What does all this medical stuff cost anyway?

My good friend Dr. Giovanni Colella, CEO of Ventana is quoted in Tackling the Mystery of How Much It Costs in today’s New York Times. (Too bad they referred to his company as Ventura –perhaps the writer or editor was unconsciously channeling Governor Jesse.)Colella’s company is helping employees and employers understand what they’re paying for medical services. That’s information that should be routinely available but rarely is. Lack of transparency is one reason medical prices are sky high. As an illustration, Ventana adviser Dr. Alan Garber --a health economist at Stanford and one of the sharpest guys I’ve met-- describes how even he got tripped up in out-of-network charges when his wife was in the hospital. (An out-of-network anesthesiologist provided services, even though the hospital itself was in-network.)The article begins in typical fashion, highlighting the oddity of medical pricing.

You go to a restaurant, peruse the menu, take your waiter’s suggestions, and order a meal. But there is something odd: the menu has no prices and you have no idea what you will be required to pay until a few weeks later when the bill arrives in the mail.That, it turns out, is analogous to what goes on in health care, where fees are hidden at the time of service. Making matters even worse, patients often are seeking care when they are frightened and vulnerable, in no position to ask about prices or to haggle.

That’s a pretty good description but it’s not extreme enough. In health care there often is no equivalent of a menu to “peruse.” The doctor or other provider tells you what you’re getting and that’s it. If you’re lucky you can go home and browse the Internet for alternatives.It’s not just that the patient doesn’t feel comfortable enough to “ask about prices or to haggle.” Often the physician or hospital has no idea of the price. And when they send out a bill based on “charges” they know that the true price paid by an insurance company is only a fraction of that. Only an uninsured/underinsured patient with the means to do so pays charges.Much of the article focuses on the high fees charged when patients go out of network: often double, triple or quadruple the in-network charges. I’m sympathetic to the idea that these fees should be regulated. In the meantime patients should try negotiating the fees –ahead of time or once they’re billed—on their own or by hiring a company to do so.