@DovidBT
“How do hospitals and other medical providers get away with setting different prices for the same service, based on whether the customer has insurance? Why is that legal?”
They don’t set different prices, they contract a volume discount with each insurance carrier. This is perfectly legal.
I just finished reviewing my MIL’s EOB from Anthem BlueCare (her Medicare replacement plan) for this years chemotheraphy at Yale Smilow Cancer Hospital.
Yale billed $486,000. The contracted price for the service with Anthem is $28,900. MIL is responsible for her yearly maximum co-pay of $6700, Anthem pays Yale $22,200. Yale writes off over $450,000. If you were an uninsured individual billed the rack rate and unable to pay, Yale would lien your home (if you owned one) and probably forclose.
The contract rate that Yale charges Medicaid, is less than Anthem is charged. The rate they charge Aetna is more. Every provider is free to negotiate volume contract discounts with insurance carriers. They will even negotiate fees with individuals who threaten to take their business to another hospital/provider.
The key to the legality is that the rate for service is uniform, the negotiated discount varies. If you walk into Home Depot and want to buy 20 electric ranges they’ll give you a better price than if you want to buy one.