In the view of Robert Berenson, a senior fellow at the Urban Institute and vice chairman of the Medicare Payment Advisory Commission, big hospitals are exerting their market power to charge ever-increasing rates and major insurers go along with it because they can pass along the costs to employers and consumers. Insurance industry officials say that health plans negotiate the lowest prices they can, but that they also need to include prominent hospitals favored by customers in the network, and those institutions can command higher prices.
Hospital executives say they don't like to charge insured patients more, but say that's a result of the country's broken healthcare system.
At Long Beach Memorial Medical Center, where Snyder got her CT scan, the hospital's chief financial officer said insured patients like her pay more to subsidize the uncompensated care given to the uninsured and low reimbursements for Medicaid patients.
"We end up being forced to charge a premium to health plans to make the books balance," said John Bishop, the hospital's finance chief. "It's a backdoor tax on employers and consumers."
Those higher prices charged by hospitals and other medical providers drove up healthcare spending at double the rate of inflation during the recession even as patients used less medical care, according to a new study by the Health Care Cost Institute.
Snyder, the salon manager, stumbled across the two-tier system accidentally. She has filed suit against her insurer, saying she hopes her case will lead to more disclosure of the price options, and ultimately lower treatment costs for patients.
The Long Beach woman said she sought treatment in 2009 for a pain in her abdomen. First her doctor ordered a CT scan of her abdomen and pelvis at Liberty Pacific Medical Imaging, an independent facility near Long Beach Memorial.
She got approval from Blue Shield, and she paid the negotiated rate of $660. Snyder underwent surgery on her colon, and her doctor ordered another CT scan in January 2010 because she felt lingering pain.
This time, her surgeon referred her to the hospital's imaging center. Snyder said she assumed her bill would be about the same because it was the identical test. Instead, Blue Shield's rate with Long Beach Memorial was $3,497 and the insurer told Snyder she owed $2,336, records show.
Incensed by having to pay nearly four times as much for the second scan, she started searching for an explanation. That's when she discovered that the hospital's cash price was less than half what she owed through her insurance.
In a complaint filed last month in Orange County Superior Court, Snyder accused Blue Shield of unfair business practices, breach of good faith and misrepresentation over her medical bills. The suit seeks class-action status on behalf of other Blue Shield customers.
A spokesman for Blue Shield said the case has no merit and the nonprofit insurer negotiates the most favorable rates it can.
In a court filing, Blue Shield said it "cannot promise or represent that there could not be providers who will charge someone less out-of-pocket cost for a service than she would pay if the Blue Shield contract rate applies."
Snyder said she went back to work last year at a hair salon in Seal Beach, partly to help pay her insurance premiums of $700 a month.
"It kills me that I'm paying that much in premiums," she said, "and it's better to pay cash out of my own pocket."
Health-policy experts say the growing awareness of cash prices should accelerate the trend toward increased disclosure of all types of medical costs. But entrenched interests are likely to resist.
"The insiders in the healthcare industry don't want to lose control over this information," Keckley said. "But price transparency is inevitable."