Former NIH Director Francis Collins Has Prostate Cancer. Use His Story To Reduce Your Risk Of Dying Of This Disease.Growing evidence demonstrates a counterintuitive phenomenon in healthcare: the cash price is often cheaper than insurance prices for the same service or product. Cash prices are unilaterally determined by a provider, while insurance prices are bilaterally negotiated between a provider and an insurance company.
How about non-shoppable services, for which patients cannot compare prices or plan ahead? A typical example is trauma activation. Hospitals designated as trauma centers bill trauma activation fees to patients coming to emergency rooms. Ourpublished in JAMA Surgery found that nationwide, cash prices are lower than insurance prices on average, as well as at the median and various percentiles, for almost all levels of trauma activation fees.
Additionally, financial interests are not well aligned between insurance companies and plan sponsors. Lower healthcare spending typically means less revenue for insurance companies. It’s no surprise that they often negotiateFrom providers’ perspective, serving cash-pay patients costs less than dealing with insurance. Administrative burdens and the time and energy spent on insurance compliance would disappear.
Importantly, patients who spend their own money are sensitive to prices and, by having full agency, actively shape the provider’s reputation, just like consumers typically do in cash-pay markets. Providers understand this and set cash prices accordingly. Cash prices are more likely to beInsurance companies should focus on what they do best—covering services that impose meaningful financial risks that can justify administrative complexities.