The Center for Medicare and Medicaid Services (CMS) attempts to pay providers for roughly average total costs of a service. CMS believes that COVID tests will cost anywhere from $35 to $100 depending on technology, place of service and type of diagnostic test. However the CARES Act is encouraging price gouging for out of network services.
UCSF’s hospital charged the equivalent of a Volkswagen Jetta for a COVID-19 test that Medicare would pay, at most, $100 for.
And Cigna (or the employer) agreed to pay *$9,300*.
A tale of price-gouging and awful negotiating. Perfectly emblematic of the U.S. health care system. https://t.co/HZnnpF6lkF
— Bob Herman (@bobjherman) June 1, 2020
Loren Adler of the Brookings Institute identified how the CARES Act encourages this type of price gouging:
How a provision tucked into the CARES Act might spur price-gouging by labs & hospitals & how to fix it.
Plus a deep dive on the different COVID-19 testing methods & how these might evolve over time.https://t.co/nlB5h84QcJ
— Loren Adler (@LorenAdler) April 10, 2020
Under current law, as long as a hospital has a list price publicly posted somewhere, the hospital will be getting full list price if the test is out of network. There is no surprise billing as the cost sharing is waived by current law. However the exorbirant list price will feed back into higher premiums and lower wages.
The policy solution is to say that any COVID testing (or any other services) that are not in network will be paid at a percentage of Medicare. 200% Medicare might be reasonable, 500% Medicare might be reasonable. 9300% of Medicare is fundamentally unreasonable.