Did a Health Insurer Pay over Ten Times the Self-Pay Price for Outpatient Surgery?

A story from Arizona is a cloud with a silver lining:

Teresa Anderson was pleasantly surprised how quick and hassle-free her eyelid-lift surgery was at Havasu Regional Medical Center’s outpatient-surgery facility in April 2014.

Weeks later, the bills arrived at her Lake Havasu City home. Her surgeon, anesthesiologist and X-ray provider submitted bills and were paid nearly $2,250.

Only one remained: Havasu Regional’s bill. When it finally arrived last May, what she saw shocked her. An explanation of benefits from her insurer, Blue Cross Blue Shield of Minnesota, showed she and Blue Cross had been billed $38,526 by Havasu Regional for prep work, surgery and recovery lasting less than three hours.

Anderson, who worked for a health-insurance company before her retirement, believes hospital charges like hers explain why the economics of health care are askew. And she isn’t alone. Consumer advocates say such experiences point to the need for more transparency in the pricing of medical procedures.

Before the surgery, Anderson had asked her surgeon’s staff to estimate all costs associated with the surgery. She was considering paying on her own if her insurer denied coverage. The surgeon’s staff quoted a price of $3,500 for the surgery, anesthesia and facility fee if she paid on her own without insurance.

The hospital’s insane bill is really a pretty run-of-the-mill story these days. I am actually not sure that the reporter or the patient have it quite right: The hospital charge is not usually what a health insurer pays. On the other hand, the charge is not usually more than ten times what the real price is.

However, that is not the point of the story I wish to emphasize: The silver lining is that the patient had actually been able to figure out what the cash price would be if she paid directly herself. It has previously been hard for cash-paying patients to avoid being gouged by hospitals unless they are Canadian medical tourists. Whether this story is idiosyncratic or symptomatic of a trend, I cannot say. I hope it is the latter.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s new book: A Better Choice: Healthcare Solutions for America, by John C. Goodman.

John R. Graham is a Senior Fellow at the Independent Institute.
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