Can you get a cash discount for health care?

Many hospitals set their cash prices below those they negotiate with health insurance companies.

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a certified personal finance counselor and former senior reporter at Policygenius, where he covered insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Hospitals may be giving patients who pay cash a discount over those who go through insurance, according to an analysis of prices at U.S. hospitals by researchers from Michigan State University and Johns Hopkins. The research, published in JAMA, a journal from the American Medical Association, takes advantage of a new rule requiring hospitals to disclose cash and insurance-negotiated prices for dozens of services. Researchers found that for many services, the cash price was lower than the price hospitals negotiated with health insurance companies.

For example, for routine obstetric care for cesarean delivery, 68.5% of hospitals set their cash price below the average negotiated price with insurance companies.

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Can you really shop for health care?

Now that prices are public information, will people shop around for the best price? It’s not clear that people will, says John Jiang, a professor at Michigan State University’s Broad College of Business and a co-author of the study. After all, most people have health insurance, which covers some or all of the cost of medical treatment.

Even if the cash price is lower for a given procedure, it may not be lower than the out-of-pocket price you pay after insurance. But those with high-deductible health plans, which only cover health care costs after you cover a certain amount yourself — as much as $7,050 a year for an individual — may want to price shop at different hospitals or try to negotiate prices down, Jiang says. Nearly half of American workers were covered by high-deductible health plans in 2018.

Jiang says it’s not clear why hospitals charge less to people who pay cash than they do to insurance companies for some services. Insurance companies have more power than individual patients to negotiate prices.

“Individuals are in a weaker position,” Jiang says. “You have to pay whatever we ask you to pay.”

One reason could be that people who pay cash, who don’t have insurance, have the lowest ability to pay — it’s possible hospitals would raise prices if everyone took advantage of lower cash prices.

The Hospital Price Transparency rule

Hospitals have been required to post price information online since Jan. 1, 2021. The idea behind the rule is to allow people to compare prices before getting medical care. The Trump Administration first announced the rule in 2019, and Seema Verma, then the administrator of the Centers for Medicare and Medicaid Services, said transparency and competition would force hospitals to bring prices down.

“The goal is, through transparency — either stakeholders exert pressure or the patient shops around — we make the prices converge to the lower end rather than the upper end,” Jiang says.

The Biden Administration has put the policy into effect, but not every hospital is complying so far. The study found that hospitals are more likely to reveal prices for cheaper procedures.

“The more expensive services are less likely to be reported,” Jiang says.

Why the rule might not work

Caitlin Donovan, a spokeswoman for the Patient Advocate Foundation, says the new rules will likely be more beneficial for researchers and journalists to see systemic trends than actual patients. 

“There will be very few patients, particularly insured patients, who will go through the trouble of scanning pricing disclosures to compare the cash versus negotiated price, then compare different hospitals,” Donovan says.

And price is only one factor in where people go for medical care, Jiang says — they might prioritize quality over paying less.

Because hospital prices were secret before, it’s not clear what impact the new rule has had so far — hospitals and insurance companies renegotiate every year, Jiang says. Whether it actually lowers health care costs is something Jiang and other researchers will have to keep an eye on as more hospitals reveal their prices.

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