Ways to save on health care costs

Jeanne Pinder is the founder and CEO of ClearHealthCosts. Previously she worked for The New York Times for 23 years as an editor, reporter and human resources executive. This article originally appeared on ClearHealthCosts.com.

As part of our mission to help you save money by beating back your health care costs, we're giving not just pricing data, but also practical consumer advice.

You can use the search tool at the top of the front page of the ClearHealthCosts website to seek prices. We have the most information in New York, New Jersey, New Orleans, Philadelphia, Los Angeles, San Francisco, Miami, Tampa-St. Petersburg and Dallas-Fort Worth, Houston, Austin and San Antonio. Here's an overview explaining what's in the database.

The best way to find information about your specific topic is to glance at this page, or to go to the ClearHealthCosts blog page and search on a topic: try "MRI," or "colonoscopy," or "CT scan" or "birth control pills." Or take a look at this search on the blog for the phrase "she saved."

These posts are based on things we've learned in our reporting. As always, our posts should in no way be construed as offering medical advice. We are strictly about pricing. Our mission is to bring transparency to the health care marketplace by talking about pricing. Your decisions about treatment, providers and anything else belong strictly to you.

Part 1: Ask the price in advance

Many people are hugely surprised to know that health-care prices can vary dramatically, by as much as a factor of 10 or more. Just look at our pricing lists, gathered by telephone, for a sample.

If you're insured, sometimes it's not an issue, if you know that you're visiting an in-network provider. But sometimes even an in-network procedure can have a co-pay: for example, one year my insurance plan started charging co-insurance of 15 percent of any lab test deemed to be not routine. They didn't explain what's routine and what's not, which makes an already-confusing process even more confusing. You might also have co-insurance on any procedure, meaning that after you meet your deductible, you're responsible for 10 or 20 percent of the price.

If you're visiting an out-of-network provider, or if you're uninsured or on a high-deductible plan, asking the price in advance becomes much more important.

Most providers have several different charges for one procedure or item. There's the Chargemaster or sticker price that's listed officially – sort of like the manufacturer's suggested retail price – which is typically the highest price. It's also the one that is most often on the bill. And it's the one that is often charged to people without insurance. That price is seldom paid in full.

Then there's the reimbursement price or contract price, negotiated by the insurance companies — sometimes called a "member rate" or something similar. Each company has a separate rate, negotiated with the provider on the basis of how many customers (oops, patients) the insurer brings, how many customers (oops, patients) the provider has, where the provider is, and so on. A bigger insurance company can negotiate lower reimbursement rates; a bigger group of doctors can push for higher rates than a solo practitioner, by pointing to market forces. So the insurance companies' rate of reimbursement may be 80 percent of the billed price, or 60 percent, or 40 percent. It's rarely 100 percent. In fact, in one lab test bill in my household, the billed rate for a test was $401, but the insurance company wanted to reimburse at $24.80. I got the negotiated rate, though I hadn't met my deductible. I paid, and it was applied to my deductible.

Many providers also have a cash or self-pay rate; if you ask before having a procedure or a visit what it will cost, you will often get a rate that's lower than the sticker price, and lower perhaps even than the insurance company's negotiated rate.

If you don't ask in advance, you may well be charged the sticker price.

The procedure also has a Medicare price, which is the rate the government pays for care for people 65 and over, which is typically a fraction of the sticker price. The Medicare rate is set by the U.S. government, using a complicated system of procedure codes and a formula paying more in areas like New York and San Francisco, and less in places like Iowa and Louisiana. Lower still, typically, is the Medicaid rate, paid by the joint federal-state program for the poor.

While you might not feel comfortable in asking this question, it can be surprisingly revealing. It's also revealing if your provider is unable to tell you how much something will cost.

Many of the providers we called in compiling these lists also said they have a rate for hardship cases, for the uninsured or unemployed. "We're not heartless," one said. Quite often the hardship rate was half the self-pay rate, or closer to the Medicare or Medicaid rate. Others said "we negotiate that" or "we require proof of hardship."

