Health Care Costs....

[Wade Lippman]

I just had a "minor" surgery. They billed $16,000. The insurance company paid $4,500 and I paid $375.

Why do they bill $16,000 when they know they will only get paid a third of that? Sounds like some sort of scam. Anyone know?

[Jim Becker]

That's how things are in the system we have in the US works. Everybody pays a different price depending on what insurance they have (or don't have), whether the services are "in network" and bound to published reimbursement rates from the insurance plan or not, etc. It's extremely complex. And yes, there may very well be someone that actually pays or is expected to pay that sixteen grand, although it would be rare. The system, which is largely for-profit or focused on increased revenue generation if "not-for-profit", is what it is. It's not a scam in the traditional sense, but... Anything I would say beyond that would get into things that we just cannot discuss here and I hope others will avoid that so this thread doesn't disappear.

[Thomas Pender]

Not a fraud. If you do not have private insurance or some form of Medicare/Medicaid, you would have technically been on the hook for the entire 16K because no one would have negotiated or set a lower rate for you. Lots of people get into tough financial shape that way - medical bills cause many bankruptcies. I agree with Jim we are probably better off shying away from this topic.

[Brian Elfert]

Medical providers will often give substantial discounts to those without insurance if you ask.

[Patty Hann]

Medical providers will often give substantial discounts to those without insurance if you ask.

Bingo.
I belong to a Christian Medical Sharing ministry.
They help you negotiate costs.
Example: one member needed knee surgery. Cost was X (I don't remember the exact numbers but it was 5 figures) with Dr Jones at the local hospital.
He found out that if he traveled 50 miles to another hospital the cost was 75% less (yes, you read that right) and the surgeon was..... Dr Jones.

[Bill Dufour]

Our friends sister went to Mexico to get the lap band surgery since her insurance would not cover it. Or maybe the copay was to high, not sure. She saw the doctor on Opra.
Limo picked her up at the airport to the very nice hotel next to the private hospital. Not much more then a luxury cruise for 3-4 day stay.
Mexico now requires a prescription to buy antibiotics. No more stocking up to take home for just in case. I have switched to buying fish antibiotics for my bronchitis. I hear dairies can buy cow medicines. Have not had the bronchitis since covid masking.
Bill D.

[Jim Becker]

Bill, insurance typically doesn't cover those kinds of procedures without someone being able to prove extreme, sometimes "life threatening" medical need.

[Bill Dufour]

My hip replacement list price was like 150,000. Insurance rate paid 13,000. I had about $6,000 after deductible etc.
My wife on medicare had finger surgery, no bill so far.
This outfit is all in one building doctor offices, surgery , physical therapy, medical home care devices like crutches and wheel chairs. All owned by the doctors.
Not sure what happened but my wife's 40 year old hand surgeon just committed suicide. All the doctors are under investigation for insurance fraud. It will be heard to prove which doctor knew and how much.
Bill D

[Bob Borzelleri]

Hospital bill total costs can be mind boggling, but if you really need a reason to scratch your head, go to the line item billings.

My wife’s uncle spent 5 days in a hospital bed for which the Pharmacy line item was $16,000. No unusual or boutique medications that I could find.

Medicare along with his supplement payed all but $450.

[Patty Hann]

Hospital bill total costs can be mind boggling, but if you really need a reason to scratch your head, go to the line item billings.

My wife’s uncle spent 5 days in a hospital bed for which the Pharmacy line item was $16,000. No unusual or boutique medications that I could find.

Medicare along with his supplement payed all but $450.

Someone showed me a line item on his bill: Vicodin....ONE vicodin tablet was $450. (I get 20 of them for $10...thank you Good Rx ).

[Edwin Santos]

That's how things are in the system we have in the US works. Everybody pays a different price depending on what insurance they have (or don't have), whether the services are "in network" and bound to published reimbursement rates from the insurance plan or not, etc. It's extremely complex. And yes, there may very well be someone that actually pays or is expected to pay that sixteen grand, although it would be rare. The system, which is largely for-profit or focused on increased revenue generation if "not-for-profit", is what it is. It's not a scam in the traditional sense, but... Anything I would say beyond that would get into things that we just cannot discuss here and I hope others will avoid that so this thread doesn't disappear.

