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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.
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I would have waited until I was on Medicare, unless the pain was unbearable.
All the comments here show why the US should have Universal Health Care. Why are we the only developed country in the world that does not offer it? Republican politicians and their lobbyists, the medical industry, pharmaceutical industry and so on. $$$$ talks
We should, but Americans don’t know what that actually means in terms of changing the health care systems and paying for it. In other countries citizens are willing to have the cost buried in taxes and to accept limitations we label rationing- which it isn’t really.
I just had two inguinal hernias robot repaired in the same procedure. In fact today marks the end of the four week moratorium I was under that forbade tennis, running, pickleball and fishing. I expect next to zero out of pocket costs under Medicare. I also got to pick a world class expert 1000 miles from my home to do it. I had a life threatening hernia repaired a year ago also by the experts also under Medicare. The bill was $249,000! My out of pocket was zero. 80% of the charges were discounted/disallowed by Medicare. Take it easy and glad it went well!
That shows you how fake the billed charges are and points out the need to consider the consequences if all health care was reimbursed at the Medicare fee level.
I can beat that. My wife took a tumble trying to avoid tripping over the dog. She konked her head fairly good but didn’t even really exhibit any concussion signs. But she had a small 3/4 gash in her hairline and I knew we needed a stitch or 2. After 2 minor emergency clinics said no go to the hospital because she hit her head, we went to a major private hospital here in Atlanta. She was given a CT scan to confirm she had no issues and 2 stables by a Nurse PA. The bill was $5500. We have an Anthem BCBS- HSA high deductible plan ($6k) while we wait out Medicare in 7 yrs. After Anthem BCBS negotiated rates and $200 of coinsurance. We had to pay $400 for the Radiologist and $2600 to the hospital. Mostly for the CT scan and what they called a Level 3 trauma visit. I’d love to know how the heck we could have avoided that cost or even received an estimate upfront?? We can afford to pay it, but so many people would not be able to afford $3 to 5K for 2 stitches…
Just one note: no one pays the whole $42k. I usually get around a 50% reduction on all bills for being a cash pay customer. Usually an additional 10% if I pay within a week or two of getting the bill.
I used to be impressed by the “discount” that the insurance companies “negotiate”, but then it turns out I always get the same discount and sometimes better on my own.
I may be missing something. Are you saying you have no health insurance at all and simply pay cash for every health care bill? If so, how would you handle a catastrophic illness?
I’m not sure what this poster’s particular situation is, but many members of healthcare sharing ministries negotiate directly with hospitals and medical providers. Since these plans are not actual health insurance, my understanding is that their members often present as self-pay, negotiate their costs individually, and then apply for reimbursement through the ministry. I’m personally not a fan of these plans, but it’s just another possible reason why someone might negotiate medical bills directly.
I had same hernia and also was retired and 64. I found fantastic surgeon who has a surgery center in their office and after all options presented I decided on old fashion way. After prep I was talking to Anesthesiologist at 9:50 and next thing I remember is nurse asking me if I would like some orange juice at 10:25. For me getting in and out is great and I chose old fashion way because by coincidence surgeon had inguinal hernia too and he said that is how he is going to have his done. I paid 600 dollars before and was surprised to get a refund months later.
Key to your choice is that after your employer group medical coverage ended you were eligible to continue to have COBRA or ACA coverage regardless of any preexisting medical coverage.
I lost my old job when the small firm I was with closed after I was age 65 and I went with traditional Medicare and Medigap policies . My old small firm was part of a PEO so my employer medical insurance was deemed to be under a large employer group for COBRA. My wife was then four months shy of age 65 and needed coverage also. The monthly premium cost of her COBRA was was about 4X the cost of her ACA premium but as the change would have been to a new plan her annual deductible would have reset for the calendar year. By choosing COBRA we incurred higher premiums for four months but avoided being exposed to repeating a second annual deductible and the work to change from an employer plan to a ACA plan to Medicare all within a single year. In hindsight we could have saved some amount of premiums but we avoided the headaches of multiple plan changes and the risk of duplicate annual deductibles. I am happy with our decision to use COBRA but an informed decision between COBRA and ACA plans seems to me to be driven by your individual circumstances.
Like many financial decisions the trade off for us was between risk, time and money and we chose to avoid risk, save some time and spend some money.
This is a great story. I waited @HowardRohelder, only to discover that the medicare advantage plan that looked so good when I thought I was healthy was very happy to make my life miserable if I in fact needed medical care. Strategies for doing this include not just limited in-network options, but also declining to pay for procedures deemed medically necessary by my medical caregivers, not even attributable to the company itself, but administered by third party companies contracted to do just that–minimize costs to the insurance company. @RichardQuinn I think has written about this elsewhere on HumbleDollar.
Fortunately for me, I was still in the “free look” period and could switch back to traditional medicare with a supplement, avoiding this “big brother knows better” supposed benefit to protecting me from unneeded medical care.
