Arbitrary Pricing

Price discrimination usually causes businesses to charge poorer people less because they are more likely to walk away if the price is high, but in health, the insurance companies pay less because they have more bargaining clout (and information) and it is hard or impossible to just walk away when you are sick.  Washington Post:

In a report this past spring, the state found that some Massachusetts doctors charge six or seven times as much as their colleagues for the exact same procedures. Across the board, a three-fold variation in prices was pretty standard.
There’s a pretty simple explanation for all the price variation: hospitals negotiate specific rates for specific insurance companies. They gauge the size of the insurance company and how many patients it would be expected to bring in, and then set a price. Insurers and hospitals alike closely guard those pricing agreements as proprietary information, with neither party wanting to see their pricing agreement undercut by a competitor.
Massachusetts wants to do away with all of that. In a proposal released Wednesday, the Massachusetts Special Commission on Provider Price Reform recommends allowing a panel of state regulators to reject rates charged by hospitals and providers if they’re too high. The report, which you can read here, also proposes the creation of a claims database, which would allow the public to see how much their health care actually costs.
That would be a really big shift from where we are now, where price negotiations are usually a private matter between insurers and providers, and it’s nearly impossible to figure out how much a given procedure costs. A recent Government Accountability Organization report really hit home on this. The agency called up 17 hospitals at random to ask how much a knee replacement would cost. Not a single one of them could name a price for one of the country’s most common surgeries.