People keep talking about this sort of "discount" as though it's some
rule growing out of the relationship between a large purchaser and a
large supplier. There isn't and the relative sizes of the two is only
relevant in that the insurance company can effectively blackmail the
provider into accepting less. In normal businesses the large
transaction is made at a discount because there's an economic
advantage to doing so. In health care there's no large transactions.
There's no (or little) economies of scale.

For ex., Georgia Pacific will sell plywood to HD at a much lower cost
than to you (if it would even deign to sell to you). The tractor
trailer rolls into the local HD where a fork lift awaits to unload
(say) ten complete pallets. 15 minutes later it's out of there. If you
were the buyer you'd only take a sheet or two, you'd want help
manually unloading it, you don't have any loading dock... you'd cost
at least the same for the sale of one sheet as the HD sale would for
ten pallets and that's just the delivery cost.

In a hospital the surgeon only operates on one patient at a time; the
OR has to be prepared and sterilized for each one, the nurse can only
install a line individually; the radiologist has to look at each X-ray
separately; the pathologist each specimen... None of these allow any
economy of scale.

This is an argument for the uninsured being asked to provide financial
security and in some cases I believe that's what happens. However what
happens with the reasonably well-off (or wealthy) uninsured? The
excuse for higher rates evaporates.

The real reason for the huge disparity is that there's an enormous
imbalance of power between the insurance company and the provider.
Individual MD's and hospitals are too weak to argue with the insurance
company for an increase. There's only one real way to deal with the
problem and that's with a concerted action like a union might. If
(say) Blue Cross refuses to pay an acceptable rate for a particular
procedure the MD's will all withdraw their labor and refuse any
BC-insured patient. Be careful though -- and this is why it doesn't
happen -- this will lead very quickly down the road to socialized
medicine. The MD's etc might just kill the goose that laid the golden
egg.

It's never going to be equalized. Insurance companies "buy" a lot more
healthcare than any individual so there's a natural bulk discount factor.
There's also the fact that insurance companies have deep pockets so the
hospital likely will actually *get* paid. On the other hand, providing
hospital service to an uninsured individual is like a very high risk
unsecured loan. This is especially true given the dismal savings rate of
Americans and that "uninsured" likely correlates very highly with
"unemployed." So some of that extra can be thought of as interest for this
high risk unsecured "loan." It makes sense to price higher since it's much
risker to sell medical service to an uninsured individual and to provide
more incentive to be insured.

Whether or not it justifies 4.64-1 ratio is another matter, but it's not a
given that they should be equal.

It may not have been "a couple of bucks."  If your insurance company
raises your rates by 50%, for example (which is not uncommon), a small
business may just not be able to afford it.   Ideally, you'd have time
to shop around, but it's not an ideal world--you have to meet your
expenses and pay your salaries and keep your customers happy if you
expect to stay in business.  In my state, I couldn't find ANY
affordable insurance at all so had to  just risk it for a while.  But
the main point was that the uninsured should not have to to pay higher
hospital rates.  There's charity care if you're practically destitute,
but a lot of middle-class people who lost their jobs recently have no
choice but to go uninsured.

No it is certainly *not* understandable.  One does not shoot
themselves over a couple of bucks (difference between policies).  If
it were that important they should have been shopping *long* before.

But understandable.  The price of health insurance has become so
outrageous that some businesses just can't afford it.

Double, since they likely also won't have any coverage for existing
conditions when (if) they get it back.

That was goddam stupid.

http://www.usatoday.com/money/industries/health/2004-02-24-hospital-bills_x.htm
Hospitals sock uninsured with much bigger bills
By Julie Appleby, USA TODAY
Ed and Dianna Jellison let their business' health insurance lapse
while they shopped for a better price. But then Ed fell ill, spending
17 days in a Florida hospital as a viral infection ravaged his body.

Now the couple are fighting a $116,000 hospital bill, one they say
could be as low as $25,000 if an insurance company were paying it.

The tough truth for patients like the Jellisons — who earn too much to
qualify for charity care — is that they are often charged the highest
prices for hospital services.

Few know that. And they're stunned when they learn.

"If they accept $25,000 from an insurance company on a routine basis,
and what they're charging us for the same thing is $116,000, that's
not fair, and it's not right," says Dianne, who closed the couple's
roofing business and took a part-time job in a warehouse because Ed's
illness left him disabled.

http://www.usatoday.com/money/industries/health/2004-04-13-rising-hospital-costs
_x.htm

"Rapidly rising hospital charges have placed hospitals in the
spotlight. Critics say hospitals are unfairly using their growing
clout in many markets and charging far more than it costs to provide
services. Spending on hospital care is the fastest-growing segment of
the nation's health care tab."

"Because most hospitals rely on government health payments for about
50% of their revenue, and private insurers who negotiate discounts for
much of the rest, raising charges is one way hospitals can try to
bring in additional money from individuals and insurers not covered by
the discounts"

http://moneycentral.msn.com/content/Insurance/Insureyourhealth/P74840.asp
Profit-hungry hospitals are overcharging consumers an estimated $10
billion a year. Some deliberately work to keep bills indecipherable.
Here's how to fight back.

By Bankrate.com

American hospitals are fleecing patients out of billions of dollars
annually, and experts say that while some of the overcharges are
honest errors, many are deliberate.