Medical Billing and Insurance Companies
by Mike Kimel
Medical Billing and Insurance Companies
Steve Lopez at the LA Times reports on the bizarre calculus of emergency room charges:
Debbie Cassettari had outpatient foot surgery to remove a bone spur. She arrived at the surgery center at 8 a.m., left at 12:30 p.m., and the bill came to $37,000, not counting doctor fees. In recovery now from sticker shock, she’s waiting for her insurance company to do the tango with the clinic and figure out who owes what to whom. Gary Larson has a $5,000 deductible insurance plan, but has found that his medical bills are cheaper if he claims he’s uninsured and pays cash. Using that strategy, an MRI scan of his shoulder cost him $350. His brother-in-law went to a nearby clinic for an MRI scan of his shoulder, was billed $13,000, and had to come up with $2,500. Kaiser member Robert Merrilees had a colonoscopy at an affiliated surgery center, which charged $7,500. His co-pay was $15, Kaiser picked up $470, the rest of the bill “just went away.” Merrillees was left scratching his head over the crazy math in medical billing.
The article goes on:
Ella’s father, John Moser, had a $5,000 deductible plan withCigna, and had taken Ella to the hospital to rule out appendicitis. Nothing serious was diagnosed, and Ella went home to a quick recovery. Her dad got a bill for nearly $5,000 from the hospital, as well as bills for $540 from a pathologist and $309 from the doctor who treated her. Like Moser, lots of patients are surprised to get separate bills like that, unaware that a hospital’s doctors can be independent contractors. It’s like going to a Laker game, paying $150 for a ticket, and later getting an additional $75 bill in the mail from Kobe Bryant.
“It’s outrageous,” Schwarzman said. “I don’t know where they’re coming up with these numbers. Are they picking them out of a hat?”
So who is this Schwarzman fellow? It turns out he is
Dr. Phil Schwarzman, medical director of the emergency department at Providence St. Joseph Medical Center
What is evident from the article, not to mention anyone who has dealt with health care services any time in the last few decades, is that medical bills make no sense at all. Having health insurance doesn’t always help, either. Sometimes the bill for a procedure is lower for someone with health insurance, sometimes it is higher. So it is hard for a patient to make an informed decision. But you’d think things would be different for insurance companies.
You’d think insurance companies would not willingly tolerate when they are the ones being handed a crazy bill. After all, they a) have information that patients don’t, b) have market power that patients don’t, and c) have a monetary incentive not to overpay. But it seems that even insurance companies don’t operate the way a buyer in Econ 101 would operate.
I’ll give you two examples from my own life:
1. When I was in my early twenties I got a bill from a hospital. I couldn’t remember having been to the hospital in the recent past. If memory serves, I had gotten a routine eye exam at the hospital a year or two earlier, but that was about it. As I went through the bill, my memory wasn’t jogged at all. I was able to determine that the bill had been rather significant for a simple grad student, and fortunately my insurance had paid for the bulk of it. Sadly, there had been one procedure which hadn’t been covered. But what the heck was an “epidural?” I finally learned, when I called the hospital to find out, that apparently I had been billed for delivering a child. And my insurance paid for the procedure… except the epidural, of course. Given that a guy doesn’t have the, er, internal plumbing to deliver a child, presumably a good insurance policy would have sprung for the epidural too.
Alternatively, they might have been tipped off by my gender that the whole thing never happened and disputed the bill. I don’t know if they ever did. I just know that the hospital decided I probably didn’t have an epidural and rescinded the charge for what they had wanted to bill me.
2. There was a point in my life I was getting headaches. Fortunately, it turns out I had a deficiency of either magnesium or placebos – a nurse practitioner I saw about the problem told me to take some magnesium pills, and since then I haven’t had any problems with headaches.
But what was interesting was that the insurance company happily paid for a bill from the doctor’s office which indicated I had been seen by a doctor, not a nurse practitioner. The rate for seeing a doctor is much higher. I only had to pay the co-pay, so it made no difference to me, financially, but my wife is a stickler for this kind of thing and called the insurance company several times trying to inform they had been ripped off. She spoke to a number of people, but the charge was never disputed.
Anyway, that’s all I got. Discuss.
Some of the problem is a left over from the pre managed care days, which is pre 80’s. Bills were paid on the “usual and customary” charge for the area. Thus, providers would charge pretty much what they wanted and insurers would pay it.
