“Will that be cash, or charge?”: Many hospitals & doctors offer cash discount for care
Posted by Warm Southern Breeze on Monday, May 28, 2012
Regular readers will recall the entry entitled “Q: Why do hospitals charge $75 for aspirin? A: Because they can.,” which was posted Wednesday, May 2, 2012.
In another venue, I had posted the following remark in response to the exorbitant healthcare costs, “It’s a simple concept, really. Anytime anyone gets in between you & who you’re buying from, it costs more. Insurance does that.”
And it’s true.
It’s not trite.
Let’s consider this example: You’re at the grocery store in the check-out line, about to pay for your groceries which have already been bagged and placed in your shopping cart. When the clerk announces the total, you have some strange feeling because the total is about ten times as much as you imagined.
When you double check the price of milk you find the sticker says $2.50/gallon, but your clerk rang up $25. You double check the price of frozen spinach. The sticker price says $1.37, but the clerk rang up $13.70. The chocolate was $4.50, but the clerk rang up $45.00. And the lean ground beef, instead of the posted $2.60/lb, the 5lb chub was… $130.00.
Talk about sticker shock!
You are aghast at the price, and in frustrated terms exclaim that “there is obviously some gross mistake!” – to which the clerk replies, “Let me check with your Food Insurance Agent,” picks up a phone beside the register, presses one button, and whispers into the receiver.
Suddenly, out of a door leading to an inside office, appears a man dressed in the finest suit of clothes, who casually walks up to you, then explains that your Food Insurance policy co-pay is only 25% of the total bill.
Practically, that means that the 5lb chub of ground beef is $32.50, the gallon of milk is $6.25, the chocolate is $11.25, while the frozen spinach is $3.43, making the total due $53.43, rather than $213.70. You breathe a sigh of relief, dutifully sign the receipt and hand it to the man in the suit, who then whispers something to the clerk as he hands the receipt to her.
Turning to you, the Food Insurance agent smiles broadly and says, “Thank you, Susan! We’ll take care of everything for you. I hope your Memorial Day cookout is a success, and that your mother gets to feeling better soon. How are the kids? Say ‘hi!’ to Frank, for me, won’t you?”
As you walk out of the store, you think to yourself, “Whew! I really got a bargain! I’m glad my Food Insurance Agent was on hand to help me!”
However, what you do NOT know is that you could have paid even less.
Milk is only $2.50/gallon. Frozen spinach is only $1.37. Chocolate is only $4.5o, and 5lbs of ground beef is only $13.00. The total of the entire purchase would have been $21.37… if you had paid cash.
But by your signature, you agreed to pay $53.43, more than three times (exactly 150% more) what you would have paid if you used cash.
And every month, not only do you dutifully send in a check for a “premium” (so aptly named, isn’t it?) on your Food Insurance Policy (which costs about $250/monthly), but you also send money to the Grocery Stores that accept your Food Insurance Policy Plan, and regularly pay the co-pays for all grocery store visits, and a few extra dollars for non-necessary, non-staple items like: capers, herbs, spices, exotic fruits, vegetables & nuts like mangoes, papayas, bananas (because they must be imported), strawberries (many which are grown in another nation), coconuts (because they’re seasonal and from an island), pineapple (not many pineapple farms in the USA, and all are in Hawaii), kiwi fruit, year ’round corn & tomatoes, macadamia nuts (also grown in Hawaii), Brazil nuts (from Brazil), pecans (the Chinese like ’em & pay ultra-premium price), cashews, walnuts, avocados (because they all come from California), and more.
The only regularly, fully discounted, non-payable (by you) items (included in your Food Insurance Policy) include flour, eggs, sugar, cooking oil (soybean only), baking powder & a loaf of bread (white, sliced, loaf bread only), and you are limited to one of each item every 30 days, which also must be “generic” branded items only. No store brands, and certainly no national brands.
That’s health insurance in a nutshell.
And why are folks complaining?
It’s a deal! It’s a bargain! Insurance companies love you, your mother, children, kitty cats, puppy dogs, birthdays, laughter, and sleeping late on weekends… just like you. And that’s why they advertise for your emotions… so you will turn over your wallet & paycheck to them.
The PPACA – Patient Protection & Affordable Care Act – more commonly denigrated as “ObamaCare,” places constraints upon the abuses that have been rampant among Health Insurance companies. And yet, some folks complain about that? “ObamaCare” requires going to private enterprise to purchase health insurance, to be responsible, to avoid dumping the costs on government, and yet folks complain – ostensibly because they bristle at the thought of being told what to do. Their states require them to have automobile insurance, but somehow, the federal regulation of health insurance – which also requires a uniform set of standards – is a bad thing?
Sorry folks… I just don’t understand why it’s a bad thing to establish uniform standards throughout the nation for health insurance.
Moreover, I don’t like insurance, and would much rather prefer it was made illegal. Well, maybe not illegal… but I can share this true anecdote. A retired insurance agent – a gentleman who operated a very profitable independent agency which was later purchased by a much larger firm for a very considerable sum – said this to me about insurance: “It’s a scam, and it ought to be illegal.”
As you read the following story, please bear those thoughts, and more, in mind.
Many hospitals, doctors offer cash discount for medical bills
The lowest price is usually available only if patients don’t use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.
By Chad Terhune
May 27, 2012, 5:00 a.m.
A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336.
Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054.
“I couldn’t believe it,” said Snyder, a 57-year-old hair salon manager. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”
Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance.
That disparity in pricing is coming under fire from people like Snyder, who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment.
