“Now, we have a 4th-party payment system. Insurers and hospitals fix prices at about three to five times actual costs, and then the oligopoly (four national carriers) shadow price each other to feed these perverted prices to employers.”
By Craig Gottwals
American healthcare isn’t broken; it’s optimized for them.
Your sickness is their profit, and they have a fiduciary duty to maximize that for their shareholders.
In the 1930s, U.S. healthcare began moving toward a third-party payment system, where insurers and hospitals negotiated pricing outside the patient’s view. From the 1940s through the 1960s, with the tax advantages given to employer plans and the growth of taxpayer-funded care under Medicare and Medicaid, the patient was further removed from the equation.
Now, we have a 4th-party payment system. Insurers and hospitals fix prices at about three to five times actual costs, and then the oligopoly (four national carriers) shadow price each other to feed these perverted prices to employers.
Patients are so far removed from the pricing mechanism that they might as well be trying to haggle at a silent auction with a blindfold on, in a different room.
Thankfully, the Consolidated Appropriation Act and new transparency laws are beginning to change that. I continue to try to present the data to folks in a digestible fashion.
This time, we examine 31 select hospitals in California and one health plan: a UHC PPO. The procedure? CPT Code 27447 – a total knee replacement.
Many would think that if they have a UHC PPO, the price at hospitals in the same state, county, or city might be the same or, at least, similar.
Nope. Not even close.
Look at these “prices” and then tell me there is any rhyme or reason to this scam.
Then tell me why any employer would pay UHC, the Blues, Cigna, or Aetna for the right to be abused like this?
If we assume that a reference-based plan would pay 140% of Medicare (the most common metric), an employer ends up with a 45% discount on the hospital pricing.
And don’t think that I cherry picked UHC. I could have done the same with the B, the C, or the A in BUCA.
Furthermore, this aligns almost perfectly with the claim savings we see on our Reference-Based pricing plans, which range from 40% to 45% in most states.
Employers with shrewd CFOs and savvy, dedicated HR teams are doing this, folks. If you aren’t, you are falling behind, and your competitors will shrink their 2nd largest budget line item by 25% to 30% while you continue to pay 8% more year after year.
