A couple of years ago, a friend of mine had a heart CT scan. A few days later, he was having a couple of stents put in to alleviate a near complete blockage of blood flow to his heart. Shortly thereafter, my loving wife decided to give us each a heart scan for Valentine’s Day. Of course, she was completely clear, and I showed some blockages. My internist recommended that I have a stress test. I had a an old fashioned “major medical” health insurance policy with a very large deductible, so I would personally pay all of my medical bills outside of hospital surgical procedures.
I contacted the office of a radiologist in order to schedule the test, and asked for the price of the test. The receptionist asked me if I had insurance coverage for the procedure, and when I replied no, she told me the price was $3500. I nearly gagged, but had the presence of mind to ask what price Medicare reimbursed the doctor for the procedure. I was put on hold, and the office manager came on the line and informed me that the Medicare rate was $1200. I offered to pay $1200 by check at the time of the test, and she replied “sure, why not?” Since that time, I have wondered about doctor pricing of their services, and have asked various healthcare professionals about pricing, billing and collection practices.
I was not surprised to find out that “list prices”, which are almost never posted for physician services, are contractually discounted by doctors who agree to private insurance reimbursement and be included in that insurer’s “network”. After all, your insurance company is supposed to negotiate prices on your behalf. But I was shocked to find that, while this discount varies by specialty, it is routinely in the 70% range! And doctors are expected to reduce reimbursement rates even further for Medicare by about another 15%, to the point that many doctors will no longer accept such patients because don’t even cover overhead costs. Consulting firm Milliman found that in 2006-2007, Medicare cost private insurers about $88 billion in the aggregate by shifting costs to them. So ironically, public health care costs only partly pay for the care provided to patients with that coverage.
In addition, both Medicare and private insurers require medical practices to complete and submit claims information, which is then processed, questioned and disbursed over time periods that can result in payments typically two months, but routinely up to six months after service was provided. There are thousands of different medical services codes, and reimbursements for the same services vary according to the insurers, who regularly deny coverage for various services. Knowing this has prompted many physicians to routinely send in billing with multiple codes, some duplicative, others just misleading, in order to try to get a reasonable reimbursement for their services.
Over time, this cat and mouse game between insurers and service providers is corrosive to the business integrity of the providers. Doctors tend to have a world view shaped by their experiences. And in their experience, bills are not paid straightforwardly. They are “chiseled” on their billing and made to wait months for payment. Is it any wonder that over time, most doctors I know routinely pay their own bills late?
By separating the consumption from the payment for medical services, third party payment systems are innately antithetical to cost containment, and have led to higher than necessary health care costs. We need to have service providers post their prices much like restaurants have menus with prices for each dish. Doctors should be paid the same by those with insurance and those without. For non emergency care, patients should pay in full at the point of service, and try to collect from their insurers later. Since the patient is paying directly for that insurance, those companies would become more responsive to them or suffer the loss of their customers.