Who'll stop the hospital billing machine when you're "covered"?

My family gets its health insurance through my wife's employer, a multi-hospital system. Until this year, we have had in-network coverage only. Last fall, somewhat to my surprise, the hospital-insurer agreed to cover in full an operation out-of-network on grounds that no one in-network was qualified to do it. This was a wake-up call for me, and I insisted that this year we pay more for a plan that provides limited out-of-network coverage.While out-of-network coverage has substantial deductibles and limited co-pays, out-of-pocket expenses are capped at about $11,000 per individual. That strikes me as worthwhile catastrophic insurance if one of us gets seriously ill and needs to tap a top specialist outside the network. But our experience with the covered out-of-network operation we already had raises a question in mind about that out-of-pocket maximum -- for myself and for insured patients in general, particularly those buying on the new healthcare exchanges.

Here's the rub: while our insurer informed us that the operation would be covered in full, they were slow to pay some bills and paid some only in part. We then became targets of "balance billing" -- practices affiliated with the hospital where the operation occurred as well as the hospital itself dunning us for unpaid balances, often under threat of siccing a collections agency on us.

Picking at the healthcare Gordian knot

It's no secret that there's a grotesque hierarchy in U.S. healthcare pricing. Medicaid pays the lowest prices, followed by Medicare, then by private insurers.. and then, at the bottom of the totem pole, by uninsured individuals, who, as Steven Brill documented in grotesque detail, may pay three or ten or fifteen times what Medicare pays for a given procedure.

This system is not only grossly unfair, it's the chief reason Americans pay more than twice the OECD average per capita for healthcare than people in other developed countries. Notwithstanding a wide variety of payment systems, countries with universal health insurance -- that is, every other wealthy country in the world -- almost universally empower government to impose uniform pricing. In Japan, for example, where most people get health insurance through private, nonprofit plans provided by their employers (generally with a 30% patient co-pay), the government publishes a uniform price schedule. T.R. Reid, in The Healing of America, describes it:

[the medical price schedule is] published in a thick book--about the size of the Tokyo telephone directory--that anybody can buy. This hefty volume, the Shinryo Tensu Hyakumihyo ("Quick Reference Guide to Medical Treatment Points"), sets forth exactly what a doctor, therapist or hospital will be paid for any treatment or medication. There are tens of thousands of different treatments in the book: "throat swab,", "application of plaster cast, ankle," "sutures, outer arm," "X-ray, simple, neck region, rear," etc., etc. For almost all of these, the price is extremely low...(p. 91).