For the uninsured, the cost of a hospitalization, or even a diagnostic procedure, can be a crippling financial event. Ideally, such individuals can and should negotiate a discounted rate with a hospital at the beginning of an admission which is similar to the health insurance company rate. Health insurance companies reimburse hospitals at a prenegotiated rate that is a relatively small compared to what self-pay patients are billed (see: Comparing the Details of Hospital Charges in the State of Oregon). However, it's also possible for the uninsured to negotiate a low rate from hospitals for services in exchange for a promise of cash payment (see: Many hospitals, doctors offer cash discount for medical bills). Below is an excerpt from an article about this topic:
Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there's a catch: Typically you can get the lowest price only if you don't use your health insurance. That disparity in pricing is coming under fire from people...who say it's unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment. The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400. When [a newspaper reporter] called for a cash price, the hospital said it was $250....In addition to Los Alamitos, [the newspaper] contacted seven other hospitals across Southern California, and nearly all had similar disparities between what a patient would pay through an insurer and the cash price offered for a common CT, or computed tomography, scan, which provides a more detailed image than an X-ray. Health insurance still offers substantial value for consumers by providing preventive care at no cost and offering protection from major medical bills that could bankrupt most families. But cash prices....have a real appeal to millions of consumers who are on the hook for a growing share of their medical costs as employers and insurers cut back on coverage and push more high-deductible plans.....The decision on whether to pay cash or apply the fee toward the deductible [for patients with insurance] will depend on a variety of factors, including the amount of the deductible and whether the person expects to incur more medical bills that year.....[H]ospitals have been trying to boost revenue by encouraging more patients to pay upfront so they can avoid a lengthy and uncertain collections process. The California Hospital Assn. says that discounted cash prices are intended for the uninsured, not those who have coverage.
Here's a summary of this article. Hospitals offer steep discounts to the uninsured who pay their bill in cash. Hospitals maintain that this process has evolved so that they can collect at least something from the uninsured and thus avoid expensive collection fees. They further maintain that this approach is not relevant for the insured. The problem with this scenario is that the nature of the coverage for the insured is changing. Many company employees have high deductible insurance plans whereby a certain yearly amount is first covered by the employee (see: High Deductible Health Insurance Plans Becoming the Norm in Large Companies). It would thus be preferable in some cases for people with such plans not to inform the hospital about their insurance and negotiate the very low cash price.
High deductible health insurance is having its intended consequence, which is providing an incentive for the insured to scrutinize the cost of healthcare. The very cozy relationship that hospitals have with health insurance companies is thus coming under fire. Unlike most other purchases, the list price for healthcare has very little relationship to its cost and hospital bills are so complex and use such arcane language that they are frequently indecipherable (see: Why the Prices Charged by Hospital for Inpatient Care Are Irrelevant; Comparing the Details of Hospital Charges in the State of Oregon). Such a system can't go on much longer. It makes no sense when an increasingly larger percentage of the insured are paying more attention to the cost of care.