Insurance: Bad at math? Or trying to avoid "gouging"?

[Cressida]

I read this post today

http://www.motherjones.com/kevin-drum/2014/12/gouging-gougeable-yet-another-triumph-american-health-care-system

and it reminded me of this old MMM post

http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

The part that jumped out was this (which is actually a quote from an NYT article that the post is commenting on): "But many private insurers continue to reimburse generously for echocardiograms billed at thousands of dollars, said Dr. Seth I. Stein, a New York physician who researches data on radiology. Hospitals pursue patients who are uninsured or underinsured for those payments, he added."

OK. So what does this mean exactly? Does it mean that if you have a catastrophic plan (which is supposed to be the Mustachian choice, as MMM explains), a hospital will charge you $5K for something that costs $80 and you have no choice but to pay it because you're an individual with no bargaining power? That doesn't seem like a wise course. I understand MMM's argument, but doesn't it go out the window if being "underinsured" makes you vulnerable to price gouging?

I'm sure there are many people who know more about this than I do, so I'd be happy to hear your opinions.

[Gin1984]

No, if you have a high deductible plan, you pay whatever the hospital negotiated with your insurance company.  When they talk about underinsured they mean (normally) those with plans that don't cover normal treatments.  For example, a treatment I used to get for my back pain was covered under my previous insurance, costing about $100 for the visit and injection.  Now that it is not covered the only doctor that will take me charges over $500 for the same injection.

[Cressida]

That makes more sense. It's still crappy, but somewhat less terrifying. thanks!

[BCBiker]

Yes, all hospitals have negotiation with insurers for specific rates for all procedures. If you are not insured you are put into the "self-pay" category, which is a euphemism for uninsured, you pay very high rates, often referred to as the chargemaster rate. The chargemaster has a long and ugly history of basically increasing the price of everything so that the negotiated rate for insurers seems like a much better deal and so insurers would pay more. If you want an hour plus read on the subject, here is a fantastic article published in Time Magazine (who ever thought this magazine would ever publish anything useful?) http://time.com/198/bitter-pill-why-medical-bills-are-killing-us/

Suffice it to say, if you have insurance, and I mean real post-Obamacare insurance, not the non-insurance that somehow made new when FoxNews made it seem like people were having there insurance policies canceled by Obamacare (see this thread for more details and more on Obamacare - http://forum.mrmoneymustache.com/off-topic/will-i-ever-be-able-to-get-health-insurance/msg479949/#msg479949 ), you pay the negotiated rate.  Not the self pay rate.