I'm a former hospital Chief Financial Officer. Jim's answer is mostly true. Some of the reason for the high gross charges go back to rules that were associated with the Medicare program decades ago when hospitals were paid in a different manner than they are paid today. The resulting practice was an inflated chargemaster against which discounts called contractual adjustments would be applied with the goal that Medicare is always paying the lower price. Later when managed care came along, the game became negotiated discounts, so hospitals raised their charges in response i.e. instead of charging you $200, I'll charge you $400 but give you a 50% discount, or $2000 and a 90% discount. I know, it sounds absurd but at this point, it's an entrenched practice.
Imagine the difference between a building that was built to a cohesive, elegant design from scratch versus a building that started out one way and then had renovation after renovation bolted on until it looked like an absolute hodgepodge. The latter is our healthcare system.

As Jim says, most people are covered by some type of insurance and hence pay a small fraction of billed charges based on the negotiated rate. The problem becomes the significant number of Americans who have no coverage. Those people are billed the full charges, and many are driven into bankruptcy as a result of the collections process.
It might seem like hospital corporations are greedy (and many are) but if they do not follow their chargemaster, it can have a cascading effect on all the other reimbursement that is built on it, including Medicare and Medicaid.
This said, there are various ways a hospital can always work with people including charity care mechanisms.
But the fact remains that purchasing power and other kinds of influence drive most of health care's economics, and sadly, the individual patient has no leverage so the patient is usually the caboose on the train and will have to go wherever the train takes him/her.

This is a very crude and brief summary, but it gives you the gist of it. Don't get me started on pharmaceutical pricing, regulated (in some states) ambulance pricing, unionization, and Rubik's cube of regulatory rules.

My advice to all, especially young people - take an active interest in your health. Do so at any point, but earlier in life the better. Simple lifestyle practices can eliminate a large percentage of chronic disease. Be your own advocate because the system we have is a reactive health care system, not wired toward prevention. So you have to be your own preventive health coach.

EDIT: My post is intended to be a technical post about hospital accounting and industry reimbursement. I hope the info is useful, at least in the course of understanding one aspect of a complicated system. I hope the rest of the thread does not devolve, and cause the whole thing to be deleted because sometimes useful info gets thrown out with the bathwater.

[Edwin Santos]

Someone showed me a line item on his bill: Vicodin....ONE vicodin tablet was $450. (I get 20 of them for $10...thank you Good Rx ).

GoodRX effectively got you a discount of 97.8% versus that particular hospital's chargemaster. In reality the Average Wholesale Price they pay for Vicodin is much much less.
Either way, you're getting the benefit of GoodRx's purchasing power as an extension to a middleman called a Pharmacy Benefits Manager (PBM). In this way, you gained leverage that you would not have had as a single patient. Good work.

EDIT: A lot of people wonder how GoodRx makes any money extending these discounts. They mostly get rebates from wholesalers and sometimes the manufacturers themselves. In your case it wouldn't be much but imagine millions of patients with multiple prescriptions. Personally I see it as a win-win and a good consumer resource.

[Ron Citerone]

Thanks Edwin! Hope this isn’t deleted. I like when people with work knowledge share on this site. Adds real perspective you can’t always get elsewhere.
BTW, is it true that a person without insurance can ask to be charged the rate of the most frequent user of a service? Usually Medicare..

[Patty Hann]

Thanks Edwin! Hope this isn’t deleted. I like when people with work knowledge share on this site. Adds real perspective you can’t always get elsewhere.
BTW, is it true that a person without insurance can ask to be charged the rate of the most frequent user of a service? Usually Medicare..

No harm in asking ...ever.

In the medical realm I'm in (let's keep it nameless) one of the first things you are taught is how to ask for discounts.
And medicare rates are often the baseline for the discounted price.
Sometimes you can get that rate, and sometimes it's a bit higher.

[Jerry Bruette]

I'm a former hospital Chief Financial Officer. Jim's answer is mostly true. Some of the reason for the high gross charges go back to rules that were associated with the Medicare program decades ago when hospitals were paid in a different manner than they are paid today. The resulting practice was an inflated chargemaster against which discounts called contractual adjustments would be applied with the goal that Medicare is always paying the lower price. Later when managed care came along, the game became negotiated discounts, so hospitals raised their charges in response i.e. instead of charging you $200, I'll charge you $400 but give you a 50% discount, or $2000 and a 90% discount. I know, it sounds absurd but at this point, it's an entrenched practice.
Imagine the difference between a building that was built to a cohesive, elegant design from scratch versus a building that started out one way and then had renovation after renovation bolted on until it looked like an absolute hodgepodge. The latter is our healthcare system.

So how do we get out of this hellish cycle? I use a CPAP nightly and won't run any of my equipment or machines through insurance. The providers jack the price up 400% then submit it to my insurance company and I end up paying more with the insurance deductible than the advertised price on a suppliers website.