They Paid How Much? How Negotiated Deals Hide Health Care's Cost

Nov 15, 2014
Originally published on November 17, 2014 1:43 pm

As Americans begin shopping again for health insurance under the Affordable Care Act on Saturday, they'll be wrestling with premiums, deductibles, out-of-pocket costs and other vague and confusing insurance-speak.

Believe it or not, that's the easy part compared with figuring out what health care actually costs.

Sal Morales of Miami bought insurance in March during the ACA's first enrollment period on the HealthCare.gov website.

It felt amazing, he says, to get that insurance card in the mail — "like if I got an American Express Platinum card. That's how I felt."

Morales was unemployed at the time. Money was tight and he knew he needed regular doctor visits to manage his high blood pressure. He diligently researched what he would get for his money before settling on a health insurance plan.

Instead of paying $560 a month for COBRA coverage, Morales discovered he could get an Obamacare plan for $145 per month.

"I have a network deductible of $500," Morales says. "My first three visits to a primary care physician — they're zero dollars. Then it's $5 out of my pocket."

Morales understands his end of the health care equation, but what he sees doesn't necessarily reflect the amount that hospitals and doctors receive to care for him, says Bruce Rueben, president of the Florida Hospital Association.

"That gentleman knows what it costs him, but he may not know what the actual cost of his health care is," Rueben says.

Here's how Rueben breaks it down: "There's one party — the hospital who provides the service. There's a second party — the patient, who receives the service. And there's a third party — the insurance, who pays for the service."

That third part is where health care pricing gets really squirrelly.

Every hospital has its own master list of charges for different services. Those charges are different from hospital to hospital.

But insurance companies don't pay those listed charges. The listed charges are almost fiction. Instead, each insurer negotiates for lower prices with each hospital and doctor on every plan. The negotiated prices even can vary within an insurance company depending on which plan a patient has.

All of this means there are about as many price tags for that hypertension checkup as there are insurers and providers.

"For an individual consumer, I am completely sympathetic that it's very confusing," says Dr. Ezekiel Emanuel, who was an adviser to the president during the drafting of the health law and is now a health policy specialist at the University of Pennsylvania. "There are at least six different prices for a hospital day. And then there's the cost of actually delivering the service, which — for most of these things, even hospitals don't know what that is. So when you say, 'What's the price?' it's almost a meaningless question, because there [are] all these different prices."

Emanuel says there's almost nothing that a consumer can check to gauge the actual prices for their health care before buying health insurance.

Those negotiated rates — the prices insurance companies really pay hospitals — are treated like trade secrets. Insurers and many hospitals don't want their competitors to know what they are paying.

It is only on an individual basis that people can see the prices their insurer paid for their care. And that's only after the care has been delivered — and only if the person is already insured.

The true cost of a treatment or procedure or medical service is buried in a statement called an explanation of benefits. These are the letters from insurers that look like a bill but say "this is not a bill."

Efrain Monzon helps patients interpret those explanations for Florida Blue, the largest insurance company in the state of Florida.

"We're identifying the procedure, we're identifying the provider, the date of service and then making sure the amount — the member responsibility — has to be in there," Monzon says.

Wedged into that statement (somewhere between the billing code and the member deductible) is a column for the amount paid.

This is the secret number the insurance company and the provider have worked into their contract, says Monzon. The industry often calls that number the "adjusted rate" or the "negotiated rate."

In Florida Blue's explanation of benefits to patients, it's called simply "amount paid."

To get a clearer sense of what health care costs, someone would have to collect enough of those statements from patients at every hospital, and every different type of insurance.

There are companies and crowdsourcing projects trying to do just that around the country. And Massachusetts has a law that says insurers have to disclose some of these prices in a way that is accessible to patients.

But so far, that's not happening in South Florida.

Which is all part of why someone like Sal Morales can know that his health care will cost him about $145 every month — but he won't necessarily know the true price of that care.

This story is part of a reporting partnership with WLRN, the Miami Herald, NPR and Kaiser Health News.

Copyright 2016 WLRN Public Radio. To see more, visit WLRN Public Radio.

SCOTT SIMON, HOST:

As Americans begin to shop again for health insurance under the Affordable Care Act, they'll wrangle with premiums, deductibles, out-of-pocket costs and other insurance buzz words, but as Sammy Mack, of member station WLRN, explains, that's the easy part, figuring out what health care actually costs is harder.

SAMMY MACK, BYLINE: This March, Sal Morales bought insurance on the healthcare.gov website.

SAL MORALES: I got my cards and it was, like, amazing, like, if I got an American Express Platinum card. That's how I felt.

MACK: Morales was unemployed at the time. Money was tight and he knew he needed regular doctor visits to manage his hypertension. He diligently researched what he would get for the price before settling on a plan.

MORALES: Instead of me paying $560 for COBRA, I found out that I would have insurance for $145. I have a network deductible of $500. The first three visits to a primary care physician - they're zero dollars, and then it's $5 out of my pocket.

MACK: But what Morales pays is part of a very complicated equation and it doesn't necessarily reflect what gets paid out for his care, says Bruce Rueben, president of the Florida Hospital Association.

BRUCE RUEBEN: That gentleman knows what it costs him, but he may not know the actual cost of his health care.

MACK: Here's how Rueben breaks it down.

RUEBEN: There's one party - the hospital that provides the service. There's a second party - the patient who receives the service. And then there's a third party - the insurance company that pays for the service.

MACK: And this is where health care pricing gets really squirrelly. Every hospital has its own master list of charges for different services, but insurance companies don't pay those listed charges. Those listed charges are almost fiction. Instead, each insurer negotiates for lower rates with each hospital and doctor on every plan. All of this means there are about as many costs for that hypertension checkup as there are insurers and providers. Dr. Ezekiel Emanuel is a health policy expert at the University of Pennsylvania.

DR. EZEKIEL EMANUEL: For an individual consumer, I am completely sympathetic that it's very confusing. There are at least six different prices for a hospital day and then there's actually the cost of delivering the service, which, you know, for most of these things, even a hospital doesn't know what that actually is. So when you say what's the price? That's almost a meaningless question because there are all these different prices.

MACK: Those negotiated rates - the prices insurance companies really pay hospitals - they're treated like trade secrets. There is a small window to see that price after it's been paid and only if you're already insured. It's buried in a statement called an explanation of benefits. If you've ever gotten a letter from your insurer that looks like a bill that says this is not a bill you've seen one. Efrain Monzon helps patients interpret those explanations for Florida Blue, the largest insurance company in the state of Florida.

EFRAIN MONZON: We're identifying the procedure. We're identifying the provider, the date of service, which is important, and then making sure that the amount - that the member has responsibility - has to be in there.

MACK: Wedged into that statement, somewhere between the billing code and the member deductible, is a column for the amount paid. This is the secret number the insurance company and the provider have worked into their contract, says Monzon.

MONZON: We pay the contracted amount based on whatever the provider has, so that would be the amount paid.

MACK: Collect enough of those statements from patients at all different hospitals with all different insurance and you could get a clearer sense of what health care costs. There are companies and crowdsourcing projects trying to do just that around the country. And Massachusetts has a law that says insurers have to disclose some of those prices, but that's not happening in Florida, which is all part of why someone like Sal Morales can know what his care will cost him every month.

MORALES: For $145 I was able to get health care.

MACK: But he won't necessarily know the true price of that health care. For NPR News, I'm Sammy Mack.

SIMON: And this story's part of a reported partnership between NPR, WLRN and Kaiser Health News. Transcript provided by NPR, Copyright NPR.