The High Cost of Medical Bills

A recent article in Time magazine, Bitter Pill: Why Medical Bills Are Killing Us, the article yet again focused on the outrageous bills that uninsured or underinsured patients are stuck with following medical services received. The article enraged the general public by comparing the cost of simplistic, over-the-counter items that can be found at your local drug store for a fraction of the cost of what is charged by most hospitals. Furthermore, the author continued to focus on the disparity in healthcare pricing across the country, using common procedures with up to ten of thousands of dollars variance depending on geographic location.

What is always interesting about these types of articles is that information is always one-sided; insinuating that hospitals ‘do not care about the patient’ or simply ‘out to make a profit at the expense of the innocent’.  Having worked a significant portion of my career in healthcare, this couldn’t be further from the truth. The article failed to mention the process of financial assistance offered by all non-profit healthcare facilities that have discounted rates for patients up to 600% of the federal poverty guidelines (see grid below). What this translates to is that discounts are offered for annual incomes up to $141,300 for a family of four (not exactly ‘poverty’).  In addition, most facilities also have catastrophic coverage of a maximum of 25% of a household annual income can be applied to medical expenses.

 

2013    POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES
AND THE DISTRICT OF COLUMBIA

Persons    in family/household

Poverty    guideline

For families/households with more   than 8 persons, add $4,020 for each additional person.
1 $11,490
2 15,510
3 19,530
4 23,550
5 27,570
6 31,590
7 35,610
8 39,630

Source: http://aspe.hhs.gov/poverty/13poverty.cfm

As mentioned above, the article also relates the retail cost of an item at a local drug store to the amount charged by a facility, such as the classic example of a generic acetominophen charged at $4-5 per pill where a bottle of 60+ pills can be obtained for $8 over-the-counter. Again, the one-sided image of healthcare ‘costs’ does not take into consideration the direct labor costs associated with the registration personnel that checked-in the patient to the pharmaceutical tech and nurse that administered the drug.  And shall we not forget the indirect labor costs associate with the environmental service staff, administrative directors, financial analysts, billers, coders and collectors all associated with converting the revenue from an ambiguous ‘charge’ to actual ‘cash’. These costs can count for upwards of 60% of the charge billed to the patient. In a future world of health insurance exchanges, this will only become more complicated for the patient but healthcare facilities are proactively responding by the creation of new roles of patient navigators in emergency departments and other ancillary locations to assure patients are directed along the correct path, both clinically and financially.

As we all have probably experienced less insurance coverage with higher premiums and out-of-pocket costs, what are your thoughts on this subject?

http://www.time.com/time/magazine/article/0,9171,2136864,00.html

 

7 thoughts on “The High Cost of Medical Bills

  1. Interesting information about hospital billing/collections policies. I’ve never heard of any of these policies before (i.e. catastrophic insurance). Are these mainstream and advertised, and I’ve just been living under a rock?

  2. Believe or not, US healthcare system is not the best. The high cost of medical service continues to increase. Not surprisingly, lot of people opt out to insure themselves becuase it is extremely expensive to get the health coverage as individauls(not a mjor group insurance). As a medicare specialist that I deal with seniors regarding their medicare benefits and entiltlement, I have experienced with lots of folks who have to deplete their asset as a result of excessive medical bills which they misunderstand that medicare takes care of everything, Which is not the case.

    1. I hear this a lot. It’s easy to use a vague term like “best” but healthcare is way too complex to use this as a description. I can say that the US healthcare system offers the best technology and latest procedures and techniques, and offers patients more choices than in most other countries. Unfortunately the reimbursement side of the system is about as complex as our tax code, leading many to misunderstand what costs they are liable for. It’s so bad that sometimes even the people working for the insurance companies don’t know how they will reimburse for a visit.

  3. Having worked in healthcare most of my adult life, and currently working for a medical device manufacturer for the past 8 years, I understand why medical care is so expensive. The biggest part of the costs can be directly or indirectly traced to liability. Our (also broken) legal system and excessively litigious society adds cost to every aspect of manufacturing, distributing, and dispensing medical care, technology, and pharmaceuticals.

    Of course, there are other costs involved, as Lisa mentioned. For example, I can get a steak for $10 at the butcher, but I don’t complain when when the restaurant charges me $25 for it. There are all sorts of overhead costs for the restaurant, plus the intangibles (such as the value of someone seeing me eating steak at Den-…um, Gibson’s). Why should it be any different when I receive a service or medication at the hospital?

    In addition to what Lisa mentioned in her post, medical providers routinely adjust bills for patients paying out of pocket. For example, if your insurance has paid its part and there is a remainder, a provider might reduce it or even write it off. If you are paying completely out of pocket for a procedure (e.g. an MRI scan), a provider might have a cash price that is a fraction of the amount that is billed to insurance (e.g. $500 cash price for a scan that would be billed at $2000). In the latter example, there is more value of taking a reduced cash payment up front vs waiting up to 90 days for insurance reimbursement that will only pay a fraction of the total bill.

  4. What??? “Catastrophic Insurance” is definitely new to me. See this is exactly what infuriates me most. I come from a low income family who has been very blessed in terms of health. It seems as though I’m not the only one who isn’t aware of the “Help” that is available to the less fortunate. People can’t afford insurance, and seeing the prices listed above doesn’t help. If there is such “help” for families, it should be more widely shared. People should be told that there is hope when there kid’s and elderly family members are sick

  5. Wow, this is a very interesting article. I would say for the most part, uninsured or underinsured patients are not aware of the information you described above. I have worked in healthcare for the past 7 years, both as a provider and now for Cigna who handles the Medicare Advantage piece. As a provide, I did realize that those in or below the poverty level actually incurred a lower medical expense then those in the middle class. Point in case, most individuals in or below the poverty level, whether insured or not, received significant assistance from the government. However, I recently had a serious health issue and was forced to undergo several MRIs, lumbar puncture and surgery, for which I received no financial assistance and was forced to pay over 12K out of pocket expense, this was on top of what my PPO had already paid. In my current role, I oversee hospital, specialist and PCP claims for MA plans. These providers have a set reimbursement schedule with Cigna. Nevertheless, they will bill outrageous amounts for certain procedures, knowing they will only accumulate a small fraction of that amount. For instance, a patient recently went to a gastro specialist and received some sort of procedure. The billed amount to Cigna was over 4K, but the negotiated amount paid by Cigna was only $350. This goes to show that if the patient was not covered by Insurance, they would incur a 4k bill. This is why the uninsured and underinsured patients, who are above the poverty level but may not have the means to provide medical insurance have significant financial hardship from medical expenses. Hospitals and other providers should enforce a reimbursement schedule for the uninsured and for all, that is similar to that of Medicare or other governmental plans.

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