Almost every American hospital publishes its price list to its primary customers: the insurance companies. The problem as I see it is that the insurance companies are the only entities that can get fair prices for health care, and they want to keep it that way. A potential solution would be to ban insurance discounts; a health-care provider could charge any price it wants, but it would be required to charge all customers the same price. Insurance companies would still negotiate for lower prices, so it would benefit all of us.

Medicare is the largest payer of insurance claims by far. Medicare also has a lot of rules. One of these rules is that, in order to prevent providers from shortchanging Medicare, they have to charge everyone the same price (otherwise medicare would be overpaying....). Medicare will then pay 80% of the indicated amount and the rest is covered by medigap insurance, Medicaid, or by the patient.

As you might imagine, the lack of ability to price discriminate, even to patients, hugely distorts the market. However, private insurers have gotten around this (how I don't totally understand), by using what is called the contractually "allowed amount". This is an agreement that the provider will write off the variance between the allowed amount and the billed amount. This results in de facto price discrimination for large insurers while getting around the medicare law. Patient's don't have this kind of gig.

Of course, there are tons of other corruptions and inefficiencies in the system. I could tell you a story about a friend who once worked for NY Medicaid who was actively prevented from working to prevent the state from going bankrupt by paying claims.

I don't have the answers, but there is serious distortion of the market ATM.

I hope I never have to use this information, but it's out there.

http://www.cms.gov/FeeScheduleGenInfo/