Many people keep demanding the state step in to make healthcare more affordable. As it turns out healthcare becomes more affordable when you cut out the middle man:
A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336.
Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054.
Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance.
Who would have guessed that cutting out the middle man could reduce prices? Insurance is a headache for everybody but the insurance company. It’s in the best interests of insurance companies to weasel out of paying a claim so they try to find every excuse in the book to avoiding paying a claim. This takes time, while you’re fighting the insurance company the hospital you visited is waiting to get paid. Everybody loses, except the insurance company.
One of the biggest flaws in our current health system, besides the state’s involvement, is the reliance on insurance to pay for everything. Insurance is supposed to be a method of reducing risk, you pay a small amount of money into a pool at fixed time increments and if something horrible should happen you can access the pool to recover your costs. The system work well when risks are low and payouts are few, which is why renters insurance is so cheap. On the other hand when everybody is pulling from the pool constantly the system falls apart and the costs have to be jacked up to make things work, which is why health insurance costs so much now.
Since dealing with insurance companies is such a headache it’s not surprise hospitals want more money when they get involved. If you have to wait months before you get paid then you’re going to want more, it’s basic time preference. Time is money, if you pay in full now you can generally get a better price than paying later or in increments over time. There is also the added risk involved if the insurance company denies the claim. If the claim is denies the hospital has to collect the money from you, and there is a risk in the fact that you may not be willing or able to pay the bill. Therefore hospitals also have to cover their potential losses when dealing with insurance, another increase in the price.