Monday, April 4, 2022

The Scam of US Medical Pricing

If you want some fascinating reading, do a web search on the "real" cost of x-rays.  You won't get any good answer, but you will spend however much time you can stomach reading case after case involving the wildly different prices being charged by various care providers for something that is surprisingly cheap anywhere in the civilized world. 

Of course some will point out that "No one really pays that much for an x-ray".  That's true, but only kind of ... sort of ... maybe not.

Let's go with a hypothetical example based on someone else's misfortune:

For whatever reason, J. Schmoe needs a chest x-ray.  Being blessed with endless patience and time, they call ahead of time to determine what the price will be, and after being repeatedly told, "We don't know what the price will be.  Come in and have it done and we'll find out after you're billed," they eventually find the one person who will quote a price:  $517.

Thinking:  Ya know, given how much I've had to shell out for testing and surgery and all in the past few years, that really doesn't sound all that bad.  Wait ... no.  It's total crap.

In some states or at some providers there's a discount you can ask for if you're paying cash rather than going through insurance.  If that happens to be the case the amount instantly drops to something like $310.

Think about this.  You know the provider isn't going to be losing money by charging you $310 for the x-ray, so the real cost is somewhere below that, and the $517 is some kind of magic markup they send to the insurers.  Why would they do that?  Let's see ...

Since J. Schmoe has health insurance the super-secret discount won't work.  They go ahead and get the x-ray, pay something like $36 as a "co-pay", and then wait for the bill.  This is where it starts getting really weird.

The care provider and insurance company have a chat among themselves.  The length of the discussion, and who wins it, largely depends on; 1. how big the provider is, and 2. how big the insurer is.  The loser of the discussion is always going to be the patient.  To add insult to injury, this part of the system involves a heck of a lot of people and time, and in itself significantly adds to the cost of healthcare - which is why a cash discount exists.

Eventually J. Schmoe gets a statement/explanation of benefits/bill that looks like one of the pictures below.  

Explanation of Explanation

Service:  The thing done.  Usually this will include an insurance code, which if you go down that particular rabbit-hole can lead to some amusingly specific insurance diagnostic codes which create more questions than they answer.

Provider Charged:  The number the provider came up with for the total bill.  Note that this might be different from what was quoted because of odd little fees added in.  There may also be situations where the amount quoted was for the procedure itself, but there was a separate bill for some other part that the patient couldn't avoid.  For example a single operation can involve separate bills from the hospital, the surgeon, the anesthesiologist, and the hospital's pharmacy.  This really ticks me off too but it's a whole separate rant.

Allowed Amount:  This number is essentially a "screw you" from the insurance company to everyone else.  They're saying, "I don't care what the provider charged, we're going to pretend the bill they sent only said this number."  I wish I could get away with that.  More on it below.

Insurer Discount:  This amount is really just showing who won the dick-measuring contest between the provider and insurer.  If the discount is high then the insurer won, otherwise the provider won.  The fact it exists at all is bad for everyone else.

Patient Liability:  The amount the patient ends up paying.  Sometimes it can be appealed and brought down, but the odds of that aren't good.  Of course it's still worth trying because a lot of crappy insurers automatically deny everything in hopes the patient will just give up and let them keep the money.

Low Suckage

This is likely the best possible outcome for the patient because the insurer paid for everything other than the co-pay.  This is also the least likely outcome, even for people who have good insurance.  Why?  Well if you were an insurance company would you want to pay anything if you could figure out a way to avoid it?

Moderate Suckage

This is like the Low Suckage results, except the patient probably has an unmet deductible.  Once that's met the insurer would (hopefully) pay more.

Major Suckage

Here something interesting is going on.  The insurer is insisting the bill is only $360, that they have a deal with the insurer to cut $150 off of that, and then they're paying the rest.  But they're going on to say that the patient's part of the bill is really based on the full amount charged by the provider rather than the numbers they were playing with.

This is called "Balance Billing" and is illegal in some states/situations.  Sometimes insurers actually pay attention to those laws, but of course "mistakes" occur.

Ok, here's the "fun" part (and by fun I mean totally infuriating):  the patient liability at this level of suckage is actually more than it would have been if they had payed in cash with a cash discount and skipped the insurance altogether.  The insurance company would have preferred that too as it means the patient is paying for insurance they're not using.

But wait ...

Remember how I said the provider was certainly still making a profit when they gave patients a cash discount price of $310?  You can also be reasonably sure they're making a profit from the $174 payment after all the shenanigans are done with.

You know who pays the full amount?  Anyone who doesn't have insurance and can't afford to pay in cash.  For a "small" bill, say a once-per-year urgent care visit for a strep test that totals $150, they can pay it off over time.  For the big stuff though, the obscene overcharging gets added in as real numbers for the big providers to play financial games with (e.g. written off as bad debt for a tax deduction or to bolster tax-exempt status, or folded into overhead costs to justify increasing prices).

And then it all gets worse when it's noted that a free-standing private office provides that same x-ray with the same quality of service for a total of $73 ... in cash.  Pity J. Schmoe didn't know about that beforehand.

Oh, and if someone can't pay the odds are they'll just not have it done at all.  This means they're more likely to end up with more expensive medical issues, or just plain die.  But of course we're not talking about anyone important, right?  It's not like those are real people.  Yes, in case you missed it, that last bit was loaded with sarcasm.


I'm not going to pretend to have all the answers, and I'm not going to say that government-run universal healthcare is the only option (though it is an effective option).  But I think a good starting point is to level the playing field between insurers, providers, and patients. 

The "Allowed Amount" and "Insurer Discount" parts need to go.  The cost for a frickin' chest x-ray from a provider should be the same regardless of who is paying for it.  Providers should be legally required to charge a consistent for a given service (they've got all those codes, after all), and insurers should be legally obligated to base benefits on that amount.

Thinking:  I'm still kind of curious if I can start using those tactics though  ...  Sorry, Fredonia Gas & Electric.  The Allowed Amount for my monthly utility bill is $120, but you'll be happy to know I'm paying that amount in full!