer has been “nowhere.”
That’s why there’s an effort now to make prices more transparent. That’s why the Centers for Medicare and Medicaid Services (CMS) issued its rule last August requiring hospitals to post their prices. And that’s why we must go further in requiring price transparency.
If a provider takes care of Medicare and/or Medicaid patients, then that provider is under the scrutiny of the federal government. The federal anti-kickback statute is very specific in dealing with discounting of pricing, which is essentially the establishment of a secondary pricing for various patient types.
This statute explains, in plain language, that if you have insurance you will more than likely not get a discount. However, if you do not have insurance, the law allows for a variation in the price list.
Yet if you happen to be in Texas or any other State that prohibits multiple price lists, all flexibility is gone. Texas has within its Insurance Code 552.003, a rule that is quite limiting to medical providers that prohibits them from providing cash pricing to those who might be uninsured or underinsured.
Yes, it’s confusing. And yes, those lists that hospitals like UT Health Tyler post are both inaccurate and often unhelpful. But that’s not an argument against posting prices; it’s an argument for more transparency.
We need to restore the relationship between doctors and patients — the entirety of the relationship, which includes allowing patients to make good, well-informed decisions about their own care.
David Balat is the Director of the Right on Healthcare initiative with the Texas Public Policy Foundation; follow him on Twitter @DavidBalatHC.