Then, it started getting expensive, so insurers started contracting rates, but these were still based on a percentage of the prior years “usual and customary”.
Then it started getting way expensive and contract rates started getting cut, up to 25% of all savings in the late 90’s was simply rate cuts. However, there were other insurance types such as personal injury and workers comp. So, the providers kept their “usual and customary” charges knowing that for some types of claims they would get the rate they contracted for.
Then, WC got expensive, so states implimented fee schedules. However this still kept personal injury wide open. Then PI got expensive and now PI insurers just play hard ball such that the attorneys have even given up and look for the simple cases that will close fast to keep the cash flow going.
In the mean time, Medicare rates were usual and customary that then started getting reduced over time and these rates were match by all the insurers.
So, yes, there are some charges that, even though they are contracted rates, they still are whacked because of a prior high usual and customary charge.
Consider the current accepted rate for cateracts. 7 minutes to do one. $2400 around here. Really!
A relative who underwent triple bypass surgery last year showed me the bills. There were a lot of surgery day bills from a variety of sources that I am sure were justifiable in one way or another. But what he wanted me to see was the hospital charges. As far as we could tell the surgeon, anesthesiologist, etc. charges were separate. The operating room (use of hospital staff and facilities?) itself was $26,000. The charge for the hospital stay (cardiac wing) was $20,000/day. Neither of us believed the insurance would pay anywhere near these amounts. They scrimped on the doctor charges which were modest to begin with and paid all the hospital charges. So one bypass surgery plus five days in the hospital came to over $125,000 before doctor charges.
No my relative didn’t think he was worth it. He said he couldn’t find out how much it would cost and when the surgeon told him the state restricted what they could charge he decided to go ahead with the operation. No one ever told him about the $20K/day from the unrestricted hospital. I think he would have just said good-bye to this world rather than ask his insurance to pay this (he is over sixty).
I must admit he is doing better than I have seen him in a couple of years. And oh yea, his insurance paid most of this. His catastrophic for non-drugs was $4000.
(By the way, he said that the entire (beginning to end) cost was about twice the numbers above.)
The medical industry and the insurance companies love high deductible policies. The medical industry gets paid more by the individual and the insurance company has to payout less from their premiums.
Wow, where was this. My mom had 2 valves repaired (open heart), 2 wks in hospital do to need to get her off the coumidin and then a cold developed. Total was $125K. The OR charge was $32K! I was floored. The $125K is what medicare actually paid.
This is RI.
Ouch!
Mike:
I ran my last 10k with pneumonia and just before going to Showdown In Chicago. I swear to god it was like someone sitting on my chest. I had a high deductible insurance plan because I was unemployed then.
I was afraid of the bill and I kept asking, “how much is this and that.” I could not get an answer to the costs from the doctor’s office other than the office visit. A hospital clerk finally told me to go to a private clinic other than use University of Michigan Healthcare. In the end I paid roughly 45% of the bill. It was a stretch then.
Good God.
So what you’re telling me is, if I get sick in the US, I should hire a private jet to fly me back to Canada, as a hugely cheaper option to getting treated in the US. Cessna, here i come.
Yes!
Prices varying wildly via unaccountable often incompetent cost shifting of very profitable middlemen? Sounds like defense contracting.
“Gary Larson has a $5,000 deductible insurance plan, but has found that his medical bills are cheaper if he claims he’s uninsured and pays cash.”
I don’t know about medical billing, but when it comes to dental billing, many dentists, at least the ones in my community, charge their uninsured patients at a higher rate than they do their insured patients. So after hearing this, I have chosen to carry dental insurance most of time, especially when I know I’ll need dental work above and beyond a routine exam and cleaning, despite the coverage being pretty lousy and the co-pays and premiums being ridiculously high! I find this a bit backwards because my dentist receives his payments from his uninsured patients much more quickly and far more efficiently than he does from his patients who have dental insurance.
This was in WA.
Cynthia,
I cannot speak for dental, but the article indicates that some medical procedures are cheaper for the uninsured, and some medical procedures are cheaper for the insured.
Two of my three kid’s births were not covered by insurance. Normal vaginal births, no complications. After each time a hospital adminstrator brought us the bill prior to check out. Each bill was approximately $10,000. (48 hour saty in private room. Did not include anesthesia or doctor charges. The two kids in question were born 18 months apart.) When we told them we would be paying “out-of-pocket” the bill was redeuced to $2,000. This was from one of the largest private hospitals in a top ten poulation city.
