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Does a CT Scan Cost $6,000.00 or $2,000?…Both!

Does a CT Scan Cost $6,000.00 or $2,000?…Both!

You are a rational economic thinker.  So you assume that the cost for a medical test, such as a CT Scan, is determined by its cost plus an amount for profit.  As a result, your rational economic mind would assume that the price of a CT Scan would be relatively uniform nationwide.  If a Ford Explorer costs almost the same in New Jersey as it does in California, shouldn’t the same rationale apply to a CT Scan?

So how do you explain this?  If you do not have insurance, a CT Scan costs $1,000.00.  If you do have insurance, a CT Scan costs $6,700.00, of which you owe $2,300.  You read that right: your cost would be cheaper if you did NOT have insurance.  This practice of varied pricing has long existed.  It also exposes a secret in the medical industry.  A recent Los Angeles Times Article exposes this practice: See http://www.latimes.com/business/la-fi-medical-prices-20120527,0,4627745.story.  As accountant Paul Keckley states in the article, “[i]t frustrates people because there’s no correlation between what things cost and what is charged.”   

So what is going on?  Basically, hospitals and insurance companies negotiate prices for tests such as CT Scans based on a host of factors, such as prestige of the hospital and size of the insurance plan.  As a result, prices vary wildly despite the actual cost of the test.  Moreover, the cash price for those without insurance, which is not negotiated, can be quite different… and may be lower!  The article cites another example:  the costs for a routine blood work-up were $782 (list price), $415 (with insurance), or $95 (cash).

This has led to at least one lawsuit in California against an insurance company claiming unfair business practices.

Have you notices similar pricing discrepancies?  Feel free to comment on this blog and tell us about it.