The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400.
“It frustrates people because there’s no correlation between what things cost and what is charged,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions, a research arm of the accounting firm. “It changes the game when healthcare’s secrets aren’t so secret.”
Snyder’s experience is hardly unique. In addition to Los Alamitos, The Times contacted seven other hospitals across Southern California, and nearly all had similar disparities between what a patient would pay through an insurer and the cash price offered for a common CT, or computed tomography, scan, which provides a more detailed image than an X-ray.
Health insurance still offers substantial value for consumers by providing preventive care at no cost and offering protection from major medical bills that could bankrupt most families.
But cash prices — typically available for hundreds of common outpatient services and tests — have a real appeal to millions of consumers who are on the hook for a growing share of their medical costs as employers and insurers cut back on coverage and push more high-deductible plans.
Some doctors are trying to spread the word about cash prices and they’re urging patients to pressure hospitals and insurers to offer a better deal.
David Belk, an internist in Alameda, launched a website about medical costs and speaks to community groups about the huge markups compared with the prevailing cash price.
Belk recently told a group gathered at a seniors center about the vast price difference when he requested routine blood work for a patient last year. A local hospital charged her $782. Her insurer said that with its discount, she owed only $415.
“She could have gotten it for $95 in cash. How does that make sense?” Belk said. “The last thing the insurance companies want you to know is how inexpensive this stuff really is.”
For those patients who have insurance, getting the lower price would typically mean withholding that information from the hospital or clinic. Experts warn that doing so, however, means any payments don’t apply to customers’ annual insurance limits for out-of-pocket spending.
The decision on whether to pay cash or apply the fee toward the deductible will depend on a variety of factors, including the amount of the deductible and whether the person expects to incur more medical bills that year.
The cash discounts evolved over time after hospitals were criticized in recent years for charging the uninsured their highest rates and then hounding them at times with overzealous collection efforts.
New government rules ensued limiting in many cases what hospitals could charge lower-income patients who were footing their own bills. Meantime, hospitals have been trying to boost revenue by encouraging more patients to pay upfront so they can avoid a lengthy and uncertain collections process.
The California Hospital Assn. says that discounted cash prices are intended for the uninsured, not those who have coverage. Jan Emerson-Shea, a vice president at the industry group, said most hospitals offer a separate discount to insured patients who are willing to pay their portion upfront.
“If you have insurance, you are under that insurance plan’s negotiated rate with the hospital,” she said.
In the view of Robert Berenson, a senior fellow at the Urban Institute and vice chairman of the Medicare Payment Advisory Commission, big hospitals are exerting their market power to charge ever-increasing rates and major insurers go along with it because they can pass along the costs to employers and consumers. Insurance industry officials say that health plans negotiate the lowest prices they can, but that they also need to include prominent hospitals favored by customers in the network, and those institutions can command higher prices.
Hospital executives say they don’t like to charge insured patients more, but say that’s a result of the country’s broken healthcare system.
At Long Beach Memorial Medical Center, where Snyder got her CT scan, the hospital’s Chief Financial Officer said insured patients like her pay more to subsidize the uncompensated care given to the uninsured and low reimbursements for Medicaid patients.
“We end up being forced to charge a premium to health plans to make the books balance,” said John Bishop, the hospital’s finance chief. “It’s a backdoor tax on employers and consumers.”
Those higher prices charged by hospitals and other medical providers drove up healthcare spending at double the rate of inflation during the recession even as patients used less medical care, according to a new study by the Health Care Cost Institute.
Snyder, the salon manager, stumbled across the two-tier system accidentally. She has filed suit against her insurer, saying she hopes her case will lead to more disclosure of the price options, and ultimately lower treatment costs for patients.
The Long Beach woman said she sought treatment in 2009 for a pain in her abdomen. First her doctor ordered a CT scan of her abdomen and pelvis at Liberty Pacific Medical Imaging, an independent facility near Long Beach Memorial.
She got approval from Blue Shield, and she paid the negotiated rate of $660. Snyder underwent surgery on her colon, and her doctor ordered another CT scan in January 2010 because she felt lingering pain.
This time, her surgeon referred her to the hospital’s imaging center. Snyder said she assumed her bill would be about the same because it was the identical test. Instead, Blue Shield’s rate with Long Beach Memorial was $3,497 and the insurer told Snyder she owed $2,336, records show.
Incensed by having to pay nearly four times as much for the second scan, she started searching for an explanation. That’s when she discovered that the hospital’s cash price was less than half what she owed through her insurance.
In a complaint filed last month in Orange County Superior Court, Snyder accused Blue Shield of unfair business practices, breach of good faith and misrepresentation over her medical bills. The suit seeks class-action status on behalf of other Blue Shield customers.
A spokesman for Blue Shield said the case has no merit and the nonprofit insurer negotiates the most favorable rates it can.
In a court filing, Blue Shield said it “cannot promise or represent that there could not be providers who will charge someone less out-of-pocket cost for a service than she would pay if the Blue Shield contract rate applies.”
Snyder said she went back to work last year at a hair salon in Seal Beach, partly to help pay her insurance premiums of $700 a month.
“It kills me that I’m paying that much in premiums,” she said, “and it’s better to pay cash out of my own pocket.”
Health-policy experts say the growing awareness of cash prices should accelerate the trend toward increased disclosure of all types of medical costs. But entrenched interests are likely to resist.
“The insiders in the healthcare industry don’t want to lose control over this information,” Keckley said. “But price transparency is inevitable.”