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IT TOOK MONEY TO resolve my recent health issue—on the surface, a lot of money. But figuring out what it really cost is difficult. Actually, I found it impossible.
Still, being a health benefits nerd, I couldn’t resist looking at the claims processed by Medicare and my Medigap insurance. Trying to understand billed charges, allowable charges and the resulting payments is daunting. I’m guessing most patients wouldn’t even try. Why should they?
My surgery was in the outpatient department but required an overnight stay. I walked into the hospital at 11:30 a.m. on day one and was out at 11 a.m. on the second day. The hospital billed Medicare $43,294, which covered scores of services, each billed separately. Medicare approved the entire amount.
Pharmacy costs totaled $936.71, which is a lot of drugs. The only non-intravenous drugs I had were Tylenol and one Oxycodone. I can attest to how good the latter makes you feel.
My favorite individual service charge was $109 for “insertion of needle into vein for collection of blood sample”—twice. Each collection resulted in seven separate billings for different blood tests, at a total cost of $1,567.10. Interestingly, the same tests were done two days in a row. Could my blood cell count change in 12 hours? Not being a doctor, who knows?
Pathology was $900. The operating room charge was a whopping $20,000. I’m thinking the robot used in the surgery got a piece of that $20,000. Anesthesia was another $5,000. I’m certainly thankful for anesthesia, but the $5,000 wasn’t for the administration of the anesthesia. Instead, the anesthesiologist’s charge was a separate bill. Six assorted injections added another $358.81 to the total.
Is all this itemization necessary? Or does it create an incentive to provide more services? Why is it important to know, for example, that an injection of an antibiotic cost $5.08? The Medicare explanation of benefits says it was a drug “requiring detailed coding.” Administrative requirements, it seems, are not limited to private insurance.
Now for the really interesting stuff: the doctor’s charges. Back in January, I had several rather unpleasant tests and procedures in the doctor’s office. The first test was billed at $1,737. Medicare’s allowed benefit—in other words, what it paid—was $447.04. Another procedure was $1,275 and Medicare allowed $240.82.
The insertion of a catheter was described as “complicated” and billed at $400. Medicare paid $88.76. I’m not sure “complicated” is the right word to describe that procedure. All the services were billed as rendered on a single date, which they weren’t.
Here’s another favorite charge in my journey: The anesthesiologist billed $4,482 and Medicare allowed $393.64.
How can health care providers survive on such low fees? They don’t. Those reduced payments from Medicare are partly recouped through the fees charged to private-insurance patients and, in the worst case, the uninsured. It’s called cost-shifting.
What is a fair and appropriate charge for all this stuff? Who knows? But here’s the thing: I don’t care what it all costs. My out-of-pocket expense for all this health care was just $233, which is my Medicare Part B deductible. Why so little? I pay an additional $240 a month for Medigap supplemental insurance, which covers expenses that Medicare doesn’t.
My attitude to health care costs is similar to that of most patients, who are focused solely on getting better. In any case, given that I didn’t see any of these charges until nearly two months after the services were provided, what could I possibly do?
It makes you wonder who pays for all this care. The lion’s share of Medicare is covered by a 1.45% payroll tax on all wages, which is levied on both workers and employers, for a 2.9% total. On average, seniors pay premiums of around $400 a month, including premiums for Medicare Part B, Medigap insurance and Part D drug coverage. Those who sign up for Medicare Part D prescription drug coverage may also have additional out-of-pocket expenses, which can be quite substantial, depending on the drug.
This is how Medicare works for some 64 million Americans. But what about the larger population? Given the high cost of health insurance and the lack of universal coverage, it’s no wonder many people are seeking a better way. One of the most common recommendations is that we expand Medicare to cover everyone.
But as my recent medical procedure suggests, paying for health care raises all kinds of thorny issues:
Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on Twitter @QuinnsComments and check out his earlier articles.
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Americans like to think that they do everything in the most effective and efficient way. Getting advice from other countries on how to design systems is anathema. Paying for healthcare is one of those things that we do not do well. Canada pays about 50% of what we do on a per capita basis. I suspect that care in Canada is not half as good as it is here. I suspect that it is very similar to what we have here. Some things are better and some things not as good. Given the cost differential, I am sure a compromise is possible that would substantially reduce overall cost per person in the US and at the same keep a steady level of care to everyone.
https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita
From a medical group CFO: you mention that private payors subsidize healthcare. While our contracted rates for private insurers are higher than Medicare, they also put more administrative hurdles to jump thru and reject more claims than Medicare. Our overall reimbursement among all claims are similar to Medicare rates. 95% of Medicare rate vs 80% of private rates. We also spend lots of money just to bill and fight with payors.
