Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
A Health Care Story
A couple of years ago, I had a sebacious cyst on my back. It was relatively small because it drained freely, but my wife was disgusted and ordered me to have our doctor remove it. At the time, I was on my company’s PPO (Preferred Provider Organization) health insurance, so I simply had the procedure done, paid my co-pay, and went about my business. I subsequently received an explanation of benefits in the mail some time later describing the amount paid by insurance, the cost of lab work done to examine the cyst afterward, and some other information regarding deductible expenditures.
Well, as sometimes happens, the doctor failed to get the root of the cyst and had sealed up the drain. So, a couple of years later, what was formerly a tiny hole was now a bulbous mass on my lower back which was steadily growing. Thus, I made an appointment at the general surgeon’s office for a routine cystectomy.
In the intervening years, my wife and I decided to switch our insurance coverage from a PPO to a HDHP (High Deductible Health Plan) with a HSA (Health Savings Account). Under this system, my company provides $1500/yr to our HSA and we benefit from considerably lower premiums and the opportunity to save for future health care tax-free. We did this because we viewed it as an opportunity to save for our future rather than simply washing our premium money down the drain from now until eternity.
So, during the cystectomy and in discussion with the surgeon and attending nurse, the point in the procedure came when the surgeon announced that he was going to send the excised cyst to the laboratory for biopsy.
“You don’t need to do that,” I said.
After a brief silence, the incredulous surgeon asked why. I replied that, unless there was some concern regarding the results of the procedure or if the contents were abnormal, then I saw no need that justified the cost of the lab work.
More silence followed, and then came the questions — “Are you self-insured? What do you mean?” — to which I explained that I cover my own medical expenses with the assistance of my HSA and have no need for unnecessary lab work. Now that I had their attention, I started to ask questions of the baffled nurse and surgeon. “Just how much does this procedure cost?” I asked. The subsequent and very awkward silence was eventually broken by the admission that they had no idea.
I’m an engineer. If a person called me on the phone and needed a piece of work done, I could quickly explain our hourly rates and provide a cost estimate. What did these medical people mean that they didn’t know what this procedure would cost?
Thus began the explanation of the (apparently) chaotic negotiations which go on behind the scenes between insurance companies and health care providers, where there is no consistency in terms of anticipated costs and the promised reimbursement rate for a pre-planned procedure can vary radically between phone calls placed to insurers just ten minutes apart.
The bottom line is that the nurse and surgeon had no idea what the cost of a routine cystectomy was because they didn’t have an insurance company official standing over their shoulder telling them how much to charge.
How did this madness happen?
The simple answer is that consumers have been completely disconnected from the costs of their health care. Insulated by our premiums, we learn that we can consume today and pay for it some day … indirectly … in a way that we’ll probably never examine and will have little control over. This, the so-called third-party effect, is responsible for much of the explosion in health care prices.
So, how do we fix it?
Republican presidential candidates frequently promise to repeal Obamacare down to the last word. That would be a step in the right direction because it would partially dis-entrench this sense of disconnection. Merely repealing Obamacare, however, is insufficient to the job at hand.
My proposal is simple. In addition to repealing Obamacare, whomever the Republican nominee is should promote legislation to allow every American to deduct the costs of health savings accounts and catastrophic medical insurance from their taxes. They could also restructure tax law so that part of a person’s compensation from their company can be a generic, tax-free “Health insurance reimbursement,” which would unchain insurance from one’s employer.
These simple fixes would probably cover 80% of citizens and radically drive down prices for those occasional consumers of healthcare.
Hopefully, as in the case of my cystectomy, the bill would be based upon time and materials such as:
Nurse, 0.5 hr @ $100/hr
Surgeon, 0.5 hr @ $250/hr
Surgical instruments: $50
I concede that this doesn’t address the needs of the remaining 20% of people who have expensive, chronic conditions that require immense resources. To be honest, I don’t have a great solution there. Perhaps the government could also use its status as a large consumer to get preferred or group-rate pricing for the indigent.
What say you, Ricochet? Am I batty in my belief that radically simplifying the billing and insurance market would produce positive results all around?
Published in General
No, you’re right. Last year, I was scheduled for a stress echocardiogram at the local hospital and wanted to know how much it cost before I did it. I’m covered but I have gotten some nasty copays from time to time and just wanted to know what it cost. Day after day I was on the phone with people at the hospital trying to find the answer. No one could tell me the cost. I almost cancelled it. Finally, as they were literally hooking the wires up to my chest, my phone rang. It was someone from elsewhere in the hospital returning my call about the cost of the procedure. She didnt have the answer but told me she was working on it. I told her not to bother.
As for cysts on your back, I’ve got a better story. I went to a Navy doctor once for that when I was in the military. He took the cyst out without anesthetic. He was out of it or something. That was my first taste of government medicine. I may as well have gone to Theodoric of York.
The Dark Ages! Did he bleed you next?
Makes sense to me. We’re on a similar high-deductible/HSA plan and have run into the same situation with specialists not knowing how much their services cost. With routine GP and gyno care, I’ve found that when I tell billing I’m responsible for the cost, they give me the self-pay rate, which is anywhere from a quarter to nearly half below the insurance rate.
