Many hospitals and doctors offer cash discounts for medical bills for their patients, regardless of income. But there’s a catch: The lowest price is usually available only if the patients don’t use their health insurance.
The savings are impressive in some states. A Long Beach hospital recently charged a patient $6,707 for a CT scan of her abdomen and pelvis after colon surgery, as first reported by the Los Angeles Times. Because she had health insurance with Blue Shield of California, her share was much less: $2,336. But the patient found out about one of the little-known secrets of health care: If she hadn’t used her insurance, her bill would have only been $1,054.
Negotiated Rates Vary Widely
Devon Herrick, a senior fellow with the National Center for Policy Analysis, says the difference between a cash price and what is actually paid by insurance companies results from the negotiated rates that vary from one provider to the next.
“Sometimes the cash price is lower than the insurance negotiated discount. An MRI that might cost $4,000 at the hospital could be $1,500 at one outpatient facility or $600 at another,” said Herrick.
Herrick said insurers should assist enrollees in deciding where to obtain medical services, and consumers should inquire about price differences.
“Consumers shopping for the best deal on medical care need to understand there is often a different cash price if inquiring and paying ahead of time compared to paying after a service has been received,” said Herrick.
Lack of Price Transparency
Dr. Roger Stark, a physician and health care policy analyst at the Washington Policy Institute, says there is no transparency in medical pricing because our health care system is based on third-party payers.
“Over 85 percent of health care in the United States is paid for by someone else—either employers, state governments, or the federal government. When someone else pays for a product or service, pricing is not based on free-market values but instead is based on what that third party can or will pay,” said Stark.
“Only recently have insurance co-pays and deductibles risen to the level where patients are experiencing unacceptable out-of-pocket costs,” explained Stark.
Stark said consumers would be wise to be mindful of these opportunities.
“Hospitals negotiate the highest prices they can receive from insurance companies. Consequently, if patients use their insurance, the hospitals demand those higher reimbursements. Private-pay eliminates the third party and the insurance companies, and is truly a free-market device for patients as consumers of health care,” said Stark.
Growing Cash Payment Trend
John Graham, director of health care studies at the Pacific Research Institute, said the trend of patients paying cash for health care services is a win-win situation for both the patient and the provider.
“When the patient pays cash, he knows how much he has to pay up front and what funds he has available. The provider wins because he doesn’t have to waste time submitting paperwork to the insurance company to get paid,” Graham said.
Graham says paying cash for health care is a growing trend.
“For years we’ve created a larger and larger bureaucracy and made things more expensive because we tend to provide insurance for things that don’t need to be insured. What’s happened is the health insurance industry has said they were providing value by negotiating the best price possible, but the insurance companies aren’t that good at negotiating prices,” said Graham.
Paying cash makes life a lot simpler for everyone, Graham notes.
“You don’t have to worry if the provider is in network or out of network, nor do the providers have to worry about getting paid,” Graham said. Unfortunately, he says, President Obama’s health care law moves things in the opposite direction. “ObamaCare is forcing doctors to join hospitals who are quickly transitioning themselves to be accountable to government rather than the patients. What they’re doing is making the cost of health care procedures more expensive for everyone.”
Gouging the Public
Dr. Hal Scherz, a Georgia urologist and president and founder of Docs 4 Patient Care, says the real story is not that there are two fee schedules—one for insured patients and one for cash-paying patients—but that special interests are price-gouging the public.
“The reason that they can get away with this is because of the disconnect between patients and the financial ramifications of the services that they receive,” said Scherz. “The third party payment system has dissociated patients from this. Consequently, hospitals, working with insurance companies, have been able to jack up prices for services which physicians or free-standing surgery centers cannot do because of state and federal regulations.”
Scherz said the federal government is complicit in this.
“With further implementation of ObamaCare, this problem will worsen, thanks in part to the reliance on the Accountable Care Organization model which is a big part of this law and which gives hospitals even more power to control prices,” said Scherz.
The solution is twofold, says Scherz: Greater price transparency with posted prices for services and the elimination of the third party payment system.
“This would put the financial responsibility for the payment of health care services back into the hands of the patients, where it belongs,” said Scherz.
Kenneth Artz ([email protected]) writes from Dallas, Texas.