[cancer] More on the weird billing, and costs of healthcare

Dad came over yesterday evening and read through the insurance paperwork. He pointed out that what the insurance company allows is by contract with the provider, and if they disallow 91% of the cost of my chemo, that’s between the insurance company and the provider.

I still don’t get that, as one of my chemo drugs is under patent and costs $10,000 per dose. Where did the $10,000 go? Let alone the other $4,500 the insurance disallowed? As Dad points out, what counts is the bill I get from the hospital, not the benefits statement I get from the carrier. Which I haven’t seen that bill yet.

I understand about how contracted services work. One of the reasons for a crying need for healthcare reform is specifically because everything in American healthcare is drastically overpriced, then negotiated back down only by parties with the power to do such negotiation. In other words, if I walked in off the street and paid for chemo 100% out of pocket, I would be paying this $16,100 bill. Apparently my insurance company can pay the same bill off for $1,500.

Kind of rough on the uninsured, the underinsured and the self-funded, who don’t have the negotiating power to have 90% of their bills waived away like my carrier apparently does. Our premiums and copays go up ahead of inflation every year, and have all my life. Apparently the problem of American recreational abuse of the medical system is so great that we must be forced to pay more to ensure good choices. That was certainly the conservative rhetoric around HSAs a few years ago.

But how the hell do we know what we’re paying when there’s a 90% differential between the list price and the insider price? What constitutes informed choice on my part?

I still don’t think this is over. I’m used to seeing downward adjustments on insurance payouts, and the $2,000 I’ll be paying over the next few months for my out-of-pocket and deductibles are just part of my penalty for being ill, despite all the premiums I’ve paid over the years. This is the “best in the world” system, after all, and I have to pay to play. But where the hell did $14,500 go? And who’s paying for it?

The healthcare system’s financial transparency is even worse than Wall Street’s.

13 thoughts on “[cancer] More on the weird billing, and costs of healthcare

  1. Kai Jones says:

    if I walked in off the street and paid for chemo 100% out of pocket, I would be paying this $16,100 bill. Apparently my insurance company can pay the same bill off for $1,500.

    It’s my understanding that no, you wouldn’t pay the full MSRP. The medical providers have different price lists for people who are paying cash–and why wouldn’t they? You’re not making work for them. You don’t have a million forms to fill out and agreements to sign, you’re going to just pay–and they don’t even have to discount it based on time before you pay, that is, they don’t have to build in 3 months’ interest on the amount by inflating it, since they’re not going to wait 3 months for your payment like they would for the insurance company’s payment.

    1. Jay says:

      Ok, that makes sense. But what does it *cost*? I am baffled. (I mean, I’ve always been baffled by this, but it’s gotten a lot more immediate lately.)

  2. Kai Jones says:

    🙂 Cost is an accounting term and it’s one that doesn’t apply here. What matters is what they want you to pay, and it seems they take individual situations into account in determining that price.

    1. Jay says:

      Heh. I get cost vs price, but somewhere down at the bottom there is money paid to the pharma companies; capital equipment; allocated costs for the facility, doctor, nursing and PA staff time; supplies etc. And the *price* is so elastic as to be meaningless. I remain baffled, yanno?

  3. Kai Jones says:

    I imagine a lot of doctors are baffled as well. They do write off a lot of work–pro bono as well as patients who just never pay. When I was in the collection industry we were always frustrated by how little the docs were willing to do. First they held onto receivables for over 2 years–past the statute of limitations for malpractice! Then they wouldn’t let us pursue debtors aggressively.

    And yet they have to be covering their costs and making a good living. There’s a lot of wiggle room in the price if they can write off so much, get so much delayed payment, and still pay for nice offices, good staff, and a good life.

  4. Ashavan Doyon says:

    The costs are indeed baffling. I have to try to explain the system to my international students who are unlucky enough to have to go to a hospital and get billed.

    They usually tell me in no uncertain terms that health care in the US is mystifying… and also highway robbery. Regrettably I can’t disagree.

  5. Clearly, when they say it is the best system in the world, they do not mean for patients. . . .

  6. Dawn Plaskon says:

    Hey Jay,

    I am glad that the 9% coverage amount does not lead to a big copay for you. I’d forgotten about the disparity between the amount a provider bills to the insurer and the negotiated payment amount, but today’s post reminded me of the vast difference in billed to paid amount for Steve’s two stenting procedures in 2008 and 2009.

