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America's health insurance system continues to puzzle me
In yesterday's mail, one of those "This is not a bill" things from the insurance company. I had a routine urinalysis, for which the provider billed a smidge over $2000. The insurance company is paying less than $800, I pay perhaps $20, and nobody at all is paying the remaining $1200.
This raises several questions.
(a) How can a routine urinalysis possibly cost $2000? Or even $800? It can't be more than an hour's labor; call that $100. And it uses a bunch of equipment that probably cost millions of dollars, but which processes many thousands of samples in its lifetime.
(b) Who, if anybody, actually pays the "billed" rate? Is that for people who don't have insurance at all?
The latter question in part answers the former. The actual cost of the test must be somewhere less than the average amount they get paid for the test. Close to 90% of Americans have health insurance, and many of the others probably wouldn't bother getting this test, so let's suppose 95% of the tests run are paid by insurance companies that have negotiated their own rates, and the other 5% are paid at the "billed" rate. Assuming my health insurance company is neither better nor worse than most at these negotiations, that leads to an average payment of about $850, so the actual cost must be less than this. So wouldn't things be much simpler if they just billed a real price and skipped the haggling?
A related question: when one of our dogs gets a routine urinalysis, it costs in the $200 range. I can't believe it's a factor of ten cheaper to do this test for a dog than for a human (although the accuracy standards are probably higher for the human), so I have to suspect most of the difference has to do with the health insurance industry.
This raises several questions.
(a) How can a routine urinalysis possibly cost $2000? Or even $800? It can't be more than an hour's labor; call that $100. And it uses a bunch of equipment that probably cost millions of dollars, but which processes many thousands of samples in its lifetime.
(b) Who, if anybody, actually pays the "billed" rate? Is that for people who don't have insurance at all?
The latter question in part answers the former. The actual cost of the test must be somewhere less than the average amount they get paid for the test. Close to 90% of Americans have health insurance, and many of the others probably wouldn't bother getting this test, so let's suppose 95% of the tests run are paid by insurance companies that have negotiated their own rates, and the other 5% are paid at the "billed" rate. Assuming my health insurance company is neither better nor worse than most at these negotiations, that leads to an average payment of about $850, so the actual cost must be less than this. So wouldn't things be much simpler if they just billed a real price and skipped the haggling?
A related question: when one of our dogs gets a routine urinalysis, it costs in the $200 range. I can't believe it's a factor of ten cheaper to do this test for a dog than for a human (although the accuracy standards are probably higher for the human), so I have to suspect most of the difference has to do with the health insurance industry.