Study: Hospitals Often Charge More to Insured than Uninsured for Same Services

It may seem intuitive that, from one hospital to another, patients encounter different prices for the same procedure. After all, different stores often set different prices for the same goods.

But different prices from one patient to another at the same hospital?

An economist at Trinity College found evidence that two patients getting the same procedure at a hospital are commonly charged different amounts depending on whether the patient is paying cash, or the patient is covered by health insurance.

In fact, the self-pay cash price is often lower than rates negotiated for plan members by health insurance companies, said Gerardo Ruiz Sánchez, assistant professor of economics, who delved into a newly public database to compare procedures across the United States.

In his study, 60 percent of negotiated rates were higher than the cash rate for the services.

“Individuals purchasing private health insurance are paying monthly premiums … under the promise that their insurer is also negotiating the lowest possible rates for services,” said Ruiz Sánchez.

“This raises the question whether it is evidence of poor bargaining by insurers, who are representing consumers, in their negotiations with hospitals.”

In the study, Ruiz Sánchez examined data on fourteen “shoppable” hospital services, those that can be scheduled by a consumer in advance, such as office visits, CT scans or MRIs.

The data was made available by a federal rule that took effect on January 1, 2021, mandating its disclosure. It is compiled within the Turquoise Health Dataset, which contains records on about 2,200 hospitals.

Ruiz Sánchez focused on the payer-specific negotiated rates charged to Aetna, Blue Cross Blue Shield, Cigna, Humana, and United Health – all major national carriers plus government-related payer plans including Medicaid, Medicare, Tricare, Veterans Affairs and state agencies insuring state employees.

His research, “Variation in reported hospital cash prices across the U.S. and how they compare to reported payer-specific negotiated rates,” was published in Economics Letters in 2021.

In addition to the variation between insured and uninsured in the same hospital, Ruiz Sánchez found substantial differences in cash prices across hospitals. From one hospital to another, costs for the same procedure could be as much as 8 times more expensive.

Cash price reflected the rate published by the hospital unrelated to any charity care or bill forgiveness that the hospital may be required or choose to apply.

Self-pay uninsured consumers bear the full cost of the hospital services and, in June 2020, an estimated 18 percent of people in the U.S. had medical debt.

Even among insured individuals, hospital prices are relevant when services are outside of the health plan coverage are required, Ruiz Sánchez noted.

More research is needed to understand the economic forces behind the cash price patterns, and how hospitals decide to price their services for the uninsured, according to Ruiz Sánchez, whose work was supported by Trinity College Faculty Research Grant Committee.