More Evidence That Health Insurance Drives up the Cost of Care

| June 19 2012

By Byron Schlomach, Ph.D.

The Los Angeles Times recently published the price based on payment type for a CT scan at eight hospitals in Southern California. As you can see, cash prices ranged from 6 to 68 percent of the average charge; and insurance prices were 48 to 84 percent of the average charge.

This table is further evidence that using health insurance paid for by employers to insulate patients from the cost of their health care is actually causing health care costs to go up. This year, Senator Nancy Barto sponsored a bill to require hospitals and doctors in Arizona to make cash prices available to patients, a reform the Goldwater Institute has been advocating for three years. This isn’t the sort of regulation we normally champion, but because there is no true market in health care forcing a little transparency would ultimately benefit consumers by lowering prices.

Unfortunately, after making it through the Arizona Senate, the bill was stymied in the House Judiciary committee due to opposition from insurance companies, hospitals, and doctor organizations. One has to wonder why hospitals, doctors, and insurance companies wouldn’t want patients to know the cash price of a medical procedure.

The Obama administration is right about one thing when it comes to health care: we are all likely to be patients. If the federal health reform law is struck down by the U.S. Supreme Court there will be a window of opportunity to advance policies that will actually lower health care costs, like having honest cash prices available to patients.

Dr. Byron Schlomach is the director of the Goldwater Institute’s Center for Economic Prosperity.

Learn more:

Goldwater Institute: Removing the Middleman: What States Can Do to Make Health Care More Responsive to Patients (PDF)

Los Angeles Times: Many hospitals, doctors offer cash discount for medical bills

Arizona State Legislature: Senate Bill 1384

Arizona State Legislature: House Judiciary Committee Hearing, March 13, 2012

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