Millions of Americans are at risk of contracting a fairly nasty respiratory infection, COVID-19. At times like these it’s a shame consumers have so little control over the medical care they receive and have little chance to avoid surprise medical bills from out-of-network providers gaming our health care system. While most physicians on the frontlines of this pandemic consider COVID-19 their worst nightmare, many others in the medical industrial complex see opportunities. Opportunities to price gouge that is. From labs charging exorbitantly high prices for testing, to hospitals charging outlandish fees for emergency room visits to the surprise medical bills Americans will face once they’ve recovered. Patients inquiring in advance about the cost of these services are unlikely to get accurate answers.
A few years ago a family member was sent to a hospital for diagnostic testing. She was assured by a hospital business office that the tests were covered by her insurance. She later received a bill for about $700 because the hospital had not checked whether her deductible had been met. In other words, no thought went into the estimate other than to shut her up and get on with the tests. She was lucky when a subsequent diagnostic test required prior authorization and the hospital had to contact her health plan. Prior authorization was how she discovered her cost-sharing would be $2,700 for a CT scan at the hospital. Prior authorization ultimately gave her the knowledge and opportunity to find the service elsewhere for $400. Perhaps that’s why many providers are lobbying state legislatures against prior authorization. The less information patients have about costs, what’s covered and who’s out-of-network, the less likely they are to balk (and walk). When it comes to expensive drugs and expensive procedures, additional information obtained from prior authorization often benefits patients.
Our health care system doesn’t have to be this way. The method Americans rely on most to drive down prices and encourage competition is price rationing. Sellers are free to charge any price they believe the market will bear but consumers are able to walk away and buy from other sellers. This method works so well that I can walk into any grocer without hardly looking at prices because the market is competitive. Prices are always reasonable, even if they are possibly higher than a neighboring store. Service industry firms provide cost estimates to avoid irritating customers. Enforceable contracts require mutual assent, also known as a meeting of the minds. Furthermore, consumer protection laws prohibit suppliers from engaging in false advertising, fraudulent behavior and wait and switch advertising.
Why do reputable retail establishments try to please their customers, but in health care patients are treated like they have no choice? The reason is because consumers are empowered to hire and fire the service personnel from whom they buy retail goods and services. A byproduct of vendors competing for consumers’ business on the basis of price is price transparency. If suppliers want business, they must disclose the price. Failing to do so would drive consumers away. Have you ever noticed that when a vendor refuses to tell you the price until he/she finishes a sales pitch it’s because the price is too high? Perhaps that’s why hospitals rarely quote you a price.
The most egregious example of patients being abused by the health care system are surprise medical bills. Consumers deserve the right to walk away and decline the services of providers they did not choose, who refuse to quote prices in advance or work with their health plans. When you cannot decline the services of providers you did not choose, outrageous surprise medical bills become possible. It’s a business model predicated on asymmetric information and extortion. Prior authorization for expensive procedures is one of the few ways to alert patients about the cost sharing and possible alternatives when they have little knowledge of prices.
Shopping for medical care has saved my family thousands over the years but it’s difficult and time consuming. Many patients have no idea where to start. Patients would benefit from more tools to compare alternatives and prices at other locations. More importantly, patients need the legal protections against policies designed to trap them with medical bills they could have avoided.