I don’t doubt that, my wife having been a physicians billing clerk. I have asked many medical offices which insurer was the easiest to deal with. The answer was always Medicare.
On the other hand, Medicare has been criticized in audits for not doing enough to manage claims, to having too low administrative costs because of that and for not effectively identifying fraud, some of which goes undetected for years.
Then there is the question of what would happen to premiums if private insurance did operate like Medicare.
Two other considerations. It’s not high insurance company profits as the incentive, they are about the same percentage as regulated utilities. And the chances are pretty good many of your patients work for a company that is self-insured and what appears to be insurance is not and there is no financial incentive for the “insurance company” working on behalf of the employer to deny claims unfairly.
Thanks for your analysis. I hope you are doing well now.
I would like to see an objective analysis of a single payer system, i.e. Medicare for all. There are so many moving parts in the current medical system, or is system an oxymoron?
What would be the cost of the single payer system and who pays: existing funds, new taxes, co-pays, etc. How would the new system work? What would be the timeliness and quality of service? I have heard horror stories of how long people wait for treatment for serious conditions in other countries. Not sure how true that is.
Medicare is an insurance system not a health care system as in the UK. There is a big difference. Presumably M4A would work as current Medicare does.
One thing for certain, M4A would increase the demand for services and put a strain on the entire health care system, especially if it followed the no deductible, no co-pays model some people propose.
Who pays, you do. As far as waiting goes, it’s a myth that Americans don’t wait. Before I was fortunate to find a friend in a doctors office, several urologists told me the first appointment was in three weeks. By then I would have been permanently disabled or worse.
Decades of weaknesses related Fed Gov’t Medicare-Medicaid eligibility, expense controls and accountability have all created structural and criminal inefficiencies with chronic fraud outcomes. These outcomes are increasing costs – it’s cost inflation masked as fraud.
Please provide data link for this statement about “criminal inefficiencies with chronic fraud.” I have read no indication that this is the case, but your knowledge may exceed mine.
Regards,
(($; -)}™
Gozo
Thank you for the interesting article.
There are many moving parts in the health care industry and it is often difficult to parse the billing information to understand charges. To be fair, my wife and I have been fortunate to have had coverage for serious issues with care costs that amounted to well over $75K each, even 10+ years ago. Didn’t cost us a penny out of pocket (directly, anyway) and frankly, never questioned anything detailed on the billings. We were just amazed at the total cost and we’re glad that it didn’t require us to take out a loan to pay for them.
What I find very difficult to accept today is the growing push to direct patients to specialists and labs/imaging within the same medical group for what I’ll call duplicate or potentially unnecessary work. Best on-going example we’ve endured is when your GP orders an x-ray, sends you to a specialist who then orders more (of the same) x-rays because, “they like how their own in-house imaging dept does the job”. You’d think there would be coded, standardized orders across the industry that results in doing this imaging one time (assuming nothing is found that dictates further imaging). Adding insult to industry, are the myriad of charges that trickle in over months of time that seemingly, are tacked on, covering the range of paying for your wristband I.D., the receptionist, the tech(s)time, hospital equipment usage, the radiologist initial findings report, etc. I can’t imagine the fun that physician billing dept and insurance personnel must have in keeping the myriad of requirements straight between all the different entities.
Perhaps there’s a pill for all this…..that seems to be a growing first line of attack method too.
What exactly is a, “not for profit hospital”, anyway?
Just like any “non profit” organization. No shareholders to distribute profits to. Such a hospital can earn a profit.
Many hospitals a non- profit. My wife’s doctor won’t use a hospital across street from his office because it is for-profit.
You’re right about lack of coordination and duplicating services.
Many labs can change in 12 hours, like WBC count, glucose, hemoglobin (esp post-surgery)…others, not so much. Depends on each patient and what the doctor was tracking with labs.
