health insurance - billed vs what insurance pays doc

[hicabob]

This one blew me away - my young adult daughter, who is still covered on my health insurance, had arthroscopic surgery on her knee - total time 1/2 hour - great doc, all good, everyone happy.
The bill came and I was amazed ... Docs billed $36992.89 (mri, anesthesia, knee work, etc) - but the "in network agreed upon price", which is what the insurance + I end up paying and the docs end up getting, was $2192.00, which seems pretty good value to me for services rendered.

An 18:1 ratio - see if you can beat that! An absurd system indeed but keep that health insurance up if you retire before 65!.

[bluemarlin08]

How much is your deductible and coinsurance? Somethings seems very wrong if that is all that is due unless it is a very low deductible.

[strafe]

How much is your deductible and coinsurance? Somethings seems very wrong if that is all that is due unless it is a very low deductible.

The OP is talking about allowable charges. Deductible/coinsurance don't affect that.

[EmergDoc]

$2200 for the work of 3 docs seems fair.

What about the facility fees for the MRI and the surgery?

[hicabob]

How much is your deductible and coinsurance? Somethings seems very wrong if that is all that is due unless it is a very low deductible.

She paid the $250 deductible + $20 copay - it's decent Aetna insurance.

[hicabob]

$2200 for the work of 3 docs seems fair.

What about the facility fees for the MRI and the surgery?

I thought the doc fees were great - it's the difference between billed and what they actually get that blows me away ( because I'd like to self insure but obviously it would not work).
mri/recovery room/etc were in the negotiated rate.

[bluemarlin08]

That is incredible, curious as to what is the premium for a family with a 250 deductible. Is it an individual plan or group. Never see that low a deductible. Good news for you.

[Alan S.]

The often unstated value of having insurance is not the payment of the claim, but the negotiating power the insurance company has by providing large numbers of patients to the provider, hospitals in particular. If you had to negotiate your own payment individually, it would probably be much higher than what the insuror paid. This is aggravated by providers passing on highly disproportionate costs to individuals, some of which are due to the concessions made to the large insurors. The resulting bills are as a result absurd in most cases, as is the industry use of the term "write off".

[Saving$]

The OP's insurance company negotiated the allowable charges to be just under 6%, or in other words, a 94% discount from the "full rate."

Until this, the most I had seen was a bill a relative received after a stay in the hospital, which was discounted over 90%, as follows:
Total Charges: $98,904
Adjustment: $89,279
Allowable Charges: $9,625
Paid by Insurance: $8,574
Amount Owed: $1,050

This is why the healthcare billing system is ridiculous. There is no possible way they can provide a service to one subgroup of people at a 90-94% discount simply due to a quantity agreement. I have no clue how they calculate the full rate, but I am quite sure they are making money even at the allowable charges, so why they charge those without insurance such high markups is an enigma.

[steadyeddy]

Did anyone else get the special issue of Time Magazine on this topic? It was eye opening for me.

[czeckers]

As a physician, I think this is one of the biggest travesty in our current system. There is no link between real costs and the billed costs. I think it evolved over time when the insurance company agreed to pay 80% of the billed amount, so the providers increased the billed amount to compensate. Then it became 60% and the charges increased again. And so on, and so on, and so on. When you realize that 20% of our population is uninsured, and most of those are middle class people who are self-employed or working at a job with no insurance, you realize that a large segment is constantly at risk of being bankrupted by one injury or serious illness. Even if they can negotiate the bill down to 50%, that's still a far cry from the usual rate.

My experience is with labor epidurals. My wife has had 6 at 4 different hospitals. The charges come to $2500-$3500 every time. The insurance pays $300-$500. As an anesthesiologist, I think the $300-$500 for a labor epidural is reasonable. I don't know why we bill so much.

-K

[ddunca1944]

I am continually astounded at the difference between the billed amount and the discounted amount. And, yes, that discounted amount is one of the biggest advantages of even carrying healthcare ins. (In addition to - hopefully - being protected from enormous medical bills in the event of an accident/serious illness.

