Q&A: Why don't hospitals display rates?

Q: If an individual has a high-deductible plan or no insurance at all, the cost of a visit or procedure is astronomical. Health plans (Blue Cross, etc) receive huge discounts, but the poor individual pays perhaps three times as much. Costs like that frequently cause bankruptcy or impoverishment. Why can't an individual receive the same price as the lowest contracted rate?

— James Hering, Fresno, Calif.

Q: I received a bill for an emergency-room stay of about four hours. I walked in and asked for a CT scan of my abdomen. No broken bones, no stitches, no surgery. The bill was for over $9,000. When my COBRA became available, the revised bill came and it showed that my insurance paid about $519, my share was $100 and over $8,000 was written off! How can so much be "written off"? Why would I have been charged the whole $9,000, but the insurance company able to pay the $519?

— Deborah Watson, Lake Forest

Related questions answered by health care researcher Gerard Anderson

A: Essentially, if you’re an individual who is uninsured and going to the hospital or to a doctor, you’ve got nobody negotiating on your behalf. So, you’re going to be billed at the highest rate. There is no federal or state law – with the exception of Maryland – that regulates the prices a hospital or physician can charge a person who has no existing contract with the provider.

The typical markup for U.S. hospital services is three to one. That means for every $1 a procedure costs, the hospital may bill you about $3. Because insurers are able to use their buying power to negotiate much lower rates, the markup on the bills that go to insurance companies is typically 10 cents to 30 cents on the dollar. In other words, while hospitals seek to make a profit of about 200 percent from individual payers, they accept 10 percent to 30 percent profit from insurers.

Most of the 44 million uninsured individuals who end up going to the hospital and running up big bills don’t end up paying the full charge. They just don’t have the income to pay for a $40,000 hospital stay, for example, and hospitals often wind up reducing the bill.

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