The $100 Billion Blind Spot

How patients can beat the healthcare billing system

I never thought a delayed flight in Kentucky would change how I see American healthcare.

There I was, sitting at the gate waiting for my return flight from a bachelor party on the Bourbon Trail, when I struck up a conversation with the guy next to me. Turns out he was a doctor at one of the busiest hospitals in the country — in Jamaica Queens, NY, close to JFK airport. He’d been an ER doctor for years and had just started helping with hospital administration.

"What's the most interesting part about your job?" I asked, expecting to hear about dramatic saves or medical breakthroughs.

"The coding and figuring out how costs work," he said without hesitation.

I smiled and stifled a laugh, "What do you mean? You code as a doctor?" I asked, the thought of a doctor pushing commits next to a gun shot victim absurd.

“I don’t write code, I’ve been learning how hospital coding works, like CPT codes” He responded.

“Did you know bag of saline costs $800 at my hospital while it’s barely $1 to manufacture. The thing is, nobody actually knows what anything costs. Not the doctors, not the patients, not even most administrators. The whole system is designed that way."

What followed was a two-hour crash course in the manufactured complexity of our healthcare system that sent me down rabbit holes on rabbit holes. I followed up with hospitals, met with billing departments, dove into companies like Turquoise Health that are trying to bring transparency to healthcare pricing. What I discovered wasn't a broken system—it was a system working exactly as designed. The American healthcare system operates like a cartel with one simple strategy: maximize profit through minimized transparency.

---

Deliberate Information Asymmetry

Healthcare breaks every rule of normal economics. In any other industry—from software to coffee—competition drives prices down. Companies fight for customers by offering better deals. But healthcare? Prices only go up, and they're hidden on purpose. It's the only business where you buy first and find out the price later.

The numbers tell the story better than words ever could. Since 1970, Medicare spending per capita has increased over 500% in real terms, while median household income has barely budged:

Source: CMS, Census, BLS - Try the Interactive artifact

This works because the system preys on our emotions around health. When it's your life, price shopping feels impossible. The same ENT exam can cost differently depending on your insurance, the time of day, even which billing code they use.

The average American spends $12,530 annually on healthcare but almost no one can estimate the price of their last blood test within 500%. That's not stupidity—that's strategic design.

After Kentucky, I started calling hospitals to investigate an exam and follow up procedure for a deviated septum - something I’d been curious about. The runaround I got was identical everywhere:

• "Depends on your insurance"

• "We'd need to run it through our system"

• "Cash price or insurance price?"

• "We can estimate after service"

Eventually I resorted to going in person to a local hospital in Philadelphia, I found the billing manager after my visit who finally leveled with me: "We have different prices for Medicare, Medicaid, every insurance company, and cash patients. Honestly the same MRI might be $500 or $5,000. Sometimes we don't know until we bill it."

This price chaos isn't anyone's fault—it's how the system works. The same procedure costs differently because:

1. Insurance negotiations: Each insurer negotiates different rates with hospitals. Blue Cross might pay $2,000 for what Aetna pays $800 for.

2. Patient negotiation: Those who ask for discounts often get them. Cash patients who negotiate can pay 60-80% less than the "sticker price."

3. Coding errors: Medical billing mistakes inflate costs by roughly 7% annually. Wrong procedure codes, duplicate charges, and upcoding happen constantly.

Nobody in the system—not your doctor, nurse, or even billing staff—knows your final cost until after treatment. It's systematic confusion.

This is why Americans waste $100B annually on overcharges and unnecessary procedures because patients have zero pricing information while everyone else operates with complete transparency.

To understand where the money actually goes, I dove deep into the data. I analyzed 100 hospital bills from friends and family, pulled comprehensive billing datasets, and discovered "Never Pay the First Bill" by Marshall Allen—which became my playbook for navigating this maze.

The numbers were staggering: 83% of hospital bills contain at least one quantifiable error, and 26% include catastrophic errors exceeding $1,000. The system's profitability relies on patient exhaustion—for every 100 overcharged patients, only three will contest their bills.

But that still didn't explain the fundamental question: where does all this money actually go?

Follow the Money

Let's take a simple procedure—a routine blood test—and follow the money. The Medicare reimbursement rate for a comprehensive metabolic panel is $11.50. This represents the actual cost of the test plus a reasonable profit margin, determined through rigorous cost analysis by the Centers for Medicare & Medicaid Services. But that's not what you pay. Here’s what I found going through the journey:

First, Hospital markup begins to appear. This covers "overhead" costs like administration and facility maintenance, but represents profit extraction through market power rather than actual cost increases.

Then administrative costs pile on. These cover billing departments, insurance processing, and complexity management—costs that exist primarily to maintain the opacity that enables overcharging.

Unsurprisingly insurance processing fees appear. Your insurance company charges for the privilege of processing your claim and negotiating rates you'll never see—adding cost while appearing to provide value.

The most absurd aspect of this breakdown is the facility fee—the $98.50 charge for "use of the facility." This has increased 89% over five years and now constitutes nearly 40% of hospital revenue for outpatient procedures. It's essentially rent for sitting in the waiting room, and it represents pure economic extraction with no corresponding value.

This system generates $380 billion in excess charges annually—money that could be saved through simple price transparency. But transparency is exactly what the system is designed to prevent.

The Economic Imperative

What started as that Kentucky airport conversation led me deeper into the issue: healthcare pricing is fundamentally broken because nobody knows what anything actually costs.

I became so obsessed with this problem that I built HealthSavers.ai—a tool that uses Medicare pricing data to help patients compare costs across 5,000+ procedures. The technical side was straightforward: pull CMS fee schedules, apply market multipliers, create a searchable interface. What I discovered building it revealed the deeper challenges.

Note: Data is stale and mostly representative

What’s great is that there are companies trying to solve this at scale. Turquoise Health, Healthcare Bluebook, and others are building impressive price transparency platforms. But here's the catch—they're all B2B businesses. Their customers are hospital systems and insurance companies, not patients. This creates a fundamental misalignment: these companies succeed by meeting the needs of the same entities that benefit from pricing opacity.

The Hospital Price Transparency Rule was supposed to change this. Starting in 2021, hospitals must publish their negotiated rates with insurers. It's a step in the right direction, but compliance is spotty and the data is often buried in unusable formats. Even when accessible, most patients still don't know these resources exist. Building HealthSavers showed me firsthand how hard it is to make this data useful—hospitals publish prices in formats designed to technically comply while remaining practically inaccessible.

I meet founders building in this space every day. The value is obvious—Americans waste $100B annually on overcharges because they can't comparison shop. But the business model challenges are real. How do you build a sustainable company serving patients when hospitals and insurers have all the money and little incentive for true transparency? My own experience with HealthSavers reinforced this: the people who need the tool most have the least ability to pay for it.

The technical problem of price transparency feels solvable. The data exists. The tools can be built. But the human problem—changing a system where opacity equals profit—remains unsolved. Until the incentives truly align with patient needs rather than provider revenue, we'll keep paying $98.50 to sit in waiting rooms.

It's a fascinating space to watch unfold. The question isn't whether price transparency will eventually win—it's whether it'll happen through regulation, market forces, or sheer patient exhaustion with the current system. My bet? It'll take all three.