Hospital care may cost less with cash than with a copay

Insurance is supposed to help make health care bills more bearable, but Johns Hopkins Carey Business School Accounting Professor Ge Bai, who is also a professor of health policy and management at the Bloomberg School of Public Health, has discovered that’s not always true. According to her study published April 11 in Health Affairs and a corresponding op-ed in the Washington Post, when it comes to procedures like colonoscopies, exams, lab work, and what the study calls “routine surgeries,” cash is often cheaper.

“In almost half of such occasions, hospitals, especially large ones with market power, set their cash prices lower than their median negotiated prices for insurers. The findings corroborate a previous study that discovered about one-sixth of hospitals set their cash prices lower than any of their negotiated prices,” Bai and co-author Cynthia Fisher say in the op-ed.

The previous study, published in December 2021 in the open-access American Medical Association Journal JAMA Network Open, explained that “[c]ash prices can affect the cost exposure of 26 million uninsured individuals and concern nearly one-third of US workers enrolled in high-deductible health plans, who are often responsible to pay for medical bills without a third-party contribution and thus are interested in having access to low cash prices.” At the time, hospitals were in the process of reporting their cash prices and the payer-specific negotiated prices for 70 specific, high-volume common services specified by the Center for Medicare and Medicaid Services. They were newly required to report these data points under the hospital price transparency rule the federal center established as of January 1, 2021. The rule was intended “to encourage price competition and improve access to and affordability for health care,” the study says.

The newly-published study shows that individuals with high-deductible health plans may benefit from paying with cash rather than using their insurance for the procedures the study evaluated. For example, the median negotiated price for a colonoscopy is $5,000 or more, but the median cash price is about $1,600. Individuals who have to meet a deductible higher than $5,000 would have to pay that full amount, more than three times what they might pay if they did not use their insurance.

Though these prices are median, Bai’s study shows that there is wide variation across the board.

In addition to those with high-deductible plans, cash options can also impact uninsured individuals. As of December 2021, there were 26 million people, or 12.5 percent of the American population, who did not have health insurance and would therefore be required to pay cash for their care.

Today’s study is the first of two related to health care costs Bai will publish this week. The second, which will be published in the open-access American Medical Association Journal JAMA Network Open, presents Bai’s findings about the trend in full-coverage large-, small-, and individual insurance premiums.

Read the op-ed from the Washington Post

Read the study in Health Affairs