Wowza, so interesting and so frustrating. What a system! Thanks for going through the details. Many parts of this that need fixing, but I get confused when folks place so much blame on insurance companies as the previous comment appears to. Isn’t this an issue with health care administration/billing at the start? Maybe I am missing something but seems as though that isn’t the insurance industry? Not giving the insurance industry a pass in the whole mess, but with lack of understanding they seem to be the main scapegoat.
I always scour my medical bills also because there are often mistakes as well and I advise consumers that I work with in medicare counseling to question things that do not appear correct. However a complex health issue makes understanding the billing almost impossible. Consumers I see with a Medigap are always glad they personally dont have to deal with bills but, as you point out, some entity does because it isn’t ‘free’.
Glad you are well, and continue to share your knowledge, experience, and wisdom.
My experience (some 40 years in an industry attendant on the relationship between health-care providers and health-care insurers) is that our American system of health-care insurance specifically is the reason our HC costs so much more than anywhere else, and our outcomes do not reflect greater value from greater expense.
Regards,
(($; -)}™
Gozo
Richard, thank God you survived to tell us all about your findings! The insurance industry is designed to hide individual costs to the consumer. Medical codes, automated billing, lack of understanding on what questions to ask as we are not doctors create a recipe for inflated prices. One would think having all this computer wizardry costs would be a no brainer, but no, computers just add to the confusion. Hope your doing well after all that you went through.
Insurance companies have no incentive to prevent or hide costs or otherwise prevent patients from trying to save money. They do try to keep private what they have negotiated with providers in their networks. They compete with other insurers to get the most providers at the lowest possible cost.
Also keep in mind that the majority of Americans do not have their health care paid by insurance. When you consider all government plans such as Medicare, VA, etc. plus the fact about 60% of employer coverage is actually self-insurance with no financial incentive for insurance companies to deny or over pay claims, the basic problem is not insurance companies.
However, the complexity of so many different payment system is certainly a factor. Why don’t we have a single ID card with all our coverage and health data so we can visit any provider in the country with zero paper work or duplicate tests, etc.?
When our family, more than 40 years ago, went into the business of verifying hospital charges in relation to insurance payments, computers played little factor in tracking services and medications to patients. We believed our industry would not last long, so we carefully lived well below our means, saving as much as we could for the inevitable loss of a lucrative income.
When we retired from this business, after about 40 years, we still had multiple clients and were able to earn an exceptional income—built on the errors between services and billing, that exist to this day. Even with the substantial transition to computer coding and billing.
Regards,
(($; -)}™
Gozo
Thank you Richard for pointing out what is obvious to us that work (or worked) in healthcare: transparency is not just impossible but that it’s an inherent part of the American healthcare system. It was, and is, never meant to be taken at face value pricing. It’s rigged so that everyone, from hospitals, physicians, pharma, medical device, and even attorneys, get their share of the pie. Notice I didn’t add nurses to that pie slice, because that would be a lie. The system treats nurses like an unreliable, and expendable, widget, as the Covid-19 pandemic has shown explicitly. I wish I could propose even the most far-fetched of solutions, but in lieu of that I worry that some day the entire system will begin to crumble, if it hasn’t already, under the weight of its inequity. 20+% of GDP with no clearly objective measures of improved aggregate health outcomes is IMO unsustainable for either an economy or a society.
The cost of drugs is one big mess. Every patient has a different price for the same drug. With some drugs the cash cost with GOOD RX is less than my copay through Part D Drug insurance. 10-15% of healthcare is over treatment and another percentage is fraud.
Very true. Some surveys of physicians say up to 25% of health care is unnecessary. Not sure how much, but there is surely some percentage.
Once your deductible is met there is no reason not to use GoodRx or similar service. I filled a script last week. The charge was $66.00. I just said use GoodRx and the price dropped to $40.
Direct to consumer advertising of prescription drugs doesn’t help either. There is no reason to permit it.
You ask what happens to the providers as income drops. “Talent follows the money.”
Except if there is no place to go.
Richard,
Are you sure about this?
The trick is getting Americans to accept the changes that must go with those systems. Not only health care itself but paying for it. No system works without some gives and takes. Generally, Americans want the latest and greatest care and the want it today and they don’t want to pay for it. It just doesn’t work that way.
I have interviewed people all over Europe about their health care systems. Most like what they have, but also accept the limitations and constraints that go with it most of which would not be acceptable to Americans – yet.
