Here's the long and short of it: Insurers demand discounts from hospitals in return for bringing them lots of patients. Hospitals, in turn, ridiculously inflate their prices so they can still turn a profit even after the insurer's discount kicks in.
Hospitals also pad people's bills with the cost of providing treatment to the uninsured or to patients who require months of care.
What that all means is that medical prices are being deliberately pumped full of hot air so that more money is changing hands. It also means it's almost impossible to know how much healthcare actually costs or whether you're getting a fair deal.
Some will say I have nothing to complain about. I'm paying only $1,500 for $52,000 in hospital bills. The system works.
But does it? UCLA billed my insurer more than $3,200 for an MRI. A Google search reveals I could have gotten that same MRI at a local clinic for closer to $300 — a tenth of the hospital's price.
So how much does an MRI really cost? Who knows? Is my $1,500 out-of-pocket payment a great deal or a rip-off, considering that the average worker pays $4,316 in annual premiums for employer-sponsored family coverage, according to the Kaiser Family Foundation?
Moreover, there's no consistency to pricing. People with different insurance plans will face different costs. Depending on income level, the uninsured could face anything from full price to discounts of 30% or more.
But this could soon change.
One little-discussed aspect of President Obama's healthcare reform law is a switch from the current reimbursement system, which rewards hospitals for treating sick people, to a system that provides incentives to hospitals and doctors to keep people from getting sick in the first place.
The basic idea, similar to the way Kaiser operates, is for insurers to give medical providers a fixed amount of money per member — say, $8,000 a year. If your doctor can keep healthcare spending below that amount, he or she pockets the difference. If you require extra treatment, insurance will cover the true costs of care.
"This is a seismic shift," Feinberg said. "It will allow us to stop sending out all the crazy bills. It will be all about what it actually costs to keep you healthy."
He said most hospitals and insurance plans will switch to the new system by the time so-called online insurance exchanges open next year for people who don't receive coverage through their employers.
"Right now, the more patients we have in the hospital, the more money we make," Feinberg said. "Soon, we'll make more money by keeping you out of the hospital."
This is a big deal, and hopefully will result in a more transparent healthcare system that focuses on the smartest use of resources, not on throwing funny money around.
I remain grateful that I received such high-quality care. I'm pleased that when I needed it, my insurance did what it was supposed to do.
But there's no excuse for charging $16 for a generic Tylenol, not to mention $70 for an IV bag of dextrose, which is basically sugar water. I found the same dose online for less than $3.
Anybody who charges prices like that deserves a little quality time with my cat.