My wife recently had a significant surgery. It was handled expeditiously, outsourced to a top-notch surgeon in Nashville. No issues, but Tricare capped the payment to the doctors at approximately $9k. It was billed at $38k, so there must be a pretty significant markup.
'Glad that this worked out ok but you are only seeing this from one side. It’s not that there is a significant mark up as such, it’s that insurance companies demand large discounts, which has created inflated charges. (Tricare is effectively acting as a government medical insurance company).
Not so long ago, if you were sick or injured, you went to a medical provider (doctor, hospital, etc.) where you were treated. There was some flexibility but mostly there was a charge for whatever you had done and you paid it.
Then someone figured that they could take the uncertainty out of your personal medical costs and make a profit, by providing a service – you paid them a regular amount and they paid for your medical treatment. Medical insurance was born and it created some upward pressure on medical costs because they were no longer as constrained by how much you could afford to pay. But this was minor compared with what happened next.
As employers started to contribute to medical insurance and more and more people were covered, the insurance companies, with an eye on their profits, created networks of approved medical providers and negotiated discounts for services with those providers. As the insurance companies got bigger, it reached the point where doctors and hospitals couldn’t survive if they weren’t part of the network, so the insurance companies negotiating power became greater and greater and they demanded bigger and bigger discounts. But the medical providers still had to make a living, so they started increasing their fees to compensate. This created an upward pressure on “published” prices across the medical community.
We are now at the stage where published charges are much greater than are actually being paid - as long your medical costs are being paid my an insurance company, that is. The problem is that some poor smuck who is uninsured or not covered by their particular insurance, ends up paying a very inflated price. Sometimes a doctor will try to help those who pay out of pocket and who don’t have much money by “cheating” on the billing but it is a big risk for them.
And this is only one of the problems. But of course, we don’t need healthcare reform.