I teach economics to working adults (night classes). When we get to the section on health care economics, it is astounding the (unprompted) stories that EVERY SINGLE STUDENT has about this type of thing. No two stories are alike, but all are so egregious as to be barely believable. This has been going on the whole 16 years I’ve been teaching the class.
Jim Z,
Can you e-mail me at the angrybearblog@gmail.com
It is perfectly acceptable to call prior to surgery and ask for the charge schedule.
For the insured it is a good idea to check if pre-certification is required and completed before surgery or procedure.
Check the statements that you receive from your health insurance provider. They list the cost billed by the health care provider and the amount paid by the insurer. Those tow amounts generally bear no resemblance to one another. They are generally hundreds of dollars apart and even thousands if the medical procedure is costly, like a cataract removal for example.
What the bill to the uninsured may be is anyone’s guess.
In my experience, you can sometimes negotiate with a health care provider to let you pay a contracted price, but usually you are stuck with the full tab.
But the discussion raises a question; why don’t providers just bill a reasonable amount (i.e. “the contracted rate”) and get rid of the middlemen (carriers)? Does that seem like a completely crazy idea?
In my experience, you can sometimes negotiate with a health care provider to let you pay a contracted price, but usually you are stuck with the full tab.
But the discussion raises a question; why don’t providers just bill a reasonable amount (i.e. “the contracted rate”) and get rid of the middlemen (carriers)? Does that seem like a completely crazy idea?
In my experience, you can sometimes negotiate with a health care provider to let you pay a contracted price, but usually you are stuck with the full tab.
But the discussion raises a question; why don’t providers just bill a reasonable amount (i.e. “the contracted rate”) and get rid of the middlemen (carriers)? Does that seem like a completely crazy idea?
Also, my relative was in the hospital twice last year and he said that both times (one outpatient) the hospital found out from his insurance company what his share of the bill was and required that his share be paid before they would admit him. I don’t know much about how these things work but I always have received my medical bills after my insurance has paid. I guess now that I live in WA, I’d better make sure I have my full deductible readily at hand. This is the only hospital around here. I don’t know what they would have done if my relative had said he didn’t quite have the cash right now and I wonder what they do with people that don’t have insurance; do they ask for the full payment up front? Oh well, I guess I will find out.
I was curious about Medicare which my husband is on. He had a mini-stoke Christmas eve and went to the emergency room and stayed in the hospital overnight. Compared to our relative, the charges weren’t too bad. Total, including ambulance, emergency room, and one night was $17066 (Medicare)+ $1343 (our insurance plan). Looking at the bills since he went on Medicare the billed amount is consistent with the Medicare allowable instead of being all over the map.
Mike, I work in medical billing. I don’t think it’s particularly confusing.
Every medical procedure has an associated code. Doctors and hospitals bill codes. Payment for each code is based on a contract. The contract rate is generally A) a percentage of the Medicare rate or B) a percentage of billed charges. A hospital might “bill” $100,000 for a surgery, but what really matters is their insurance contract rate — it always gets adjusted. A hospital might bill you for the unadjusted amount if you don’t have insurance, but that’s just a negotiating tactic — when they give you a discount you feel like you are getting a deal.
Re: A nurse practictioner billing for an office visit — that’s standard practice. If the doctor is present in the office, they are allowed to bill for evaluation and management services — usually under the doctor’s provider identifier. Experienced are really just as informed as doctors when it comes to explaining and diagnosing problems, so I don’t see why this is a problem. So your wife was wasting her time.
Re: Getting billed for a pregnancy. — Mistakes happen. Insurance companies and doctors and hospitals audit their records. If you reported it, I’m sure it was refunded or fixed. Otherwise it’s fraud and there are severe penalties for that.
I’m not saying medical billing is ideal or great – it’s confusing and opaque. But it’s not really outrageous in the sense that I think you mean.
Robert,
You start off by saying medical billing is not particularly confusing and end with saying that it is confusing. I’m confused!
And to follow up… if the head of the medical department at a well regarded emergency center says “it’s outrageous” (see quote in post) he may or may not be right, but saying “it’s not really outrageous” is not much of a counterargument given all the examples provided in the post.
Jerry – Ha, thanks. What I meant is that Mike’s anecdotes did not confuse me. I understood exactly what happened and probably why. I agree that medical billing is confusing and opaque if you are not familiar with it, but that’s different from saying that insurance companies or hospitals are acting irrationally, which is what Mike argued.
