Cost Transparency in Healthcare: Why does everything cost so much?

On Behalf of | Feb 7, 2019 | Blog Articles

Cost Transparency in Healthcare: Why does everything cost so much?

In 2016, an individual, on average, paid approximately $10,345.00 into the healthcare system. That means, in 2016, the United States spent approximately $3.35 trillion on healthcare expenditures. In fact, the United States spends more on healthcare than most other developed countries. While it is well documented that the United States is a country of spenders when it comes to healthcare, most individuals who receive healthcare services in the United States do not know what those services truly cost. There is a definite disconnect between the actual healthcare service received and the cost of that service.

There are many reasons for this disconnect. One reason is due to the rise and prevalence of insurance companies. Most individuals, about 86%, have health insurance. The majority of those individuals, about 75%, receive their health insurance coverage from their employer or from a privately purchased plan. The remaining 10% of individuals receive their insurance coverage from a government provider, such as Medicare or Medicaid. The insurance company (either private or public) acts as a middle man between the healthcare providers and the healthcare recipient. This creates fiscal distance between the recipients and the providers.

But as health care costs increase and individuals become more affected by higher health insurance premiums, high co-payments and higher deductibles, it is time that patients demand transparency in healthcare costs in order to rein back prices and create accountability. Before insurance became commonplace, or more accurately before it became a necessity, hospitals had a uniform pricing system where it charged all patients the same cost for the same procedure. It was the hospital’s cost of providing the service plus about ten percent. This cost was uniform across the board, regardless of whether the patient was insured or not. Then, Medicare required that hospitals set charges for all Medicare recipients. This means that the payment that Medicare would pay to the hospital was a predetermined fixed-price. As time went on, the predetermined fixed price established and paid by Medicare did not cover the rising costs of medical care. Then, the insurance companies negotiated contracts with the hospitals to obtain discounts off of charges.

As a result, hospitals began to restructure how the services were priced in order to keep making profits. Determining the price that each patient pays is a complicated endeavor requiring a team of medical billing experts. Every hospital maintains a “charge master,” or a master list of hospital charges and procedure codes.

Ever try to ask what the cost of a procedure will be? The answer always seems to be “I have no idea.” These listed prices are pretty arbitrary.

In our jury trials, as well as most trials involving significant injuries, one of the elements of damages are the medical bills incurred by the client.  In order to establish the fair, reasonable and customary charges for any given medical service or admission, Loizzi Law Offices have to retain the services of a medical billing expert who specializes in  the area of medical billing.  This individual meticulously sifts through a client’s medical bills and records and makes a determination as to what the fair and reasonable charges are for the treatment received.