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Why are prices for medical care such a mystery?

Health insurers should require all in-network doctors and hospitals to give average prices for various procedures so policyholders can make informed decisions.

April 18, 2013|David Lazarus

Ted Kamp wanted to make sure his daughter received the medical treatment she needed. That was his first priority.

His second was making sure his insurance would cover things and that he'd pay a fair price for any procedures.

The fact that this proved so difficult highlights one of the crazier aspects of the U.S. healthcare system: the inability of patients to know how much their treatment really costs.

"It's infuriating and it's exhausting," Kamp, 50, told me. "It's clear that the entire system is designed to bully you into submission."

He entered the twilight zone of medical pricing in November when his 15-year-old daughter complained of chronic shoulder pain. She's a star volleyball player, Kamp said, and the pain was in "her spiking shoulder."

He took his daughter to UCLA Medical Center in Santa Monica, where a doctor recommended an MRI for the injured joint. Just to be on the safe side, Kamp decided first to contact his insurer, Cigna, to verify that the procedure would be covered.

Like many people, he has to be mindful of his healthcare spending. As a freelance TV producer, Kamp pays $780 a month to cover himself, his wife and two daughters — a price that seems almost reasonable until you realize that each member of the family has a $5,000 deductible.

In other words, the first $5,000 of healthcare expenses annually for each family member comes from Kamp's own pocket. Only after that will he reap the benefits of paying $9,360 in annual premiums.

A few days after Kamp contacted Cigna, he received word from an outfit called MedSolutions, a "radiology management" company that helps insurers decide if an X-ray or MRI is warranted — even though a doctor already has decided it is.

In this case, MedSolutions concluded that an MRI would be acceptable to Cigna. It was covered. So Kamp brought his daughter back to the hospital.

"Covered, for me, means that the insurer will pay for a portion of it and I'll pay a portion of it," he said. "Why else did Cigna have our doctor fax in paperwork about the need for an MRI?"

Here's why: Cigna was simply finding out how much to credit against that whopping deductible. So when UCLA billed Kamp a few weeks later for $4,767, he was left holding the bag.

Considering that an MRI can cost as little as $300 elsewhere, Kamp then asked UCLA why he was being charged so much.

The hospital didn't offer an explanation, but it did eventually agree to lower his MRI bill to $3,336.90. In other words, the hospital would enjoy a profit margin of about 1,000% rather than the nearly 1,500% it originally envisioned.

Kamp still didn't think this was fair. So he mailed the hospital a check for $1,000 as a gesture of good faith and asked to discuss the matter further.

He received word late last month that UCLA had turned the matter over to debt collectors. Discussion over, apparently.

Roxanne Moster, a spokeswoman for UCLA Health System, said this was a matter of bad timing. Kamp's check arrived just days after the debt collectors were unleashed. The collection process was subsequently called off, Moster said.

As for that sky-high MRI bill, she said all the hospital's "technical fees and charges are usual and customary." She noted that the MRI Kamp's daughter underwent also included injection of a fluid to enhance the image, which raised the price.

Moster said "there is no evidence" that an MRI could cost as little as $300. She might do what I did: Google "Los Angeles MRI" and then call a few of the clinics that come up, which told me they would indeed charge around that much to take images of a shoulder.

Obviously, there's no defense for a hospital imposing a 1,000% markup on a relatively common procedure.

By the same token, it's shameful that a family has to accept $5,000 deductibles as the trade-off for a halfway affordable insurance premium. But a deal's a deal, so Kamp has no grounds to gripe about getting stuck with UCLA's absurd bill.

If there's any shovel-ready room for improvement here, it's the role of insurers in helping policyholders make informed decisions about treatments.

Insurance companies should require all in-network doctors and hospitals to provide average prices for various procedures. Whenever a policyholder asks if a procedure is covered, he or she would also find out the average price for the facility in question.

Even better, the insurer would include prices of other medical facilities, just like some car insurers routinely show how their rates compare with those of competitors.

I asked a Cigna spokeswoman, Amy Turkington, if her company would be open to such a system.

"We acknowledge and agree that more must be done to educate American consumers about healthcare prices, and about how much costs can vary for the same procedure based on where that service is provided," she replied.

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