DICK QUINN RECENTLY wrote about his $233 surgery. I wasn’t so lucky.
When marketplace health plans first became available in 2012 as a result of the Affordable Care Act, my wife and I bought coverage. After my wife signed up for Medicare in 2020, I switched to a solo policy. I’d been counting down the days until I, too, qualified for Medicare at age 65. With a $7,000 deductible on my policy, I was crossing my fingers that my health would remain good. In May, at age 64½, my luck ran out, and it cost me a good bit of money.
It could have been worse—medically. I noted a painful swelling, which Dr. Google diagnosed as an inguinal hernia. My family doctor agreed and referred me to a surgeon. In June, with the assistance of a surgical robot, I had an outpatient repair.
I could have used my experience as a former hospital administrator to research the most cost-effective care. But I didn’t. Instead, I went to my family doctor with a list of general surgeons in my insurance network. Since my doctor is younger than my children, I said, “Send me to the surgeon you’d send your dad to.”
He laughed, looked at the list and picked a surgeon.
The surgeon said I was a candidate for a robotic procedure. We discussed infection risks and the surgical mesh he would insert, but I never asked if the robot cost more than a non-robotic repair. In fact, I made no effort to hold down the cost of the procedure or find out how my health insurer would handle the bill, and that tells you a lot about the economics of U.S. health care.
I implicitly accepted that I would go to the only hospital where the surgeon was on staff. There are several nearby hospitals in my network, including some outlying community hospitals. It’s unlikely, however, that the community hospitals have $2 million surgical robots. In retrospect, it’s possible I would have been billed less for a non-robotic approach.
The hospital I used is a level 1 trauma center that has both heart and advanced orthopedic surgery programs. None of this mattered in my case, but it’s an indication that the hospital has a lot of surgical overhead, which could have been reflected in the charges billed for my surgery.
But does that matter? Billed charges may or may not relate to what the insurance company and I ultimately paid. Instead, that amount is determined by the deal that the insurance company has with the hospital, and I’m not privy to that. For instance, it’s possible that a common surgery like mine would be covered by a fee schedule where the insurance pays the same amount regardless of where or how it’s done. Alternatively, the contract may specify the payment for the billed charges would be discounted by a certain percentage.
I could have called the insurance company to find out if another hospital would be cheaper, but I didn’t. The hospital provided me with a cost estimate in advance of about $45,000, plus $1,500 for the surgeon.
Why didn’t I worry about any of this? My cost was fixed. I was on the hook for what remained of my $7,000 annual deductible. I knew that—whoever did the surgery and wherever it happened—it was going to cost more than that, so I didn’t care about the total charges.
After meeting with the surgeon, I was sold. Why would I shop around to save my insurance company money? Even if I were on its insurance plan for another 10 years, there’s no reason to think I’d pay lower premiums later if I saved the insurer some money now. But as it happens, I’ll only be on the company’s plan for five more months.
While I didn’t question the cost, I did a little research on the use of surgical robots for hernia repairs. For technical reasons, hernia repairs are particularly amenable to using robots. The data seem to show marginally reduced pain and slightly faster recovery compared to a straight laparoscopic procedure, both of which are substantially better than the traditional open repair. The surgeon suggested there may be a slight reduction in post-op infections with a robot, but otherwise the long-term outcomes were similar.
Nobody questioned whether I needed to recover faster. Since I’m retired, what difference does it make if I stopped post-operation narcotics on day two or day three? I was happy with my recovery, but I would have been just as happy with another day in front of the TV.
In the end, I paid about $6,100 to finish out my annual deductible. The insurance company paid around $8,400 against total hospital and doctor charges of about $42,000. That means more than $27,000 of the charges were written off, thanks to the discount negotiated by the insurance company.
I did have a choice. The surgeon made it clear that I could go indefinitely without a repair, albeit with some discomfort. I also could have waited until I joined Medicare this December to get the $233 deal Dick Quinn received. Indeed, the greatest pain from the procedure was writing that $6,100 check. I comfort myself by remembering that I could have been facing a $42,000 bill if I didn’t have insurance coverage.
I’ll pay about $10,000 in premiums for my health care plan this year, and get more than that back from the insurance company through medical expenses paid and negotiated discounts. That means my annual bet—opting to buy health insurance—has paid off this year. Since 2012, that’s only happened once before, when my wife needed surgery under her policy.
As it turns out, the biggest benefit my insurance provided was the discounts it negotiated with the hospital and doctor. And the insurance company didn’t do too badly for itself: It paid out less for my operation than I paid the insurer in premiums this year.
One theory about high-deductible health plans, such as my Affordable Care Act coverage, is they will make the patient a better consumer. Maybe that happens with smaller claims. Faced with a big expense, such as surgery, I knew immediately I would exceed my deductible, so I didn’t shop around.
Instead, I went with my family doctor’s judgment. He was paid about $100 for that visit, and yet he was directly responsible for additional costs of more than $14,500 that were paid by my insurer and me. I trust he made the best medical decision. Could he have made a better economic one?
Now that my annual deductible has been met, I’m scheduling a specialist visit and some lab work for things I’ve been putting off. Why not? I have nothing left to lose.
Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.