A friend of mine recently took an exotic trip. While shopping in a market, she picked up an appealing item and asked the seller what it cost. She was given a price that seemed high, and paused to consider whether the impulse seemed justified. The shopkeeper grew confused in the silence. Finally he asked my friend, “Don’t you want to know if I can do better?”
Clearly this person was outside of her bargaining comfort zone. Many – perhaps most – Americans are accustomed to paying the price as written on a tag. If you have to ask, you can’t afford it, or so I was told growing up in suburban shopping malls.
American consumers make the same assumptions as they search for transparency in health care costs. Obviously there are charges for these services – they are clearly written on the bills after the services are delivered. So why is it so hard to find out the cost of a service before it is performed? Here it is essential for the customer to understand that the charge and the price paid may be quite different; in fact, they are expected to be different. The health care consumer is not shopping in a chain store whose clerks forgot to stamp the items with their prices. On the contrary, the confused shopper has stumbled into an exotic market without a clue on how to haggle.
I work for a large health care system in a metropolitan area. I am well aware that the amount we charge for services is far higher than the amount we collect from payers. In fact, government payers will often pay 25 cents on the dollar, while private insurance companies will pay more. Still, we rarely receive more than 50 percent of what we charge. The reasoning behind the sky-high price tag always eluded me, and when I saw its effect on my self-paying patients, it infuriated me.
It is no secret that large insurers negotiate payments with health care facilities and providers. We charge a fee, the insurer hands over the pre-negotiated payment, and we do not ask the patient to make up the difference (such a system, known as balance billing, is not permitted where I practice). The patient pays his or her copayment, and the transaction is closed. The same occurs with government payers, though the negotiation seems a touch more one-sided.
This system breaks down for the uninsured patients – either those who have no coverage at all, or those seeking a particular service that is not covered by the insurance policy. The same exorbitant charge will go out to the individual consumer, who will assume (rightly so) that the entire amount is due. Failure to pay the bill lands many an American into financial straits. On a few occasions my billing service has sought permission to send a collections agency after a non-paying patient. Such a decision feels entirely counter to my doctor-patient relationship, one in which I want to support and advocate for my clients.
Once I understood this system I tried to make it feel fair. When I had an uninsured patient, I asked my billing service to charge a discounted amount, calculated by averaging my collections from all payers for that particular service. This met with great trepidation from the billing office. I was informed that it was impermissible for me to charge different amounts to different patients. No one had any problem with the fact that I was going to collect twice as much from the uninsured customer as the insured one. As the shopkeeper, I was expected to throw out the same initial number when asked to charge for my service, but no one was turning to the uninsured patients and saying, “Don’t you want to know if I can do better?”
This is why cost transparency in health care is so difficult. We can’t predict what the final negotiated payment will be without knowing who is paying and what kind of bargaining position that person is in. And no one had taught the individual consumer the rules of the game. Physicians may be criticized for not knowing the costs of the services we order, but there simply is no straightforward answer.
I look forward to the day when health care charges and collections can be both uniform and reasonable. I am thrilled that consumer advocates are seeking clarity in health care costs, but they must understand what all this encompasses. The cost must reflect not only the price of facilities, supplies, high-tech equipment, and service providers, but also the bargaining position of the person who pays.
Do we as health care consumers require a crash course on bargaining? I’ll give it a go for some sparkling jewelry, a piece of furniture, or even tonight’s dinner. But when facing a major illness I’d prefer a price tag, thank you.
Daniela Carusi is an obstetrician-gynecologist.
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