We received a hardcopy insurance statement in the mail for our son’s first two days of life at a local community hospital. The “amount your provider charged” was $5,047. Blue Cross got a “discount” of $3,030. The total cashflow was thus $1,945 of which we paid $73 (Blue Cross says “Benefits are not available for routine services” and this was the full amount billed for “Hospital Services”). The printout says to expect a hardcopy bill to arrive in the mail from the hospital at a future date.
Now I’m wondering what function the retail price serves. Does Blue Cross pay attention to the $5,047 that the hospital wanted in order to pay $1,872? If Obamacare makes it illegal for Americans to refuse to purchase health insurance, why have a retail price at all? TIME says that roughly 10 percent of Americans are uninsured (August 12 article; students of government-media partnership will be interested to see that the journalists focused on the accomplishments of the Great Father in Washington: “Nearly 90% of of Americans Now Have Health Insurance”). That’s about 32 million people. But are those 32 million uninsured folks going to schedule a delivery at a private hospital like this one? And then have $5,047 that they are able and willing to pay?
[Note the that hoped-for $5,047 was on top of all of the maternity/labor/delivery costs. This is a bill for the child; the major expenses show up on the mother’s statement.]
- What other industry can afford to mail out a 4-page hardcopy bill for $0?
- America’s Efficient Health Care System: my $15 bill for a checkup (pre-Obamacare)
- An Obamacare Day
- Slam-dunk employment discrimination case against hospital maternity operations?
Often, that is what poor people without insurance pay. Scripps Hospitals in San Diego lost a multi-million dollar class action suit for doing just this in their emergency rooms.
Dentist’s billing works in a similar fashion. The dentists work with the insurance companies to negotiate a fictitious “prevailing price”, e.g. $1400 for a crown. Your insurance company negotiates this down to $1000 of which insurance pays pays $800 and you $200. The only people who pay $1400 are the unemployed.
Maybe this is a negotiating tactic the provider uses when working out the contracted rate with blue cross. To prove to the insurance it is real they have some small percentage of suckers actually pay the full rate. This way, the insurance thinks it’s getting a great deal at “only” 1800.
It’s all about escalating the public benefit that the hospital can claim when they write off the work they did on those who can’t pay. Self payers get trapped in it because in the hospitals eyes the number of people who can pay and don’t have insurance is zero. A few years back I had 0.0001%er friend who self pays, had a heart attack and the hospital billed him $128k, he mailed back a wall street journal article saying the average cost of the treatment was $46k – they sent him a bill for $46k.
I think that most professional negotiators of hospital bills start with the Medicare rate and work up, instead of the fictional list prices. The Medicare rate is supposed to be based on the hospitals actual cost of providing the service plus a small profit.
Stephen Brill has written an interesting book on the subject, A Bitter Pill, that was a decent read on the subject. His current thinking is that we need to move toward a combined hospital/provider and insurance model, which would have a greater incentive to keep the costs lower.
The retail price is an input to “balance billing.”
The pattern is as follows.
Practicioner accepts reimbursement for an out-of-network patient from the insured’s carrier for a fair and customary amount, then turns around and seeks reimbursement for the difference between retail price and reimbursement from the patient.
Practice is now illegal in NY post April, 2015. I don’t know how Mass. works.
Generally seen for emergency/hospital services and out-of-network patients.
See, for example https://en.wikipedia.org/wiki/Balance_billing
Hospitals use the difference between the actual $ paid vs the retail price as an accounting “loss” to maintain their fiction of being a non-profit (and tax exempt) organization.
Also, insurance companies make a big chunk of their profits from “claims repricing”, which is charging the policy holder 35% of the negotiated “savings” (actual vs retail).
Here’s a doctor explaining it (the whole interview is good): https://www.youtube.com/watch?v=dRn9ySc-RDM#t=9m05s
… oh, and ambulance chasing lawyers love hospital retail prices too, as they use that inflated number when seeking damages rather than actual costs.
EDA tool prices are like healthcare prices. $ynopsys and ¢adence give you an absurd list price followed by a protracted and confusing confidential negotiation. EDA prices are supposed to be more confidential than the NSA spying program (and more carefully guarded) but careful study of the tool usage billing to the group shows major semiconductor companies end up paying 37-50% of list price. Then brand X and brand A FPGA companies came out with good synthesis tools that actually give the same or slightly better results, for 1/4 the price of the EDA vendor’s tools. Guess how I save money on FPGA tool costs? And not time wasted on negotiation! Without competition and the ability to compare list, and total prices, healthcare will keep increasing faster than GDP.
> Obamacare makes it illegal for Americans to refuse to purchase health insurance
What happens if one refuses or can’t pay for insurance? What is the penalty?
Oh well, I was unfortunate enough to fall through the cracks while diagnosed with a stage 4 cancer. I had no choice but to turn to a NY-state hospital. I used to make a solid six-digit salary before I got sick but I lost my professional income and all I had left was savings. (I am happily divorced as I cannot even think of my family going to debtor’s jail after I die.)
Anyways, I was told by the hospital administrator, probably a city employee, Our goal is to put you on food stamps, and when you are down to it we will help you get a government-sponsored medical care. No kidding.
They were cheerful and calling me a fraud and a deadbeat as I had to sell my professional tools (for under a week’s income rate) to pay for chemotherapy. Oh well, not everyone is happy…
I was unfortunate enough to fall through the cracks while diagnosed with a stage 4 cancer. I had no choice but to turn to a NY-state hospital. I used to make a solid high 6-digit salary before I got sick but I lost my professional income and all I had left was savings. (I am happily divorced as I cannot even think of my family going to debtor’s jail after I die.)
Anyways, I was told by the hospital administrator, probably a NYC employee, Our goal is to put you on food stamps, and when you are down to it we will help you get a government-sponsored medical care. No kidding.
They were cheerful and calling me a fraud and a deadbeat as I had to sell my professional tools (for under a week’s income rate) to pay for chemotherapy. Oh well, not everyone is happy…
Phil, can you please delete a duplicate post? Thanks!