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Comment by tptacek | Hacker News Reader

Careful. Hospitals and doctors often report the amounts that insurance companies report based on a master price list that bears no relation to what the insurers actually pay. Insurers are presumably fine with misleading reports that puff up their value.

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If they pay 20% of price A and the insurance theorethically covers 80% of A, but in actuality pays only B << 0.8 A, then that sounds like fraud.

Because everyone in all industries pays list price. Right.

The problem isn't the insurance negotiating a discount - it is that if your insurance has agreed to pay 80% of the cost of your care, and then is able to negotiate a discount, you should pay 20% of the discounted price, not 20% of the pre discount price.

I've never not had my co-insurance portion be anything but the percentage of what their negotiated rate was. I don't know if it is fraud, but breach of contract would probably apply if you did (assuming it wasn't in the fine print).

Insurers apparently also are fine with the side effect that hospitals overcharge non insured patients, sometimes bankrupting them in the process.

For those who want to know more about that master price list and how its prices have little to no correlation with reality: http://www.time.com/time/magazine/article/0,9171,2136864,00....

Retail prices in hospitals take into account a high-percentage of non-payment...which is why they are high to begin with! They have complete correlation with reality: an uninsured person is more likely not to pay, so prices are higher so that works out. Now, the higher prices lead to more non-payment, and a vicious cycle ensues.

This is why the mandate in Obama care is so important, to stop this cycle.

So would the uninsured pay the prices on this price list?

At every hospital I've ever been to (N=3) that answer is a firm "no". With one hospital the price was automatically knocked down 75% before any negotiations took place and this policy was advertised everywhere. At another hospital I simply had to speak to a account manager to get a drastic reduction (> 80%). The third hospital took a harder line, but ultimately caved. If you are uninsured you should never pay more than 15% spread out over 6-12 months (less if you're going to pay in a lump sum). Everything is negotiable.

So, basically, the list price is just an inflated number they can use so insurance companies pay them just enough to cover what they'd charge everyone else. This, my friends, is what madness looks like.

Not madness! Capitalist free-market efficiency!

The healthcare market is anything but a free-market.

When you're sick or dying, there is no "free market". You pay what you have to to the health cartels, and you don't have either the energy or will to negotiate.

A real driver for the inflated price is so that they can cover the marginal loss they're taking on every Medicare patient. That loss is only going to get worse as the program expands.

The whole joke about it is that they aren't taking a loss they are just not profiting as much, which is a completely different thing. It's like me saying I don't have a drinking problem because I only drank 2 bottles of vodka before lunch, instead of the 3 I could've drank.

In any other industry the practice of inflating the value would be illegal, specially when done in the cartelesque way it's done in health insurance/healthcare. 'Luckily' the health insurance industries has managed to lobby its way into getting all kind of exceptions, and our representatives are hard at work to keep it that way.

A close friend of mine is an ophthalmologist. The Medicare reimbursement rate for a cataract surgery is a little over $300. This is surgery that restores eyesight. How much would you pay to have your eyesight restored? It's clearly not market rate.

I guarantee that at least in this situation his practice is not turning a profit on these surgeries. $300 certainly doesn't cover the labor expense.

This story is, of course, anecdotal. I'd be eager to hear of similar stories of Medicare reimbursing appropriately.

Because that value is directly correlated with the price that insurance companies can charge consumers.

I don't think that's true.

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