In fairness, he's not wrong, and neither is parent. Hospitals companies have local monopolies, which they can use to charge ridiculously high prices. On the other hand, insurance companies do get a kickback of sorts when the hospitals bump prices - the negotiators get compensation based on the dollar amount of savings they can bring from negotiation, so effectively, even if the hospital bumps prices high enough and renegotiates the chargemaster rates to a lower one, while still ensuring a profit for the negotiators, they'll go for it. Bloomberg did a nice write up of it a few years back, but it's now behind pay wall.
I think my takeaway from the whole conversation is that the insurance business can be counterintuitive to outsiders. Salvation may not be as simple as getting rid of them.
Another tidbit is that insurance companies don’t mind being the bad guys. I’m not sure if our focus on that industry blinds us to effective solutions for controlling costs.
Public disclosure and reputational price-indexing as well as regulation of emergency and regionally-monopolized non-elective care would help a lot, but backing the train up on decades of broken incentives and profit-optimized behavior is no small task.
The hospital makes more margin off of people not covered by the insurer, the insurer is largely insulated from the change, and everybody comes away okay... except the uninsured patient who has no negotiating power.
I agree that the chargemaster prices are fake, but what you are proposing is:
Hospital: "Our insurance partners pay us a fraction x of Chargemaster charge X, so let's make C larger."
The insurer understands the game being played here, just like you do. It's not like the insurer doesn't also realize just like you do that the chargemaster price is fake.
The insurers are not going to say "Oh C got bigger this year? Well, let's pay more!"
More important are failures of competition in the marketplace, especially consolidation on the hospital side (most markets are now served by large hospital systems, so insurers cannot plausibly threaten to exclude hospitals from networks), the lack of exposure of consumers to most of the price, and the lack of incentives on the consumer side to search for cheaper prices (plus a general lack of any information about which facilities might be cheaper).