    In reviewing the claims data before posting this,
    I found it interesting that the negotiated amount paid to the hospital for the identical procedure appears to have been cut by almost 40% in one year period while the billed amount was increased by a very minor amount. In this particular case, the billed cost of the medical care did not rise significantly, but the insurer’s payment to billing ratio dropped by almost half. So, the argument that cost of care is increasing too much does not hold for this particular example. In fact, the medical provider saw a significant reduction in its compensation for the same procedure billed at an increased rate of only 2%. Additionally, my cost to cover Steve increased by 38% (from 500/month to 800/month) when our company health insurance was renewed in October 2009.

    Stent procedure 1 in early October 2008 was billed at 160k, insurer paid 25k.

    Stent procedure 2 in late September 2009 was billed at 163k, insurer paid 17k

    I am baffled at how to determine the ‘real cost’ of medical care. Do the hospitals bill such exorbitant amounts in order to ensure that they are able to recover their actual costs, plus?

  7. Rick York says:

    Medicine is inherently non-competitive. I mean, really, does anyone want “cheap” medical care? Are caregivers going to race to the bottom in price?

    The market simply has no real application in health care. Most of the industrialized world recognizes that – even Switzerland, which was late to the game.

    Since health care is not a real market, pricing is essentially irrational. Why shouldn’t an insurance company pay one-tenth of the stated price? Who else is the hospital going to make pay? We flesh and blood – as opposed to corporate – persons just go bankrupt. Any relationship between cost and price in health care is strictly accidental.

    People need health care. Contrary to the libertarian view of everything as a choice, health care is not a choice.

    We have straight-jacketed health care into an obsolete, inefficient and inhumane model. People are, literally, dying to maintain a system which makes no sense from any viewpoint.

    Unfortunately, all you have to do is throw in a few “Death Panels” and cost shibboleths (hey, we already pay more per capita than any first world nation) and people lose track of their own self-interest. Don’t even get me started on birth control and abortion.

    Rationing? If you cannot see that US health care is rationed right now, you’re not paying attention.

    1. Mark says:

      Rick, what a great response. Not only do I agree 100%, but I greatly admire the way you stated it. I usually get so angry and frustrated at the conversation I just start mumbling. I wish more people would see this particular issue more clearly and understand that we aren’t talking about buying a car. We are talking about the medical care that literally keeps us alive. Yeah, I really think discounters would love to get into that business. Perhaps they will hire only Dr’s who are in the bottom 3rd of their classes – and use the minimum bandages when you are bleeding. Perhaps you will be abel to buy your high blood pressure medication in 50 gallon drums – like a Sam’s Club for American Health Care.

      -M

  8. Meran says:

    My experience has been just as stated by all the well versed comments above, except:
    in the past, I’ve actually been presented by the “without insurance” costs ahead of time. These were NOT “cash” prices. The differences were huge. When I questioned, as I am wont to do, it was explained that since insurance never paid all they were asked for, there was a percentage added on to insure (lol) the doctor would get what he really wanted.
    As to actual prices of services or equipment, an aspirin is worth prob 1/10th of what you see in Walgreens; the service is whatever they want to ask (rent, everyone’s salaries, etc, etc plus 4000%, just to make a “decent” profit).
    Why is a painting by one artist more than one of the same size by a different artist? The question just doesn’t apply.
    Yes, the system needs an overhaul. Will it be fixed? I doubt it, tho it prob will change.
    I downloaded the president’s plan last night, started reading, and saw guidelines but no real facts I could follow in my own situations.
    Good luck on your own sitch…

  9. Stuart Holtby says:

    In Canada doctors opposed universal health care until they realized that they actually made more money after it came in. I’m not proud of that, being a doctor myself, but there it is.

    And you may have noticed that the country to your north is well ahead of you in overall satisfaction with health care, and taxation, and more importantly is so far ahead of the USA in mortality statistics that even a Democrat needs binoculars to see us. Look at the numbers, folks, the USA in on the second page of UN stats for health, and in some categories on the third page.

    Efficient care? I have a colleague in Duluth whose office staff consists of a secretary, and 5 (yes dear readers FIVE) people who do nothing but chase insurance companies. I have a secretary. Billing takes her about 10 minutes a day and our reimbursement rate is 99 – 100%.

    Yes we wait for some things longer than someone with ready cash or a great plan waits in the USA, but no one waits for critical care and no one (NO ONE) pays for chemo or worries about the cost of chemo.

    What is with America? I really don’t understand.

    Remember Bismark? “A fool learns by experience. I learn by the experience of others.”

    I hope your chemo goes smoothly and cures you!

    1. Jay says:

      Believe me, you don’t have to convince me. Sigh.

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