Hidden Charges: Fixing Health Care Means Ending Secret Prices.

• Author: Longman, Phillip

A cynic, Oscar Wilde famously observed, is "a man who knows the price of everything and the value of nothing." Yet when it comes to health care in the United States, the quip doesn't get it quite right. In that realm it's not too cynical to say that no one even knows what the prices are, much less what the value of any particular doctor or hospital really is.

Take hip replacements. What happens if you call your local hospital and ask how much they charge to perform one? Even if you get past the phone tree, chances are that no one you talk to will even understand your question. Which price do you mean, and who's paying? Do you mean for the surgeon or the anesthesiologist, for your meds or for your meals? There are different prices for each, and each price is different for different people.

For example, there's the price the hospital charges people without insurance, which is the highest of all. Then there's another, government-set price that hospitals are paid for treating people on Medicare, and still another for people on Medicaid. And how much will the hospital bill for treating people with employer-sponsored health care plans or other private insurance (the majority of working-age, middle-class Americans)? Well, there's one price for me and one price for you and another for Uncle Joe and another for that guy on Facebook you went to high school with. In other words, it just depends, even if we are all getting the same operation by the same surgical team in the same hospital on the same day.

Here's how that works. Suppose you have a standard health insurance plan that covers 80 percent of your hospital expenses and leaves you responsible for the remaining 20 percent. The big question is, 20 percent of what? If your insurer has a big market share in your town and knows how to throw its weight around, it may have negotiated with the hospital for "in network" prices that are substantially discounted. This means that your out-of-pocket cost will be substantially lower than what people on some other health care plan with the same benefit structure have to pay for the same operation. Alternatively, if the hospital is a local monopoly (which is more and more common these days), even the biggest purchasers of health care--whether insurance companies or large employers--won't be able to negotiate much of a discount, or even any terms at all, and a lot of people will just have to pay whatever "surprise bills" the hospital sends their way.

There's...