A recent article in an insurance industry periodical asks why hospitals charge auto insurers more than health insurers. The article then concludes hospitals use their market power against commercial insurers. Hospital charges are unfair. Hospitals regularly take advantage of people following automobile accidents. However, the insurance article asks the wrong question and reaches the wrong conclusion.
What is the correct question? The article should ask “why do patients with auto insurance claims pay more.” The real focus should be on the actual patients. After all, the patients ultimately bear the real cost of health care. And, patients seeking treatment following an automobile accident often pay more. The injured patient loses in two different ways. First, the patient probably paid health insurance premiums with the expectation of health coverage. Yet, their health insurance goes unused following a car accident or other personal injury. Second, the inflated medical charges not covered by your health insurance — These inflated charges were ultimately paid from the settlement money you needed to cover all your damages.
What is the correct conclusion? The article WRONGLY concludes the higher charges are the result of hospital market power. The article ends by quoting a professor at Johns Hopkins — “If market forces fail to generate a reasonable price for these patients, policymakers should step in to address this market failure.” I’m sure hospitals do use their market power to extract the highest reimbursement possible. However, we are NOT in this predicament solely because of true economic market power. At least not in Alabama. No, we are largely in this position because hospitals have already worked our actual policymakers to pass a law allowing them to place liens on medical care rather than simply bill health insurance. Policymakers have enacted special legislation giving hospitals the authority to interject themselves into liability cases for maximum payment. Let this special use of government legislative power sink in for a moment. Hospitals enjoy a lien privilege not held by others. It’s not called market forces or market failure when you use the political system to gain an unfair advantage. I call it an abuse of government that further harms people.