My 34-year-old friend Chelsi Ross went to the emergency department of Methodist Hospital in Richardson, Texas four years ago for sudden onset of chest pain and shortness of breath. Fortunately, she was not diagnosed with any serious condition and her symptoms resolved. The blood tests, X-ray, EKG and CT scan during her four-hour ER visit totaled $11,300.75. She had health insurance but, paradoxically, it cost her more than she would have paid had she not been insured.
We’ve all heard about massively inflated healthcare charges. In this case, though, I want to focus on how our healthcare and insurance system is built irrationally, in a way that sometimes surprisingly disadvantages patients who are insured.
But, as more than 50% of privately insured Americans now have, the Aetna insurance plan that she had was a high-deductible plan. This means until she had spent her $5,000 deductible plus her co-insurance amount, her insurance would not kick in. As a result, she was essentially a self-pay, or cash, patient until then.
Hospitals that contract with insurance companies have an “allowed amount,” or “negotiated rate,” that they accept. This means that rather than requiring insurance companies to pay the “sticker price,” hospitals give them a discount. So in this case, the “sticker price” of $11,300.75 was not what Aetna or Ross was expected to pay. Methodist Hospital gave a “discount” to Aetna of $3,503.23 for Ross’ services, so the “allowed amount” that they expected from Ross or her insurer was still almost $8,000. While Aetna paid the hospital $2,192.03, she was left with $5,605.49 to pay out of pocket.
Methodist does offer a “cash” discount of 45% off the sticker prices on its website. So, for example, the hospital charge of $6,229 for a CT scan of the chest is $3,426 if you want to pay in cash. That means her total bill, had she not provided her insurance information and asked to pay in cash, would have been $6,215. Given that the average annual health insurance premium is $8,345 for an individual, she would have saved over $7,700 by not having insurance with this episode.
Wait, you say, don’t you get a fine if you don’t purchase insurance? The answer is no, as Congress eliminated the tax penalty for not having insurance in 2019. But wait again, she only would have saved money if she didn’t have other healthcare costs that year, right? And that’s correct—if Ross had ended up needing a big surgery or having another expensive ER visit that year, her insurance would have kicked in after she met her deductible and co-pay.
But the fact that the average American must pay at a minimum more than $8,000 a year for insurance that may not be used—and then has a deductible and copay on top of that—seems to illustrate one of the ways our current healthcare system fails us. Insurance also fails us because you’d think they would be able to negotiate a lower price than not having insurance. After all, isn’t one of the purported benefits of insurance that companies have more bargaining power and can negotiate better prices? And to add further injury, the “discount” that Aetna received didn’t really help Ross. After she had reached her out-of-pocket maximum, she would have paid the same regardless of the “discount” that Aetna had negotiated with Methodist.
I’m certainly not advocating that people be uninsured—healthcare costs can be catastrophically high. But even having insurance doesn’t mean people are off the hook for medical debt. In fact, 61% of people with medical debt have insurance, per a Kaiser Family Foundation and New York Times report. And this has real consequences. That same report revealed that 75% of insured patients who have difficulty paying their medical bills end up reducing their spending on food, clothing, or necessities. Whether insured or uninsured, 62% of people facing medical bill problems have difficulty paying other bills, too, and can trigger an avalanche of financial instability for not just them but their families, too.
Numerous policies have been proposed or even adopted at the state and federal levels in recent years to start to address the financial catastrophes that Americans have suffered from receiving healthcare. But these wouldn’t have helped Ross. For example, the federal Price Transparency Act required hospitals to publish pricing information online starting in January 2021, but patients in emergency situations, like Ross, don’t have the time to shop around for information to make decisions about where they should seek care. The same goes for the Transparency in Coverage Act, implemented in January 23, which requires health insurers to post price information for covered services. And the No Surprises Act, implemented in January 2022, to prevent people from surprise emergency bills, wouldn’t have applied to Ross’ case since the hospital did have an agreement with her insurance company.
If it’s not an emergency, you can choose not to disclose that you are insured if you want to pay cash. Hospitals may tell you differently since they often prefer to bill your insurer and get more reimbursement, but it is within your rights to tell them you don’t want them to contact your insurer, as protected by the Health Insurance Portability and Accountability Act. But it’s nearly impossible to have enough information to make that decision before you receive healthcare services since, most of the time, you aren’t sure what exact services you’ll need, what the hospital will charge or what your health insurance company will pay until after the fact.
We wrote to the hospital three times in 2021 and asked if she could receive the cash discount given her situation. There was no response. Methodist also did not respond when asked for comment. There was someone, however, who called Ross during that month and asked her, “How much can you pay?” Even a few weeks ago, she also got another call asking if she wanted to “settle” her bill, dangling her a 25% discount if she could settle that day. These phone calls are reminiscent more of flea market bargaining rather than a functioning healthcare system.
One of the building blocks of a basic health system, as defined by the World Health Organization, often known for its work in low-income countries, is one that “ensure[s] people can use needed services and are protected from financial catastrophe or impoverishment with having to pay for them.” Yet that is exactly what we face here in the United States, one of the richest countries in the world. There are potential ways to reform the system—including big ones like single-payer to reduce the inefficiencies of thousands of different health plans, whether that be on a federal or state level, or less dramatic ones, like a “public option,” which is a government-established healthcare plan that Americans can opt into if they so choose. But it requires us to move beyond recognizing there are problems to being willing to have these conversations.
Meanwhile, Ross, like so many other Americans, is still on a monthly payment plan for healthcare that she received while she was insured.
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