I am near 40 now and have always been athletic which has led multiple hospital visits in various states (sometimes I had health insurance sometimes I didn't). Also, I now live in HI which has great health insurance policy (as far as I have experience). That being said, I have had a question that no one has been able to sufficiently answer. My question is as follows: given the fact that I am now insured every bill I get for a service is broken generically down to say something like; cost of X is $3000, negotiated insurer price $450, after insurer payment you owe $94. How can something that costs $3000 have a reduced cost to $450 just because I have insurance?

I have also noticed that in my city MRI before insurer negotiated costs can vary by as much as 40% for the same service. To me (as a small business owner) this seems crazy that "retail health stores" (AKA hospitals) can be within 3 miles of each other and charge wildly different prices that the consumer won't be aware of until after they have received the bill. To me, a basic public "price list" seems like a foundation to a business. Why isn't that so? What am I missing?

Thank you

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    This question might be better off being posted in money.stackexchange.com Nov 7, 2017 at 14:05
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    Questions about hospital prices are not really questions about politics. But I don't think that this question belongs to money.SE either. Maybe health.SE? They do have some questions regarding hospital processes.
    – Philipp
    Nov 7, 2017 at 15:33
  • This is is actually very much a political question in that the answer is politics. We have a for profit health care system in the US which allows every insurer to negotiate privately with every provider. The reason there isn't a 'public list' of rates is that requires a single payer system to work--which the US does not have (at least, not universally). Voting to reopen.
    – user1530
    Nov 8, 2017 at 1:04
  • There is no reason why a private system couldn't advertise prices and it's unclear that a single payer system would advertise prices, since it wouldn't be individuals that pay them.
    – Brythan
    Nov 8, 2017 at 3:44
  • @Brythan at least with the current system, all costs are negotiated privately between care provider and insurer. These are not shared amongst providers for competitive reasons. The insurer doesn't want doctor X to know that doctor Y negotiated 10% more for procedure Z. A single payer system, like any government paid system (such as the military) should have an accounting system available to the public to view on some level. Plus, there could still be incentives for consumers to choose the less expensive provider (something they can not do at this time)
    – user1530
    Nov 8, 2017 at 16:22

2 Answers 2


I don't think I'm knowledgeable enough about this subject to give you a complete answer. At some point I tried to have a better understanding of the US healthcare system due to its unique features but unfortunately it still eludes me somewhat.

In any case for your question "How can something that costs $3000 have a reduced cost to $450 just because I have insurance?" the important concept to understand is Chargemaster:

In the United States, the chargemaster, also known as charge master, or charge description master (CDM), is a comprehensive listing of items billable to a hospital patient or a patient's health insurance provider. In practice, it usually contains highly inflated prices at several times that of actual costs to the hospital. The chargemaster typically serves as the starting point for negotiations with patients and health insurance providers of what amount of money will actually be paid to the hospital. It is described as "the central mechanism of the revenue cycle" of a hospital.

So the real cost (assuming the hospital is not operating under profit) for the $3000 service is actually somewhere below the $450. The $3000 value is a starting point for negotiation. As for your second question "To me, a basic public "price list" seems like a foundation to a business. Why isn't that so?" there are some efforts to bring transparency to this sector:

Updated March 2017: In the past decade, health care price transparency or disclosure has emerged as a hot topic in state legislatures, as a strategy for containing health costs. States, the federal government and the private sector have enacted legal requirements and initiated programs that aim to shed light on the costs of health care services.

According to wikipedia some states (California) have legislation for this:

In California, a regulation known as the "Payers' Bill of Rights" (which is unique to the state) requires all hospitals to provide their chargemaster to the state, which then posts them online for the public.

You should also be aware that this (as in the actual healthcare system) is a contentious issue (often even outside the US). A possible analysis for the cost of the US healthcare system is:

Unlike most markets for consumer services in the United States, the health care market generally lacks transparent market-based pricing. Patients are typically not able to comparison shop for medical services based on price, as medical service providers do not typically disclose prices prior to service. Government mandated critical care and government insurance programs like Medicare also impact market pricing of U.S. health care. According to the New York Times in 2011, "the United States is far and away the world leader in medical spending, even though numerous studies have concluded that Americans do not get better care" and prices are the highest in the world.

You'll find plenty of other resources on the subject both from media, independent organizations, or academia (see also: resource1, resource2).

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    "Patients are typically not able to comparison shop for medical services based on price, as medical service providers do not typically disclose prices prior to service." Not only that but in fact they tend to be ill and therefore often in a very weak position for economic decisions. (I'd even argue a weak position for situations where you have time and actually ask for a 2nd opinion.) Nov 8, 2017 at 23:30
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    @cbeleites Well I believe there is a safety net for those uninsured or otherwise unable to pay (public hospitals, Emergency Department). But the situation seems, in fact, far from ideal. This is made even worse by the fact that the great majority of health spending is still done by the government. If one were to look to the numbers alone the US should have the best healthcare system in the world. Instead it has the most expensive. Something, somewhere went wrong.
    – armatita
    Nov 9, 2017 at 9:08
  • sorry, my comment was ambiguous/misleading. I was not primarily thinking of the financial position of the individuals but of the assumption that homo economicus is knowing what they do/takes informed decisions. When you are sick, your capability for decisions (and even more for rational decisions) is impaired. This is quite obvious for lots of emergencies but AFAIK also true for more-or-less planned surgery. I heard a talk by so. writing patient information and consent sheets. IIRC, she was discussing intellectual level in school year equivalents, and said at least 2 years need... Nov 10, 2017 at 13:11
  • ... to be subtracted for the influence of ill person vs. their normal capabilities. (Concluding, that hospital information needs to be written in a language that a 6th grader understands without difficulties!) So what I want to say is that doctor's price lists won't help much because there are big issues in addition to missing data: even if that data were available, people could use it as they can use say, supermarket price tags. Also, big medical costs are often both once-in-a-lifetime decisions (so you don't learn from experience nor for the future; you must hit the right choice) + urgent. Nov 10, 2017 at 13:20

I will try to answer this question just in case it is not moved to money. I am assuming that you are not talking about how much you have to pay after the insurance company pays part, but rather how much the total bill is.

Prices can vary by who is paying for a number of reasons. A lot of times paying cash is cheaper because a doctor or hospital does not want to deal with insurance. However, a product may be cheaper through insurance because the insurance company has negotiated a deal with the hospital.

You're a small business owner, so perhaps you have made such deals yourself. If a person agrees to purchase a large amount of a product from you, or offers to be a long time guaranteed customer, you may offer a lower cost as incentive to do that. Your profit margin might take hit, but you're selling so much more product that you end up with a better deal overall.

This site goes into detail about the difference between "master list" prices and negotiated prices.

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