Always ask first.

Here are 10 questions to ask to find out what stuff costs in advance.

Here are some examples from the blog about people who saved money.

Part 2: Even in an emergency, ask the price

If you're in a medical emergency situation, it's hard to have the presence of mind to ask the price in advance, but we suggest that you try anyhow if it is at all feasible.

If it's a discretionary procedure, maybe it's not so hard: what does a colonoscopy cost? What does an MRI cost? But an emergency is more complicated — and yet you should still ask. How much should anesthesia for surgery cost? There could be a lot of answers.

A friend who had an emergency appendectomy not long ago at a hospital that participates in her plan, with a surgeon who participates in her plan, was surprised after the fact to receive a bill from an anesthesiologist who did not participate in her plan. She was billed the sticker price, and not the negotiated or network rate.

The bill was for several thousand dollars, while a participating anesthesiologist would have resulted in a much more modest patient outlay.

I've heard several stories about nonparticipating anesthesiologists, and had one such experience myself in the past. I've trained myself to ask as often as possible, but it's not clear to me that I would have had the presence of mind if I was unconscious or in need of emergency treatment.

Legislative and regulatory efforts by states to address these anomalies are not unheard-of, but the problem persists.

My friend addressed the hospital about this issue, and they told her to talk to the anesthesiologist in question.

The anesthesiologist insisted on getting paid the full price. The insurance company was unsympathetic.

Eventually, after the bill was submitted several times to the insurance company, the company paid.

The rights and responsibilities of the provider, the customer, patient — or, as we like to call them, people — and the establishment  where the event took place are murky and often decided on a case-by-case basis. Regulations vary by state.

The practice by hospitals and other establishments of using nonparticipating emergency room doctors, anesthesiologists, radiologists and other pathologists is growing, and it is not always easy to find out who's participating and who isn't. It lends to the feeling of mystery in the system. Your part is to keep asking.

If you don't or can't ask before, and find yourself billed for a hefty sum after, it's time to negotiate over your medical bills.

Some people think you shouldn't ask the price in advance.

My friend S., who has spent a great deal of time in the health care industry, says she's cautious about the idea that people should ask in advance.

The price the provider quotes is a sticker price, she says, and it may have no relation to what the payment is.

For example, for a procedure priced at $100, Insurance Company A may pay $50 to Provider X. By the logic of the industry, if you are insured by Company A, even if you haven't met your deductible, the price to you is $50.

S. thinks that if people ask the price and are quoted $100, they may not choose to have the procedure — because they don't know the price to them is $50.

I see her point, but I still think you should ask. And in our experience, asking for the cash price can often get not the sticker price but an actual cash price.

Part 3: Do you really want to make medical decisions based solely on price?

If you're buying a tomato or a car, your purchasing decisions are based not just on price but also on quality. Rolls Royce or Honda? Bentley or Kia? The same is presumably true with medical treatment.

Obviously, it's complicated, though, by the fact that you might not be feeling well when you make a decision about medical treatment. You might well be anxious. You might well feel that asking the price of something changes the way your provider views you, and not for the better. You're hoping for the best outcome, the most reliable test, the least pain and so on.

We don't want to make suggestions about your medical decisions. That's for you alone.

We personally do not think medical decisions should be based solely on price. But we do think that the current system – when the customer has no idea of what a service or a procedure or an item will cost – should be more transparent.

There's also the counterintuitive notion that price itself has power, espoused by, among others, Dan Ariely, the writer of  "Predictably Irrational: The Hidden Forces That Shape Our Decisions." His idea is that when people pay more for something they think it's better, explaining why a 50-cent aspirin works better  than a 1-cent aspirin. He writes: "The Bayer aspirin and the Rolex watch seem valuable because of how much they cost, not because they're better in practical terms than a generic aspirin or a Timex." It's not clear whether a $50,000 aspirin would work better, but he argues that price works in complicated ways on our decision-making processes.

