Recently, a family member needed an MRI. The clinic had a list price of $1,500 for the scan but was in the insurer's PPO, and so discounted ("adjusted") the price to $690, of which we paid 10 percent and the insurer paid the rest. Clearly, that $690 price allows the MRI clinic to do business, pay its technicians and radiologists, etc., or else the clinic would not participate in the PPO. Yet if I'd walked in off the street and said, "I will buy this MRI myself," the price would have been $1,500. Meanwhile, if the clinic had not been a member of my PPO, the insurer would have paid the same $621 it pays within the PPO, and I would have been on the hook for the rest, $879. The benefits sections of insurance manuals make it appear that if you use a PPO you pay 10 percent and if you go outside the PPO you pay 20 or 30 percent. Not mentioned, or stated in legalese, is that outside the PPO, the insurer only pays its "adjusted" amount -- you pay 20 or 30 percent plus the balance of the list price.

The distinction between list prices and "adjusted" prices prevents health care services from functioning as a rational marketplace. It's not just that many physicians refuse to speak about dollar figures. ("We don't discuss prices over the phone," a doctor's office told me a few months ago when I had the gall to ask what something would cost, adding, "after the doctor has seen you, then we will tell you what the visit cost.") It's not just that many physicians' offices and clinics do not have anyone authorized to discuss prices: They have minimum-wage receptionists and Mercedes-driving docs who expect the max under all conditions, but no one who will talk price with patients. The larger issue is that the system prevents the consumer from seeking the best price. If an MRI makes money for the clinic at $690, any customer should be able to buy at that price. The theory of the PPO from the provider's prospective is that the provider grants a discount in order to get business: The self-pay customer represents business, just like the PPO customer. But the self-pay customer can't get the PPO price, and the PPO price is the true price of the service. This prevents the bargaining-for-a-good-deal seen in the parts of the free-market system that function smoothly and hold down prices.