My advice to people going on Medicare? Remember, this is insurance for when you are in desperate need of the best possible medical care, not a gym plan or a small box of freebies every few months. If and when that time comes, I will not be thinking about whether I saved a few dollars in out of pocket costs in a normal month or year. Instead I will be asking whether I got the care I needed quickly and whether it was done with the excellence I prefer in such matters so I can get on with my life journey with minimal distractions, whatever it includes.
And about the hernia surgery? I got it for $247 inclusive a few years ago, but that was because I was able to return to Taiwan where it turned out I was still covered by the national health plan at the time. My surgeon did only hernia surgeries, and prided himself that he was the best in the world at doing them. In fact, he claimed he should be in the Guiness book of World Records for most hernia surgeries and had a statue of Michelangelo’s David in the lobby with a prominent, externally protruding grapefruit sized inguinal hernia added. But that’s another story….
My wife and I have Aetna Medicare Advantage which is fully covered through her NYC employee retirement plan. We have no co-pay or deductible and physician choice and treatment approval have never been an issue. While the experiences of others indicate that we are fortunate I think it is best not to automatically rule out Medicare Advantage plans.
It sounds like you have a group plan which is not available to others in the insurance market, and that NY is paying Aetna for an option that covers co-pay and deductibles for its retirees.
That is correct. The main point of my comment was that provider access and procedure approval have never been an issue.
You may well have a private version of MA just for the NYC system you mention. The typical MA plan has a limited network that may or may not be an issue and most have some form of co-pays.
The bottom line is there is always a price to pay. It’s either money or restrictions and limitations. It troubles me greatly when I hear politicians make it appear otherwise with their grandiose promises for any and all health care covered with no premiums or out of pocket costs. No system in the world does that.
I can think of two scenarios where the “better healthcare consumer” theory can bear some fruit. The first is for diagnostic procedures. When my doctor tells me to get an MRI on my right leg, she enters the order on her “web portal” which makes it very easy for me to schedule the MRI at the location that is affiliated with her medical group (they are on the same web portal – just click a button to schedule!). However, I now know how to look on my medical insurance website and search for “MRI – Leg” where I can see significant cost savings if I get the MRI at another location (saving $ both for me and the insurer). It takes some effort to do this. I have to call the alternative MRI location, get their fax number (yes, fax), and then ask my doctor’s office to fax the MRI order to them. I might have to call my insurance company too and ask them for a “reference number.” I can’t schedule the MRI online. For me, I consider the savings worth the effort. The second scenario is for people with chronic conditions. They likely can save money by doing the same type of research and selecting lower-cost options for treatment, medications, etc. since their savings can add up over many visits / years.
But…it turns out that after I did this I discovered that all MRI’s are not equal. Further, my insurance declined to pay on a technicality and still hasn’t paid 8 months later. When I got a second MRI in another state, they actually discovered a worse cancer nodule that was missed by the first MRI, resulting in a radical change in my course of treatment. In hindsight, the $600 I paid and have not recovered for the first MRI at the “preferred in network provider” was an insignificant cost in my overall journey. The difference would only have been between the “negotiated” price and the “cash” price anyway, which I haven’t even yet heard.
As a person who has purchased MRI machines, I agree that not all MRIs are the same. There is a wide range of prices based on the strength of the magnet. When I was doing this, the range was something like $600,000 up to $2,000,000. A stronger magnet yields a better image. In many cases, doctor’s offices or outpatient centers are not spending what hospitals spend on their MRIs.
The other virtually impossible-to-research factor is the radiologist reading the image. Not all radiologists are the same.
On the other hand, all things being equal, hospital MRIs are going to be more expensive because of the cost shifting that is inherent in the system. When you have an exam at a hospital, you (or your insurance company) are paying a hidden tax to cover the below cost payments from Medicare and Medicaid patients and those patients who pay nothing at all. Outpatient centers simply screen out patients who can’t pay. I would need to write another article to address that issue!
Insurance companies are happy to send you to the cheaper site because they want you to believe that all MRIs are the same.
Howard, you did what most people do and what I did, you put your health first and to the extent you could you made the best decision about receiving care. No reasonable person is going to shop for the bargain price.
As shown by who paid what, that $42,000 is not even a real charge and the hospital and doctor knew what they would be paid. If you had asked, they may have even lowered the amount billed to you for the deductible.
As you said, now the deductible is met, why not receive more care – coinsurance I assume though. But keep in mind every penny spent affects premiums and the premiums you are paying already reflect your deductible and negotiated fees and that unfortunate person who incurs $250,000 in claims. Three years ago after a baseball to her eye my wife – Medicare- incurred over $150,000 in charges, and they are still being accumulated.
My bargain price came at a cost too. My individual premiums for Medicare, Medigap and Part D are over $8,400 a year.
A reason the US should have Universal Health Care. The increase in taxes would be less for most than their premium costs
There are good and bad things about my high deductible ACA plan but one of the good things is no copays once you meet the deductible.
Interesting. So the deductible amount is also the max out-of-pocket amount?
Yes… the maximum out of pocket is the same as the deductible