That aside, it seems clear that the system we have now doesn't encourage savings or thoughtfulness. From a patient's perspective, you are essentially obliged to go seek treatment with little knowledge of costs (or charges, or prices). When you have received whatever care you've received, it's often only months later that you receive an explanation of benefits that explains exactly nothing. And you pay (if you're uninsured or on a high-deductible plan) or argue, or — in some cases, you don't pay.

Our service here consists of finding and revealing as much pricing information as possible, so you can factor price in to your decision-making should you see fit.

Part 4: Aren't medical prices regulated?

Hospital rates and other medical costs are regulated by the government, aren't they? So there's not really a great deal of variance.

Not true. Prices for common procedures can vary by thousands of dollars.

The rates hospitals charge are based on lots of things: their estimate of their costs, their status (teaching hospital, for-profit), geography (Iowa is cheaper than New York).

Rates vary wildly. And reimbursement rates vary wildly too: While Medicare and Medicaid rates are indeed government-issue, private rates are quite different.

"Private insurers pay hospitals predominantly on the basis of per-diems or fee-for-service schedules," the Princeton economist Uwe Reinhardt writes. "On average these payments exceed the hospital's cost of providing the underlying services. The profits built into these payments cover the losses hospitals book on serving Medicare and Medicaid patients, who are billed high prices but often do not pay their bills in full. Private insurers also feed the net profits that most for-profit and not-for-profit hospitals book.

"The per-diems or myriad fees that private insurers pay hospitals are negotiated annually between each hospital and each insurance carrier. A given hospital may thus negotiate one by one with several dozen or even several hundred insurers."

Many economists think that one of the problems with our health-care system is that people who are insured don't know what things cost, and are insulated from the costs, so they don't work to press prices down.

Other economists will point out that hospitals, doctors, pharmaceutical manufacturers and so on don't have any incentive to reduce the prices they charge if the amount of money they receive for a procedure, drug or suchlike depends on what the insurance company says it should receive, rather than what it costs — and that in an opaque marketplace, the consumer (patient) has no way of knowing what that procedure or drug might actually cost, because the information is hidden.

In any case, as a patient (consumer) you should know: there's a great deal of variance in prices, even block to block. Pay attention to the charges.

Part 5: Rising deductibles and other outlays

A huge trend changing the market is the rise of high-deductible insurance plans often coupled with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA). The high-deductible plans usually carry lower premiums, but can mean that the insured person is responsible for the first $5,000, $10,000 or whatever sum of money described as the deductible.

Those pre-funded spending accounts are the chief difference from the now-common PPO plan, in which the patient-consumer using an in-network provider pays a fixed co-pay — say $20 — and the remainder of the cost is covered by the insurer.

It's the fastest-growing part of the insurance marketplace: Millions of people are enrolled in high-deductible plans with health savings accounts.

The idea of such plans is to make the patient-consumer more responsible for health costs. This, supporters say, will drive down premiums and eliminate unneeded care, making people directly responsible for, and aware of, their health-care spending. Supporters of such plans use the phrase "consumer-driven health care," which, of course, it would be hard to oppose, right?

There is ample evidence that high-deductible plans cause people to avoid necessary care, and that because health care prices are hard to find, the consumer won't have  the tools to make good decisions.

It's also true that people tend not to reject doctors' recommendations, so if doctors recommend something then patients are likely to say yes, whether it's actually needed or not. And if a doctor recommends a provider for, say, an MRI, the patient might not be eager to shop around for another provider.

In many cases, the annual outlay will be less under such a plan: the way to calculate it is to add up the lower premium and your annual expenses from a preceding year, guess what you think the next year's expenses will be, analyze what the plan covers, who's in the network, hypothesize about the unexpected, then hold your hands over a pile of papers and guess. Here's a New York Times piece by the terrific Walecia Konrad about such plans.

Read more about saving money on health care at ClearHealthCosts.com.