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AHIP Sics the NYT on Those Greedy Doctors/Hospitals

Part I. Who’s the Enemy?

After Karen Ignagni, the personable head of America’s Health Insurance Plans (AHIP), saw that President Obama and the Democrats had decided to make her insurance companies the enemies of "health insurance reform," she came up with the logical response: blame those greedy doctors and hospitals.

There’s a lot going on this AHIP-fed NYT article, which highlights an AHIP survey of provider charges/fees that insurers get from doctors and hospitals. The AHIP survey, and the additional Times sources, tell us that there is no rational pricing system apparent for doctor/hospital charges, and no apparent connection to what Medicare pays:

A patient in Illinois was charged $12,712 for cataract surgery. Medicare pays $675 for the same procedure. In California, a patient was charged $20,120 for a knee operation that Medicare pays $584 for. And a New Jersey patient was charged $72,000 for a spinal fusion procedure that Medicare covers for $1,629. . . .

The survey, insurers and some economists say, shows the sort of irrational pricing of medical care that is an integral part of the nation’s health care problems and that is largely being ignored, some say, in the current debate.

“It’s the wild, wild West when it comes to prices of anything in the U.S. health care system, whether for a doctor visit or for hospital charges,” said Jonathan S. Skinner, a health economist at Dartmouth.

The situation is so irrational, said Uwe E. Reinhardt, a health economist at Princeton, that it simply cannot go on. “We will not emerge out of this decade with this lunacy,” Dr. Reinhardt said, adding, “You worry about credit card charges, you scream for consumer protection — why not scream for it here?”

The article does not explain what accounts for this irrational pricing — I’ll return to this in Part II — but instead moves on to the huge disparities in payments and collection rules between providers that are part of an insurer’s provider network and providers deemed "out of network."

Here we find examples of insurers getting charged more by out-of-service providers and if/when such charges are denied, the providers are free to collect the difference from the patients, even when the difference would have been paid if the providers were within the insurer’s network.

So, America’s insurer/provider payment system is irrational and arbitrary and discriminatory. But what else is the article telling us? First, Ignagni and AHIP have been perfectly willing to be cooperative partners in health care reforms as long as they got a guaranteed market with no competition from a public option for the 30 million or so people who might gain insurance under the "reform" bills. That "reform" was just fine.

But the moment the White House and Nancy Pelosi said AHIP’s practices are part of the problem that needs to be fixed, AHIP very quickly pointed the finger at doctors: "You should look under that rock, where the providers do their billing." I can’t wait for the providers’ response.

As I explain in Part II, What I Learned from Sis, I suspect Ignani’s right, but when was she going to tell us? And now that AHIP concedes there is massive price discrimination going on between in-network and out-of-network services, how exactly does the reform that was just fine two weeks ago deal with this glaring problem?

Of course, AHIP didn’t tell the Times that one way we could fix the discriminatory part of the pricing system would be to provide a common shared risk pool, a common payment protocol and eliminate the irrational distinction between in-network and out-of-network. The common insurance scheme would pay all providers for their services using a non-discriminatory payment scheme. I wonder what that reform would look like?

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John has been writing for Firedoglake since 2006 or so, on whatever interests him. He has a law degree, worked as legal counsel and energy policy adviser for a state energy agency for 20 years and then as a consultant on electricity systems and markets. He's now retired, living in Massachusetts.

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