Is it possible Americans could adapt to what ever mandates come with changes in our healthcare. After all COVID has certainly made every one understand that they cannot always have the instant service they were used to getting with supply chain and service shortages. COVID established a new normal that folks are adapting to.
Happy to be wrong. Just speculating. Looking forward to Medicare in 14 months. 🙂
Over time people will adopt to just about anything, but getting to the point of making changes is very difficult. I worked with people and their health benefits for nearly fifty years and how Americans view receipt of health care is not consistent a universal system.
Listen to the anti insurance company rhetoric, listen to complaints about denied coverage or interference between patient and doctor. Mention Medicare for all or even ACA and someone shouts rationing. There are many Americans who still view Obamacare as government health care.
In fact, mention any effort to manage costs and you get screaming about interference.
When there is discussion about M4A – in some versions coverage for nearly all medical and dental services with no cost sharing, there is never mention of how costs will be managed going forward. That is what no one wants to explain in any detail, that and funding.
to become “more attuned to costs and smarter consumers” one needs total transparency in those costs … and that’s not even close to happening anywhere i know … who are you blaming – hospitals, insurance companies, politicians?? Certainly not the consumer
Americans don’t want to be consumers, they never will view receiving health care as buying a service or commodity. Nobody want to spend their own money on health care. We have been conditioned that way since the 1940s.
You are asking good questions, Dick. There just aren’t many good answers. I do believe some of the testing is redundant and not necessary. But it would still be expensive, even if some of it was eliminated.
I had a very complicated surgery last year and the final bill was $249,000 USD. The actual cost to me was zero!
There are many civilized countries that have figured this out. We don’t need to invent it—go abroad and adopt one of those systems. Yes, it will seem to cost more, but as you know, many of our expenses are hidden or contorted. And, everyone will be in the same boat=less societal strife.
The trick is getting Americans to accept the changes that must go with those systems. Not only health care itself but paying for it. No system works without some gives and takes. Generally, Americans want the latest and greatest care and the want it today and they don’t want to pay for it. It just doesn’t work that way.
I have interviewed people all over Europe about their health care systems. Most like what they have, but also accept the limitations and constraints that go with it most of which would not be acceptable to Americans – yet.
Two comments
Antithesis of itemization – I was hospitalized in Australia for 10 weeks in 1982 (subacute bacterial endocarditis, if anyone cares). My bill was $105 per day. That included everything. Doctors, blood draws, X-rays.
Hospital charges I was glad to pay – In 2000, I had a heart valve replaced at the Mayo Clinic. My heart was stopped for several hours during the surgery. Nearly a week in the hospital because of some complications. Bill was itemized and came to about $80,000, which I thought was fairly reasonable. The bill included $500 to re-start my heart. I was tempted to dispute some of the (outrageous) charges for toothpaste and common drugs. I did NOT want to dispute the charge to re-start my heart. I thought that was a bargain.
It makes you wonder how so many other countries manage to have universal health care. I’m sure that there are lessons to be learned.
Universal care (coverage) is easy. Structuring the system in an acceptable way is not so easy. Americans have a distorted view of health care. People do not even understand the difference between universal coverage and government provided health care. Medicare for example is an insurance system, not government health care, but much of the political rhetoric distorts that fact.
With Value Added Tax, stratospheric petrol and utilities taxes, etc.pay for universal health care in many other countries.
I have a friend in England. He is 65 and now pays no premiums and no out of pocket costs for care. His view is his health care is “free.” Of course it isn’t. All the rhetoric about Medicare for All never mentions how it will be paid for.
That “All the rhetoric…never mentions how it will be paid for” is not necessarily related to how it would. Right? If most of the rest of the world has some variety of universal healthcare, one that works for us must surely be viable. How we can (A) be so wealth a country and (B) not be able to afford so much of what the rest of the world can manage is (C) a mystery.
Thanks for the great narrative, though! All Americans can benefit from knowing a good deal more about our healthcare-delivery system than we do. We don’t need to be ignorant of such things: it’s a choice we seem glad for the “freedom” to make.
Regards,
(($; -)}™
Gozo
The thing is it is not a wealthy country picking up the tab, but the citizen’s of that country. That means higher payroll taxes, a VAT, higher income taxes and/or premiums.
When comparing with other countries it also means lower incomes for many in the health care field, especially doctors.
And if you believe in the Sanders version of M4A it means a starting point for costs higher than we now have.
All that needs to be explained to people in detail.