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2013 February 23 Saturday
Do The Uninsured Pay More For Medical Treatment?

How much of the medical expense debt default of the uninsured is due to higher prices for those who pay cash?

Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

Every time a nurse drew blood, a “ROUTINE VENIPUNCTURE” charge of $36.00 appeared, accompanied by charges of $23 to $78 for each of a dozen or more lab analyses performed on the blood sample. In all, the charges for blood and other lab tests done on Recchi amounted to more than $15,000. Had Recchi been old enough for Medicare, MD Anderson would have been paid a few hundred dollars for all those tests.

Granted, Medicare is paying less than private insurance companies. Basically, people paying thru private insurance are subsidizing Medicare (making the intergenerational wealth transfer to the old even bigger than it looks at first glance). But dental practice standard prices for something like a root canal are much higher than what they get paid by insurance companies. So I got to wondering do people pay more when they have no insurance for a hospital operation or other procedure.

The account above with really high prices might just be the result of a naive buyer. As a May 2012 LA Times article shows people who pay cash can sometimes get the cheapest prices of all if they know to ask.

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336.

Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn't used her insurance, her bill would have been even lower, just $1,054.

Read the full article. Cash prices can be really really cheap. But in most cases you have to ask.

I think it depends on the circumstances though. If, say, you want to get a colonoscopy as a preventative measure and you have time to shop around and offer cash then you can get a cheaper deal. But patients offer a number of different stories on whether insurance prices or cash prices are cheaper. One makes a simple point:

Basically every provider that one actually selects had no problem with me sending a copy of the EOB and paying what it said I owed. Basically every provider that one doesn't select offered me a cash discount but wouldn't negotiate. The cash discounts were never as low as the EOB number.

Here are some tips about negotiating lower medical prices. Aside: Why did the site show me a Spanish language video for Vidal Sassoon shampoo for women? Does their ad targeting software think I'm a Spanish-speaking woman?

Share |      By Randall Parker at 2013 February 23 11:21 AM 


Comments
bbartlog said at February 23, 2013 12:44 PM:

One of the reasons for this kind of elasticity in medical service prices is that the marginal cost of providing them is so insignificant compared to the overwhelming overhead costs that a hospital typically has. So it becomes a game to try to load as much overhead cost as possible on to every billable event. The result is $85 aspirin tablets and the like.

Calvaria said at February 23, 2013 1:18 PM:

A couple additional details:
1) "Medical expense debt default" is broadly interpreted by different sources. The 'logical' definition is costs that are too high to ever be paid off (i.e. a 100k hospital stay); however, to boost the statistics, many sources also include default from lost wages (i.e. 2k bill, but can't wait tables with a broken leg, so no income --> default).

2) IIRC, I believe it is illegal for providers to "charge" anyone a lower rate than Medicare. Thus, charged rates will always be: Medicare (less than) private ins. (less than) cash. In *reality* however, a cash paying customer is much much much cheaper than one on gov't or private insurance. This is a law that has always irked me, since it deliberately fucks common sense.

3) Thanks to the gov't health insurance system, the 'list prices' for procedures are completely divorced from their actual cost and are a reflection more of negotiation. There is a bit of a dance where the insurer 'sets' a target cost for one thing, the provider then sets a 'list price' for that and gives a 'discount'. For each billable item, this is done and you get some crazy contracts with insurers. For example, insurer A will pay 40$ for a chest x-ray and 5c per aspirin. Insurer B will pay 10$ for the same CXR, but 2$ per aspirin. The 'true cost' for these would be somewhere around 20$ and 10c, but the 'list price' will say something like 100$ and 5$. List price does not reflect actual cost in any way, it is a negotiation start.

As a business-minded person, the healthcare payment model blows my mind. It's why everything needs to be blown up and started afresh. I can have someone willing to pay me cash RIGHT HERE AND NOW, but have to 'charge' them a higher price than someone who is going to pay via an insurance system that will spend the next three months pushing cash through 6 different entities (who all factor in a cost) before it gets in my pocket?

The transaction where I perform a service, pay someone to code it and send it to an insurer, who pays someone to decode it and pick through it for any inconsistencies, before sending it to someone in accounting paid to negotiate rates, who then cuts me a check is considered "cheaper" than someone directly handing me cash?? Really???

*bbart is right as well, since negotiated rates are set and very difficult to renegotiate

Stephen said at February 23, 2013 6:51 PM:

Calvaria said: "I can have someone willing to pay me cash RIGHT HERE AND NOW, but have to 'charge' them a higher price than someone who is going to pay via an insurance system..."

Why do you "have to"?

Calvaria said at February 23, 2013 8:30 PM:

@Stephen

Because it is illegal to charge a Medicare or Medicaid patient more than any other patient. Meaning that unless you opt out of seeing Medicare/Medicaid patients (increasingly hard to do), you have to charge non-Medicare/Medicaid patients a higher price than Medicare/Medicaid patients. Even though a cash patient costs you much much much less in terms of ancillary personnel for paperwork.

piezo said at February 24, 2013 4:30 AM:

I worked for a medical technology company years ago, working with some of the biggest health care insurers in the US and internationally. It is literally impossible to reconcile some of the rules & regulations that go into this medical nonsense. We literally had people with 20+ years experience in the field stumped trying to turn some of the regulations into an application flow because you end up with logical impossibilities like situations where the insurance must deny coverage because of A, but also must not deny coverage because of A.

I didn't fully understand how insane the health care system was though until I ended up in a hospital and was charged over $10,000 to have some basic chest X-rays and be prescribed a common antibiotic that can be gotten for virtually free at WalMart.

Calvaria said at February 24, 2013 8:48 AM:

@piezo

Yep on the coding and coverage. Some physician offices dedicate more resources to billing/coding/reimbursement than patient engagement (outside the physician).

Another point I should have added: tax implications. If you charge X for your services, but receive less than X, I believe you can write off a portion of the uncollected income as charitable care or business losses.

The payment system needs to be blown up.


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