Health Care [Playing-] Market

Economics Economics Questions
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1

Has anyone here ever studied the detailed statements that your HMO/PPO sends back to you with the breakdown of your doctors visit costs?

First, you notice that the doctors break down even the most simple of office visits into a smorgasbord of charges (probably at the behest of the insurance companies, I know). And then you notice that the Q-Tip culture swab of your throat was billed at the rate of $95.00 for the procedure, $175 for the culture, etc. which are costs WAY out of line with what you would have paid, had you opted to deal with the doctor strictly in cash. And then you notice that the insurance company states how much they are reimbursing for the procedure (like $9 for the swabbing procedure, $21 for the culture) which is also out of proportion of the amount billed. Informally, the doctors office will simply credit you for the difference between what they billed and what they were reimbursed, but not always, making me have to call them and either threaten to take my business elsewhere, or settling the balance with them.

What I guess it comes down to is that if you read the fine-print, it will state that the insurance company arrived at the reimbursement amount based on the prevailing market rate in your region. Now the question is, if a vast majority of any given region is utilizing an HMO/PPO arrangement, how the hell do they determine the correct pricing for the procedures? I think the answer is that they don’t, and they truly can’t ala the socialist calculation problem, and so the health-insurance oligopoly end up playing market.

Any thoughts?

2

If I remember correctly the government has a big hand via medicare/medicaid in determining the ‘market’ price of these services, which then gets translated into the HMO’s billing practices. There was also an interesting example someone brought up here once, hopefully they’ll pop in on this thread, of one of the European countries which had socialized health care but still a strong out of pocket payment system for certain medical services, which it turns out where the only services whose prices hadn’t sky rocketed.

So brief answer is someone is playing market, the question really is who though.