Katz: Here's an ugly secret that not too many people know. Insurance companies pay a FRACTION of what "Joe off the street" pays for every medical procedure. They negotiate with the hospitals and clinics to get the best rate possible which is an enormous discount from the "list price". Medicare, as far as I know, sets their price largely based on what those negotiated rates are.

For a continuing problem I had, each ER visit would "cost" $2500 or more (typically 2-4 attack per year). My insurance company paid nowhere near that. When the same thing hit me in Montreal while on vacation, I saw the FULL 'retail' bill was $550. (I paid $50 and my insurance paid the rest)

I learned about these 'negotiated rates' while working at Boston's Beth Israel Hospital. Just to give you an idea of what was going on - in the mid 1990s, as everyone is complaining about rising insurance rates, most insurance companies were lowering what they paid the hospital for inpatient admissions. We HAD been getting $1600/day and the next year many companies came in at $1200/day (looked suspiciously like collusion).

Yes - they paid by the day NO MATTER WHAT PROCEDURES YOU HAD DONE OE HOW MANY!!!

So the insurance companies were hiking their rates while paying us less. Guess where the extra money went. (Hint: The people who own the insurance company)