By HAYWARD ZWERLING, MD
I recently saw a patient who received a bill for an outpatient procedure for $333. The Medicare allowable reimbursement for the procedure was $180. I have seen other medical bills where the healthcare provider was charging patients more than 10 times the amount they expected to receive from Medicare or any insurance company.
Another one of my patients had an unexpected medical complication which necessitated a visit to an emergency room. He received a huge bill for the services provided. When I subsequently saw him in my office (for poorly controlled diabetes) he told me he could not attend future office visits because he had so many outstanding medical bills and he could not risk incurring any additional medical expenses. While I offered to see him at no cost, he declined, stating the financial risk was too high.
A patient is required to pay the entire medical bill if they have:
- no insurance
- poor quality insurance
- a bureaucratic “referral problem”
- an out-of-network provider, which means they have no contractural relationship with the healthcare provider/institution, as might result from an emergency room visit or an unexpected hospitalization.
Hospitals, physicians and other healthcare providers usually do not know what they are going to get paid for any given service as they contract with many insurance companies, each of which has a different contracted payment rate. Healthcare providers and institutions typically set their fee schedule at a multiple of what they expect to get paid from the most lucrative payer so as to ensure they capture all the potential revenue. In the process, they create an economically irrational fee schedule which is neither reflective of a competitive marketplace nor reflective of the actual cost of the services provided.
After the insurance company pays the contractually agreed fee to the healthcare provider or institution, the provider “writes-off” the unpaid balance as their contract with the insurance company usually prohibits them from “balance billing” the patient.
If the healthcare provider does not have a contract with the patient’s insurance company, they are a non-contracting or out-of-network provider and they can charge the patient any fee they wish.
When healthcare providers create their exorbitant and economically irrational fee schedule, the patients who suffer the most are those who have a medical emergency which requires them to obtain healthcare services from a non-contracting or out-of-network provider. These patients are legally responsible to pay their entire medical bill, regardless of the absurdity of the charge.
A commercial insurance company which “pays well” would be expected to have a fee schedule that is set at about 150% – 200% of Medicare’s fee schedule. It is almost universally true that the only time a patient is charged in excess of 3 time Medicare rates is when they are seen by a healthcare provider who is non-contracting or out-of-network provider.
If healthcare providers and institutions were prohibited from setting their fee schedule in excess of 250% of Medicare’s fee schedule, it would ensure that an unexpected medical event does not result in an irrational medical bill. From perspective of the healthcare providers and institutions, a 250% Medicare fee schedule restriction would not cause the vast majority of healthcare providers/institutions to experience a significant loss of income.
Clearly, an objective analysis of the risk/benefits of this proposal, as viewed from a societal perspective, would demonstrate that this proposal would be a net positive for society.
Everybody agrees the current healthcare system is not working. We need to try some new solutions. This proposal would be a win for vulnerable patients and would not cause significant financial injury to the vast majority of our healthcare billing entities.
If we hope to create a healthcare system that is sustainable and meets the needs of our society, everyone who works in our healthcare system must be willing to “give a little.”
Hayward Zwerling is an endocrinologist with an interest in health information technology, health care policy, woodworking, and politics. Blog: IHaveAnIdea.us