Once recent bill was $16 for a blood draw. The discount was $13 and the amount we paid out of pocket (had not reached the deductible yet) was $3.

[winglessangel31]

Without going into a discussion on politics, I think this is still a fair place to put a plug for the following petitions:

[No, it's not. Links removed by admin LadyGeek]

[winglessangel31]

As a physician, I think this is one of the biggest travesty in our current system. There is no link between real costs and the billed costs. I think it evolved over time when the insurance company agreed to pay 80% of the billed amount, so the providers increased the billed amount to compensate. Then it became 60% and the charges increased again. And so on, and so on, and so on. When you realize that 20% of our population is uninsured, and most of those are middle class people who are self-employed or working at a job with no insurance, you realize that a large segment is constantly at risk of being bankrupted by one injury or serious illness. Even if they can negotiate the bill down to 50%, that's still a far cry from the usual rate.

My experience is with labor epidurals. My wife has had 6 at 4 different hospitals. The charges come to $2500-$3500 every time. The insurance pays $300-$500. As an anesthesiologist, I think the $300-$500 for a labor epidural is reasonable. I don't know why we bill so much.

-K

In my understanding, the answer is a simple two-word phrase: "rate setting". There are no restrictions or strict guidelines for rate setting, therefore it's a crap-shoot free-for-all out there, and nobody has a reason to price lower than the next guy because it's just lost profit to them. It's basically a tacit cartel with high barriers-to-entry, and nobody needs to police the price because supply is limited.

[mayoman]

As a physician, I think this is one of the biggest travesty in our current system. There is no link between real costs and the billed costs. I think it evolved over time when the insurance company agreed to pay 80% of the billed amount, so the providers increased the billed amount to compensate. Then it became 60% and the charges increased again. And so on, and so on, and so on. When you realize that 20% of our population is uninsured, and most of those are middle class people who are self-employed or working at a job with no insurance, you realize that a large segment is constantly at risk of being bankrupted by one injury or serious illness. Even if they can negotiate the bill down to 50%, that's still a far cry from the usual rate.

My experience is with labor epidurals. My wife has had 6 at 4 different hospitals. The charges come to $2500-$3500 every time. The insurance pays $300-$500. As an anesthesiologist, I think the $300-$500 for a labor epidural is reasonable. I don't know why we bill so much.

-K

Interesting you would value your time for 8-10 hours of labor (no pun intended), often times at night or weekends, at $35-50/hr. Does that even cover overhead of malpractice, CME, etc.? My plumber charges more than that ( and yes I have heard the joke). Not trying to belittle you, just interested. It has been my experience with a number of physician acquaintances that they have begun to feel "guilty" about their professional fees when in reality a number of primary care physicians have longer work hours, more overhead costs, no "pension" or healthcare plans provided, and generally lower overall salaries than their counterparts, with less investments in education, in other areas of business.

[Piecake]

Did anyone else get the special issue of Time Magazine on this topic? It was eye opening for me.

Yup, The Bitter Pill is a great article. Highly recommended that everyone read it

[NOLA]

As a physician, I think this is one of the biggest travesty in our current system. There is no link between real costs and the billed costs. I think it evolved over time when the insurance company agreed to pay 80% of the billed amount, so the providers increased the billed amount to compensate. Then it became 60% and the charges increased again. And so on, and so on, and so on. When you realize that 20% of our population is uninsured, and most of those are middle class people who are self-employed or working at a job with no insurance, you realize that a large segment is constantly at risk of being bankrupted by one injury or serious illness. Even if they can negotiate the bill down to 50%, that's still a far cry from the usual rate.

My experience is with labor epidurals. My wife has had 6 at 4 different hospitals. The charges come to $2500-$3500 every time. The insurance pays $300-$500. As an anesthesiologist, I think the $300-$500 for a labor epidural is reasonable. I don't know why we bill so much.