That the head of an ER center finds pricing outrageous is not exactly persuasive either. Is price discrimination really so hard to understand? Does he also find it outrageous that car dealerships put a higher sticker price on their cars than what ithey expect to get? Does the fact that Kroger will give you a discount if you have a coupon utterly shock him?
Personally I am happy that hospitals are offering discounts to uninsured patients — many places overcharge the uninsured and send the debt to a collections agency when they don’t pay.
Robert,
Price discrimination doesn’t depend on opacity. Everyone knows the movie theater will charge more to see the movie on a Friday at 8 PM than on a Tuesday in the early afternoon. But imagine if you didn’t know what watching a movie would cost you until you walked out the door. And it might cost you more, or less, depending on whether you had some sort of Theater Card with them for which you paid a monthly subscription… and whether it was more, or less, depended on factors which are also opaque. Additionally, you might be able to negotiate a discount after the fact, or you might not.
A hospitas bill as a negotiating tactic. That’s a good one. Would you buy a used body part from this man? 😉
I once asked a hospital CFO why they charged so much when he knew that insurance would pay much less and they would significantly discount the bill for the uninsured. His answer was that when they have a Kaiser patient, Kaiser would pay the whole amount…and he said it with a straight face.
Until I actually see the medial claim for the $37k and the $13k, I will remain skeptical that those billings actually exist. Embelishment is the best part of narrative.
However, if there are complications during surgery-could happen given the nature of the vagaries of human biology-giving a quote up front and then sticking to that would be tough. Imagine work on a car for a general problem like I had recently-“the engine is knocking more than it should.’ How would a mechanic be able to know how much work would be needed on my car?, until the situation was evaluated after an hour of work, that a previous mechanic had messed up the oil filter by clamping it too tight and causing all of the engine oil to leak out, nary a peep from the warning system.
Surgery is much more complicated than car mechanics, and giving a quote up front could be done with the proviso that complicating factors would drive the bill upwards. Or, medical providers could bill in a much more general way without listing all of the specifics; along with Robert, I have, in my limited experience, found that most people are not aware that doctors bill for specific codes; there are about 5,000. Or maybe 10,000. Another 75,000 are going to be added when the new standard- ICD 10 -goes into effect next year. A lot of work would be needed before the average person understands medical billing and I will remain skeptical of most comments until I see a claim that shows amounts listed out-and has been pointed out-what was actually paid.
I’ll side with Ray on his issue. I have been covered by health insurance since early childhood (GHI has my total medical care for as long as they still have records). My mother, 90 and counting, is covered by a GHI/Medicare Advantage plan for the past eight years and California Kaiser prior to that. I see all the bills. Always is some ludicrous amount billed and never is it paid in full.
Keep in mind that all of these issues disappear with single payer coverage through a government mandate, even if parceled out to private insurers. And then all plans are the same regarding what is covered and how much it costs. It’s hard to imagine that the health care industry would co along however. As much as we hear doctors complain about compensation, they are still well into the six digits income stream. The problem is that they want to be seen as business people and we all know that business people are entitled to more. And more. And more.
US doctors also make twice as much as European doctors. No wonder they don’t want single payer insurance.
Just because you have health insurance it doesn’t mean you will get medical services.
Due to today’s high deductible plans, paying cash before services is standard procedure in many hospitals. Not only are about 15% of Americans uninsured, but another 10% are underinsured, meaning they can’t afford the high deductibles, copays and low insurance levels of their health insurance.
I once went to the hospital for an outpatient procedure and was told (for the first time) that I would have to pay $400 for them to continue the procedure. They didn’t even bother to tell me this ahead of time.
Just like Sarah Palin did as a child.
It depends is you negotiate the price up front. Usually, the person who is CHARGED the highest price is that person without insurance. But if you can show you are unable to pay, most non-profit hospitals are under pressure to negotiate the bill down in order to justify their not for profit status.
The good news is, there are a lot of new companies springing up that are trying to help consumers figure out what health care should cost. The bad news is that the contracting and billing processes between providers and insurers is still horribly complex and there is a lot of room for miscommunications and errors. Consumers need tools and they need real, knowledgeable assistance to help them untangle the medical billing mess. I co-founded a company to help patients investigate their medical bills and find errors and overcharges and unfortunately we consistently see cases like this where the patient has been charged far more than they should have been. Contact us at copatient.com and we’d be glad to provide a free medical bill audit report for you.