What does your healthcare really cost you?

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Imagine heading to your local grocery store to pick up some things for dinner. As you head down the aisles, you notice there are no prices listed. On anything. You continue to gather your items and head for the checkout stand. You don't know what your grocery bill total or even what the individual items cost. Neither does the cashier. He simply tells you that "you'll get a bill in the mail."

And when you get that bill, you may be paying ten times what the guy checking out next to you pays. Maybe you'll pay less than your next-door-neighbor. Maybe the mail you get tells you that, though you've already eaten them, they don't approve of your Twinkie purchase. So you'll be paying triple for snack cakes. But you'll never really know—it all seems so random.

This would seem intolerable to anyone. But it's currently happening in healthcare, and we have been tolerating it for eons. There is virtually no transparency in medical costs today. Two patients in the same room at the same hospital getting the same surgery by the same surgeon on the same day will get wildly different charges. One may be thousands of dollars higher or lower than the other. Which could be thousands of dollars more or less than what they would have paid at the hospital on the other side of town.

Currently, it is nearly impossible to comparison-shop for a doctor, a procedure, or even a simple test. The information just isn't available to consumers. Guesswork and the internet might get you an estimate—but even that will vary widely.

Why? Because doctors and health insurance providers routinely negotiate rates and agree not to disclose the costs. According to a recent Forbes Technology blog post by Nicole Perlroth, "That means the price tag of a routine colonoscopy, performed in the very same neighborhood—in some cases by the very same doctor—can range from $500 to $3,000 dollars."

You might think since you don't pay for it out-of-pocket, why should you really care? You may not pay directly, but consider this: Health insurance premiums have nearly doubled since 2000--that's three times faster than wages. And each year, we all face increasing deductibles, co-payments, and other out-of-pocket expenses.

According to MarketWatch, average out-of-pocket costs jumped 34% from 2004 to 2007. And the U.S. government predicts that consumer out-of-pocket healthcare expenses will reach an average of $3,301 a year for each household by 2014. It was $2,500 in 2009. What could your family do with an extra $800?

Perhaps its time we finally become customers of healthcare.

Castlight Health is one company that thinks so. They are working to "bring the online-shopping revolution to the giant, opaque healthcare industry." They collect price data, consumer reviews, and individual health-benefit information in one place so that individuals can make informed economical decisions. Their intent is to cast light on medical spending.

Earlier this month, The Wall Street Journal published its second annual list of the 50 most promising venture-backed companies, and Castlight Health took top honors, securing $81 million (so far) from investors.

We hope that this is only the beginning. Increased transparency in healthcare means better arming us all with information about our medical choices—one way to change and improve the way we approach (and pay for) healthcare.

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stites's picture
Open Source Champion

It is far cheaper to pay your medical expenses out of pocket than to buy health insurance. When you buy health insurance you are paying for both your medical expenses and the cost of the insurance company.

Also when you are paying out of pocket you can negotiate price as I did when I had an operation on my back. I negotiated the price of anasthesia down $500. Because I had no health insurance I had to pay cash in advance but I also had an itemized bill before I had the operation rather than being surprised in the mail.

Steve Stites

Chris Wells's picture

It must be nice to be able to afford surgery cash. I know I can't.

Levi's picture

I can't imagine how that would be like. In Belgium, everyone's wages are deducted 32 % via taxes, but we get free healthcare (or almost free); whatever happens. The same money is also used to pay unemployed people a decent wage. But I highly doubt it the people that decide these things (e.g. the extremely wealthy) will like that concept for the US. You could suggest a proof of concept to your local representative?

kozlowski's picture
Community Member

What is interesting is that USA has 10 times higher spending on health care than Poland, but the life expectancy is almost the same.

Don McCormick's picture

We are a patient/physician cooperative in Houston and we publish the Medicare Rates for Harris County and the DRG Rates for the Hospitals. These are the bench marks for every kind of service provided by any medical care provider. We have agreements with 520 physicians and three major hospitals that will accept these rates from our patient members and likely from anyone else. Not getting these rates and not knowing them is a failing of the reporter and the patient as they are public. Not being in a coop that gets you these rates in advance is an organization mistake. While the effort to get an publish this information is a little labor intensive it is not very hard. Don't make it a bigger black box because of a little work and a little organizing.

ObamaLied2US's picture

Even if this WERE true, Medicare only reimburses 86% of what the Houston's hospitals' COSTS are (not their charges). Historically, they have been able to shift the additional 14% to commercial payers and employers. This party is over.....