-K

Interesting you would value your time for 8-10 hours of labor (no pun intended), often times at night or weekends, at $35-50/hr. Does that even cover overhead of malpractice, CME, etc.? My plumber charges more than that ( and yes I have heard the joke). Not trying to belittle you, just interested. It has been my experience with a number of physician acquaintances that they have begun to feel "guilty" about their professional fees when in reality a number of primary care physicians have longer work hours, more overhead costs, no "pension" or healthcare plans provided, and generally lower overall salaries than their counterparts, with less investments in education, in other areas of business.

8-10 hours for an epidural? We just had one last night (wife gave birth to a beautiful baby girl) and we saw them for 15 minutes. I'm sure its more work than that, but 8-10 hours?

[bluemarlin08]

Reimbursement rates are typically around 50% for my plan. I can usually negotiate the Medicare rate which is typically 50% of the negotiated insurance rate. Wife recently was referred to a major medical centers "alternative integrated" facility. My wife went alone and didn't negotiate the price. Doctor billed 1000 for a 45 minute visit, insurance credited 500. Should one expect a physician to read your medical file before the visit, I did. Half way through her appointment he went to his computer and read her file for the first time, would have saved the first part of the appointment.

[pennstater2005]

As a physician, I think this is one of the biggest travesty in our current system. There is no link between real costs and the billed costs. I think it evolved over time when the insurance company agreed to pay 80% of the billed amount, so the providers increased the billed amount to compensate. Then it became 60% and the charges increased again. And so on, and so on, and so on. When you realize that 20% of our population is uninsured, and most of those are middle class people who are self-employed or working at a job with no insurance, you realize that a large segment is constantly at risk of being bankrupted by one injury or serious illness. Even if they can negotiate the bill down to 50%, that's still a far cry from the usual rate.

My experience is with labor epidurals. My wife has had 6 at 4 different hospitals. The charges come to $2500-$3500 every time. The insurance pays $300-$500. As an anesthesiologist, I think the $300-$500 for a labor epidural is reasonable. I don't know why we bill so much.

-K

You said it. Even in the field of physical therapy it's no different. We have patients all the time who ask about their bill for $300. If they don't read the bill thoroughly they have no idea we were only reimbursed, say $100 depending on the insurance. And most of the time it is less than that. It's a ridiculous system. The insurance company only pays a certain percentage so the medical side offering the service adjusts their prices accordingly to receive an appropriate fee. Who knows if this practice will ever change.

[ram]

This one blew me away - my young adult daughter, who is still covered on my health insurance, had arthroscopic surgery on her knee - total time 1/2 hour - great doc, all good, everyone happy.
The bill came and I was amazed ... Docs billed $36992.89 (mri, anesthesia, knee work, etc) - but the "in network agreed upon price", which is what the insurance + I end up paying and the docs end up getting, was $2192.00, which seems pretty good value to me for services rendered.

An 18:1 ratio - see if you can beat that! An absurd system indeed but keep that health insurance up if you retire before 65!.

Most MDs have given up the billing part to the business managers in their practice.
In the OP's example 6% of the full rate was received by the practice and 94% was the discount. This steep discount is unusual (but possible).

Lets say that a medical practice gave some medical service to a patient and wants to RECEIVE $1000 for it. Every billing manager knows the "weighted average discount rate" for his practice. Lets say it is 75%.
If you know these two values you will know what to bill to get what you want. Thus in this example one would have to bill $ 4000 and after a 75% discount you will get $1000.

Within in this weighted average discount rate some insurers are getting a 90% discount and some are getting a 60% discount. Lets say the next year the proportion of patients from the insurance company getting the larger discount increases such that the "weighted average discount rate" now becomes 80%. The practice still WANTS $1000 for the same service. But now it has to bill $5000 to get the same $1000. If it wants $20 more the "full rate" has to go up to $5100.

I do not know of any solution to this problem.
Edit-
Added. - The federal govt values my time at $86/hr based on my research grants. But it assumes that I work 40 hr/wk. For the 50+ hrs that I work I calculate it to about 70 to 75/ hr. I am on a salary and patient care pays me somewhat better than the federal medical research rate.

