Health care prices charged by hospitals and physicians for care provided to uninsured and out-of-network patients are more than 2.5 times what insurance companies pay and more than 3 times their actual costs. Unlike insurance companies, individuals are not able to negotiate a fair price. Physicians do not obtain “informed financial consent” for their fees from self-pay patients before providing treatment. An unconscious patient or someone in need of urgent care simply is not in a situation where a meaningful discussion about the cost of care can be had. Patients do not have any information about the physicians’ actual costs, and they do not have any ability to compare prices between providers. The law of implied contracts provides a fair way to price health care to people without insurance and prevent overbilling.
The law of implied contracts dictates that a patient should pay whatever price a prudent patient and physician would have agreed to if they had the appropriate time and relevant information to negotiate. The best way to prevent overbilling is to use a proxy for informed bargaining, namely the rates charged between providers and private insurers. Insurers are informed purchasers of health care and can negotiate fair market rates. Another method of pricing could be to use Medicare reimbursement rates to approximate the lower range of prices that a reasonably informed negotiation would produce.
The lack of discussion and transparency in the pricing of health care, although financially advantageous to the physicians, prevents individuals from being able to meaningfully negoatiate prices. Insurers and providers consider their prices confidential and do not disclose them. Individuals simply are unable to give informed financial consent to the prices charged for their care. Yet the higher prices paid do not increase the quality of care and do not reduce the risk of malpractice injuries. The doctrine of implied contracts should be used to determine the appropriate price for care and to prevent the overcharging of self-pay patients. The prices charged for health care should be what is custom in the industry, not what is the custom for the individual physician. The prices paid for health care should not be kept secret, and a fair price should be paid by all.