Why are medical bills so high? Because of our tax system - and Obamacare did NOTHING to fix that.
It is quite simple, medical providers gets to deduct from their taxes the difference between what they charge and what the patient actually pays. NO OTHER BUSINESS GETS THIS DEDUCTION!
Let me give an example. Let's say you sell hot dogs. Each hot dog sells for $6 (they're really good hot dogs!) Someone comes along and says, "I want a discount. I'll pay you $4 a hot dog and buy 20 of them." You think, "Cool, I sell only 20 hot dogs a day. In one sale I can make my day and either go home early or continue to sell hot dogs and earn more money. Since each hot dog in a bun only costs me $1, I'm still making a profit." So you sell your 20 hot dogs at the discounted price of $4 each then you pay taxes on your profit (which is $4 minus $1 or $3 each hot dog.) You, as a hot dog sales person, can not DEDUCT $2 per hot dog because you gave the customer a discount ($6 minus $2 = $4 customer's price)! You can't tell the tax-man that you have a "loss" of $2 a hot dog just because you reduced your price. You can't lower the taxes you pay because you deducted the $2 discount from your profits.
Makes sense, right?
Well, your doctor and your hospital CAN take that tax deduction.
Your doctor charges you $100 for a 10-minute office visit. In reality, considering his/her time, the cost of staff, equipment, insurance, office space and repaying all those student loans (which, if he or she works it right will be erased through government programs), the office visit should really cost about $35. Considering that a doctor will see at least 5 patients an hour (often more), $35/hr is equivalent to about half a million a year in gross revenues (but then again, they DO have a lot of costs they have to pay out of that.)
So the office submits the $100 bill to your insurance. The insurance company reviews it and says, "No, doctor we agreed you'd only charge $35 for that office visit." Wink, wink (because the insurance companies are in on this deal, too.) "You have to write off $65 from your bill. We'll pay 80% of that and our customer will pay the rest." So the insurance company send the doctor a check for $28 and you get a bill for $7 which you get around to paying two or three months later.
Poor doctor, he is out $65! It isn't fair! (Or is it?)
The doctor goes to the tax accountant who gathers up all those "write offs" and deducts that $65 - plus all the other write offs that the insurance company told him/her to take - from the millions of dollars of gross revenue the doctor made that year (plus deducts the cost of staff, depreciation on equipment, operating costs and supplies, and a bunch of other stuff.) You have to admit, that is a pretty little write off. Actually, it is one of the biggest write-offs a doctor gets.
The hospitals do exactly the same thing. That's one of the reasons why one aspirin tablet costs $6. Oh and yes, pharmacies do it. And drug manufacturers do it. Lobbying is a beautiful thing.
What if you pay cash? Well, the doctor first says you have to pay your bill, in cash, before you leave the office. The doctor's office might even make you pay your bill before you see the doctor. Second, the doctor will give you approximately a 10% discount. And third, they'll make you feel like they are doing you a favor for seeing you even though you don't have insurance.
Why? Because no insurance means no negotiated "write off". They can't deduct the $10 discount they gave you from their taxes. Instead, they get to use $90 to go out to a restaurant you and I can't afford.
So the question that pops into everyone's mind is, "If they can charge $100 for a $35 appointment, what is stopping them from charging $200?!?!?!" Answer: Very little. They DO, however, have to justify the over-head expenses associated with the $100 fee but the justification is very loose. It does account for why every doctor's office happily pays a contractor to maintain the fish tank in their waiting room and why their offices are so beautifully decorated - more expenses associated with their "over head", the more they can justify charging more for their services.
It is a vicious circle. And very few doctors or hospitals will admit it because doing so could ruin a good thing.