He didn’t bleed me, but he said that until recently, it was believed that cysts were caused by demonic possession, but that they now believed it was most likely caused by a small dwarf living in the stomach.
You’re right of course.
I’m lucky enough to have relatively robust health but I have occassionally visited urgent care when I’m sick long enough.
Once I walked into one of those urgent care “ER’s” because it was 3AM and I’d been sick for three days. I inquired as to the cost and they told me my insurance covered the visit like an ER visit (I was too miserable to fully absorb what that meant at the time).
The doctor spent about 5 minutes with me, gave me a prescription for antibiotics and sent me on my way. About two weeks later I got a bill for $900 because my insurance did not, in fact, cover ER visits at all until I met my $2500 out of pocket deductible.
I was literally paying for health insurance that didn’t cover the cost of any medical bills I had that year. Is it any wonder people are attracted to the idea of single payer?
Recently, my wife was in the hospital for several days, and our 8 year-old grandson was brought by to visit. He noticed that the food menu from which we ordered my wife’s meals had no prices.
“Is the food free?” my grandson asked.
“Ohhhhh, noooo,” I sighed.
“Then how much does it cost?” he asked.
I told him the sad truth: “Nobody knows the answer to that question.”
You are right and your solutions sound very sensible.
They won’t do it because too many people like the idea of someone else taking responsibility for these types of things. And the politicians pander to this to win elections. People would rather be free from responsibility to think and plan and pay, than to actually be free people. How this will end is predictable.
I had a similar experience. I hope yours resolves better than mine. With my case ,without guidelines from an insurance company the hospital decided the sky was the limit. I got a bill that was totally ridiculous. I kept calling and went up the chain of command until reaching the CFO. I had been warned that they would threaten my credit rating which they already had. I explained that I would send them five dollars a month for the rest of my life unless they negotiated. They did and cut the charges by 60% which was still a bit higher than normal. I paid, and stayed healthy until going on Medicare. Good luck.
You’re not wrong.
But you’ve forgotten something.
Donald Trump is going to fix healthcare and it will be tremendous. He will fix it so fast your head will spin. And the government will pay for it.
Stop worrying about it. It’s going to be great.
I’m actually a huge fan of the HDP or catastrophic health care plans because they are finally (slowly) bringing some accountability to pricing.
Regarding the 20% who have chronic conditions that require vast resources, because many of these conditions are age related, most already fall under medicare. What to do with the few percent who have chronic conditions but fall outside medicare or medicaid? I could be swayed to support some sort of chronic condition “insurance” subsidized by the government if the ACA, in return, were abolished.
Wow! That’s amazing. Some of these procedures sound horrific, but I’m amazed at how inexpensive they are given their invasive nature.
This should be a big part of reforming health care. Providers should have to tell you the costs upfront.
Health care is practically the only thing we buy , but only learn what it cost weeks later.
Due to the extremely complicated nature of network contracts with doctors, most doctors truly have no idea what they will get paid for any procedure- they just bill it at whatever random (and usually inflated) rate they want and then accept whatever the insurance company (or medicare/medicaid) decides to send. ( this is known in the industry as repricing) Since the final rate is determined by these complex contracts, the same procedure can be paid at very different rates even for two patients getting the same procedure at the same facility.
Which explains why the actual charges for a procedure are not tied to the actual cost of the procedure. The pricing is based on many other factors outside time, materials, supply and demand. In other words, there are no true market forces affecting pricing, so the pricing is wildly inconsistent and illogical.
This also results in anyone paying for services outside network contracting rates paying a huge price, since they don’t benefit from the negotiated rates of any network contract. Many physicians will tell you that they have to charge an even higher rate for out of network patients in order to make up for the below cost rate they get for some procedures from their in network patients.
It’s not just apparently chaotic. It is.
The last time I had a plan where I as a patient could reliably predict my benefit discounts and obligations was years ago. We are insured through my husband’s employer, and our plan has changed at least twice. (Back then, the plan we were on provided the consumer with this lovely paper booklet for looking up estimated benefits – and it more or less worked. Our current plan allegedly offers the same thing online, but the website is nearly impossible to navigate and the cost-calculators I need most are buggy.)
It’s not only the mindset that we can consume today and pay later. My experience is that many providers effectively tell anyone with a health plan they must consume today and pay later. I make a habit of offering to pay my estimated bill up-front. Despite signs insisting “co-pay is due at time of service”, my money is often refused. It’s very confusing.
My health is such that it’s rare for me not to meet the deductible, and while we have an HSA for flexibility, under current rules it’s unlikely to serve as a savings instrument for us. We are most likely still getting a better deal by relying on our plan than we would get through the rates currently available to self-payers, which are themselves not very transparent, but it’s quite possible that things would be different in a system with more transparency overall.
This post and the reactions to it are typical in conservative circles. In liberal and progressive circles it would be,
“It’s horrible that anyone has to think about money when they are lying on the surgery table! That’s why we need single payer.”
I offered to pay up front and they basically told me to take a hike.
I’ve never been so shocked in my life that a service provider didn’t want their money as quickly as possible.
