We’ve all heard these outrageous stories about how expensive hospital bills can be.
A Dallas man who paid over $2,000 a month to his health insurance was billed over $128,000 for his hospital visit.
In Fort Worth, a woman was charged over %3,429 for her in-network hospital using an out-of-network doctor.
In Utah, a couple was charged $40 just so the father can hold his newborn baby.
These kinds of stories are far too common with more and more individuals speaking out about their outrageous hospital bills; so much so that John Oliver of HBO’s Last Week Tonight made a prime time splash and managed to pull off the largest giveaway on national TV by purchasing and subsequently forgiving $15 million in hospital debt.
With the national spotlight on the fate of the Affordable Care Act and Healthcare Marketplace plans, one thing that many people don’t seem to be asking is why is medical care and hospital bills so expensive?
To explain the current state of our health care system, let’s use a simple hypothetical:
Let’s say your local supermarket began charging $300 for eggs, $200 for bread, and $100 for milk. There are, however, smaller and more specialized stores that either sell eggs, bread, or milk for the same retail price they’ve always been.
If you purchase your groceries at the supermarket and you are a monthly-paid subscriber to a coupon book, you may use your coupons to purchase your groceries at a discounted rate around the neighborhood of 90% off. However, if you aren’t a paid subscriber and have no coupons, the supermarket may or may not offer you a discount if you can’t afford the groceries; if they do, perhaps they will charge you $150 for eggs, $100 for bread, and $50 for milk, instead. Although discounted, clearly these prices are well and above what eggs, bread, and milk are priced at the specialized stores.
If the supermarket has set the price for groceries so high and so expensive that it is, essentially, necessary to be a monthly subscriber to a coupon book and even pass laws to provide access to affordable subscriptions to these coupons, shouldn’t the issue not be how many individuals we can get coupons for, but how egregiously high the supermarket is charging for groceries? If a basic need has become impossibly expensive, shouldn’t we be concerned that no one can possibly afford it alone?
So what exactly is going on?
Dr. David Belk helps explain the true cost of healthcare in the video below:
From Dr. Belk’s Website: truecostofhealthcare.net
The method of reimbursement for a hospitalization differs substantially for different insurance companies. It’s not just that the rate is different for each service, but that different payers will reimburse different services. Medicare, for example, bases their reimbursement rate solely on the patient’s diagnoses. A diagnosis of pneumonia will get a fixed Medicare payment regardless of how long the patient stays in the hospital, what tests are ordered or what treatment is given. Other payers might pay by the day, or for each individual service. But the hospitals do all their bills the same way, no matter who the payer is. So the best way for them to get paid is to put anything that might be reimbursed by any payer on every bill.
An insurance company will happily ignore the things it doesn’t intend to pay, but will never add anything the hospital leaves out. It will also happily pay less than the hospital asks, but certainly will never pay more. In other words, there is no penalty for billing too much for a service, but if the hospital doesn’t bill enough, it short changes itself. The only potential penalty would be for billing for a service not provided or a diagnosis not justified.
Hospitals see no problem in sending bills to insurance companies for five to ten times the amount that they actually expect, because they are simply playing the game that the insurance companies fashioned. But remember, they only produce one kind of bill, and it’s designed to send to someone who holds all the cards (an insurance company), and so can just refuse to pay anything they didn’t already agree to pay. That’s their game.
But what happens when you have to play the game with the hospital alone (if you don’t have insurance, or if your insurance doesn’t cover that stay for some reason). Then you’re on the hook for the entire amount. Most hospitals have a policy that allows people to negotiate for a lower amount, but most people don’t know this. And don’t expect the hospital to tell you about it, let alone help out. So even if you can remember to negotiate while you’re convalescing from a long hospital stay, good luck trying to get the deal the insurance company gets.
In short, hospitals charge well and above the reasonable and regular rate, or well and above what they expect to be paid, typically at the expense of the under-insured or uninsured individual. This systemic price gouging and debt collecting is really all in the interest of one thing: making money.
Is any of this legal?
In Texas, if a hospital files what is called a hospital lien on an individual with a bill that is well and above the reasonable and regular rate, they would be breaking the state hospital lien law that explicitly forbids hospitals from doing so.