That's true, no-vas, and I'll see if I can explain it. First, I think Mojo was talking about commercial insurance. Aetna, Blue Cross, those guys all negotiate flat rate payments based on procedures. So the hospital bills $10,000 for a overnight stay and hysterectomy, but the insurers pay whatever the contracted rate is, generally at least 40% less. If an uninsured migrant worker comes in, has a hysterectomy, and stays the night, they get billed the $10,000 rate. There were a bunch of lawsuits a couple of years ago against the larger hospital corporations, claiming discrimination against poor people because they couldn't get the better rates, and most hospitals will now accept lower payments, but you have fight for it.
Now, for Medicare, there's a federal regulation that makes it fraud to allow someone with Medicare to privately pay for care that would otherwise be covered by Medicare. I think the intent, if there was one, was to keep hospitals or physicians for telling Medicare patients... "well, you really need your gall bladder taken out, but Medicare doesn't pay me enough to break even on the procedure, so unless you want to give me an extra $500, you'll have to find someone else to take it out."
If a provider gets caught taking private payments from Medicare recipients, they are banned from participating in the program again. So, some MD's will simply opt out of the Medicare program, and only take private pay patients. Last I heard, here on the Central Coast, there are no psychiatrists that participate in the Medicare program. If you have Medicare, and need psychiatric care, you have to go to Santa Barbara, or Salinas.