Side note: it’s 2 weeks later and I still haven’t seen a bill or an explanation of benefits from Blue Cross/Blue Shield.
From Surgery Center of OK’s FAQ site:
“What methods of payment are acceptable?
To keep our prices as low as possible, cashier’s checks or cash are the methods preferred. Credit cards are accepted on a case by case basis. Human resource departments or divisions of self-insured companies can make other arrangements if necessary.”
Physicians in this kind of practice frequently have privileges at near-by full service acute-care hospitals. If a patient doesn’t have money, they will be referred to the hospital to let the hospital absorb the cost of uncompensated care.
The rates seem low but are actually at or above those negotiated with physicians and hospitals participating most insurance programs, Medicare and Medicaid programs. Those other physicians have to incur the costs of dealing with all of the eligibility, documentation, billing and bad debt from high-deductible and co-pays.
This kind of practice is takes the cream off the top and leads to a two-tier HC system.
I would tell them: that’s the first thing you should be thinking about before you even get to the surgical suite.
Of course, someone is always thinking about the money, it just might not be the actual person on the table. That’s great if you imagine that everyone will get whatever treatment they want or need with no consideration of cost, but of course, reality is that when someone else is doing the worrying about money, someone else is deciding what the person on the table can get, no matter what they want or need.
I am slightly puzzled by this proposal, though. Tax breaks for medical spending specially available only through employers have historically had the effect of chaining medical discounts (whether provided through insurance or not) to employment.
I believe a generic tax-free “reimbursement” available through one’s employer could easily be much less bad than current premium exemptions, but how is it a complete unchaining between medical benefits and employment? Getting to pay for medical care with pre-tax dollars is still a medical benefit.
Of course, the reason the “self-pay rate” is a quarter to half below the insurance rate is because we knowingly set the insurance rate at an inflated rate in hopes of getting a reasonable return (ie 1/4 to 1/2 of the “price”).
Exactly. It is frustrating.
With our current plan, while some bills are processed promptly, others are held up for months – you know, long enough that, if it were any other bill, it would have gone into collections. I’ve heard from other Ricochetians that my experiences getting demands for FINAL PAYMENT OR ELSE YOU ARE AN EVIL, IRRESPONSIBLE PERSON WHO TOTALLY DESERVES TRASHED CREDIT out of the blue, only to call up and find that, no, the billing office is still working on it with my insurer and I haven’t magically become a delinquent overnight, aren’t that unusual.
The rate that your insurance company negotiated for that procedure is essentially a trade secret. Most insurance companies are more than happy to help individual members estimate expected out of pocket costs for upcoming services, but they aren’t happy to have negotiated rates published in aggregate to the general public, and their competitors.
Even if you paid entirely out of pocket due to being below your deductible, you still got the “benefit” of the specific rate negotiated by your health plan.
As long as there is some connection with the insurance company (I.e. you want the credit towards your deductible) I’m not sure the status quo will ever really change. It would have to be an entirely insurance free transaction between the patient and provider. Something like catastrophic coverage that only really concerns things like hospital admissions or intensive outpatient treatments that are expected to run in the tens of thousands of dollars, and then cash for everything else.
As it sits now Midge, in order to effectively take advantage of that benefit a person has to participate in the companywide group health insurance plan.
In this case the tax free benefit could extend to payments made to employees to pay for health insurance of their choice and even contributions to HSAs rather than the benefit being derived through payments made by the company to group health insurance.
Physician’s offices with e.g. a $1200 bill are known to hold that bill to the insurance company until the hospital or other physician’s (prompt bills) receive a “no money” remittance from the insurers, eating up the deductables.
The clever doc gets actual money, not just an invitation to bill the patient.
Money is power and control. You pay, you get to choose. If someone else is paying, they get to make all the decisions – about your treatment, your medicine, your very life. I have a hard enough time understanding why people would give up control over their own healthcare. Why would they give up control over decisions about their KIDS?!? Or their spouse? Its madness!
Majesty’s, I have gone through what you describe for over twenty years, with my own individual high deductible non- employer policy. The first few years I paid at time of service and if I exceeded the deductible I billed my insurance company for reimbursement. eventually I found out I was paying a higher price than if I let them submit to insurance. As PhCheese and PHenry described, in our current system the insurance companies have negotiating leverage the individual doesn’t. If we had a free market in health insurance people would probably form similar negotiating groups which would still stick unaffiliated individuals with higher prices, but perhaps they would not all be employer related.
I dislike HSA’s. No one can save for medical costs without a tax incentive?
We have several dogs and over the years have been faced with various surgeries and other serious interactions with Veterinarians. The difference between that and our personal medical care is amazing. Although the financial part of the difference is large, it is not the only thing we have given up. The interaction between the doctor or vet and patient seems to be much more productive when it is tied to a direct payment.
Thank you for posting this. I sent it on to my sister who is a surgery nurse. Curious to hear back her thoughts.
We experienced the same thing with our old diabetic dog. He had his eyes fixed so he could see again, it was fairly expensive for a dog (he was special) but he saw good the rest of his life. It was a simple process to set up and go through with. I felt in control, that is for sure.