[jsl11]

Reimbursement rates are typically around 50% for my plan. I can usually negotiate the Medicare rate which is typically 50% of the negotiated insurance rate.

The reimbursement rate for my plan is quite variable. My records show reimbursements ranging between 11% and 88%.
Jeff

[czeckers]

I agree that having access to the negotiated rates is a huge advantage of having insurance. I personally like the high deductible HSA plans for that reason. You pay a much lower premium and you essentially self-insure for the first portion but at negotiated rates and with pretax dollars. Once you use up your deductible everything is covered so it works as catastrophic coverage. It also makes me think about how I allocate my health dollars. Do I really need that MRI be abuse my knee hurts?

As far as valuing my time... I get a salary so I'm (thankfully) removed from the whole billing issue -- it's one less thing to worry about so I can focus on my patients. Medicare values my time at $68/hr and that includes all non-drug equipment/supply costs. It is what it is. The economics of health care delivery are very perverse.

-K

[mayoman]

As a physician, I think this is one of the biggest travesty in our current system. There is no link between real costs and the billed costs. I think it evolved over time when the insurance company agreed to pay 80% of the billed amount, so the providers increased the billed amount to compensate. Then it became 60% and the charges increased again. And so on, and so on, and so on. When you realize that 20% of our population is uninsured, and most of those are middle class people who are self-employed or working at a job with no insurance, you realize that a large segment is constantly at risk of being bankrupted by one injury or serious illness. Even if they can negotiate the bill down to 50%, that's still a far cry from the usual rate.

My experience is with labor epidurals. My wife has had 6 at 4 different hospitals. The charges come to $2500-$3500 every time. The insurance pays $300-$500. As an anesthesiologist, I think the $300-$500 for a labor epidural is reasonable. I don't know why we bill so much.

-K

Interesting you would value your time for 8-10 hours of labor (no pun intended), often times at night or weekends, at $35-50/hr. Does that even cover overhead of malpractice, CME, etc.? My plumber charges more than that ( and yes I have heard the joke). Not trying to belittle you, just interested. It has been my experience with a number of physician acquaintances that they have begun to feel "guilty" about their professional fees when in reality a number of primary care physicians have longer work hours, more overhead costs, no "pension" or healthcare plans provided, and generally lower overall salaries than their counterparts, with less investments in education, in other areas of business.

8-10 hours for an epidural? We just had one last night (wife gave birth to a beautiful baby girl) and we saw them for 15 minutes. I'm sure its more work than that, but 8-10 hours?

Nola,

First let me congratulate you on the birth of your daughter and hope mother and baby are healthy and doing well. Please understand I am not trying to start an argument but I am just trying to understand for myself how services should be valued in healthcare because it is obvious our present system is unsustainable especially for those of us who may not have employer sponsored plans. In your example, you said that the anesthesiologist was only involved for 15 mins so it makes me assume the epidural functioned well and there were no complications throughout the labor and delivery process even though that process may have been several hours. During that time good medical practice would require the MD to be present and immediately available for any complications. To me that is work because if this is middle of the night, I for one would rather be home and in bed. A couple of analogies come to mind. In my plumber example, customers are usually charged a "portal to portal" hourly rate. Thus time not actively working on my leak but dedicated to my problem is charged. Another example is airline pilots. Their main work involves take offs and landings which involves only a small portion of the total flight time, while at altitude their main function is monitoring the autopilot which is doing the "work". Granted I want their expertise in the event of an emergency. Should they not be compensated for that "monitoring" time and how should that be valued. I have no answers, just questions and please don't take the above comments as dismissive but as exploring an issue which directly affects me financially.

[dm200]

I am continually astounded at the difference between the billed amount and the discounted amount. And, yes, that discounted amount is one of the biggest advantages of even carrying healthcare ins. (In addition to - hopefully - being protected from enormous medical bills in the event of an accident/serious illness.

Once recent bill was $16 for a blood draw. The discount was $13 and the amount we paid out of pocket (had not reached the deductible yet) was $3.

None of this applies to me now, since I am in an HMO. However, in past experiences with claims with insurance, the differential was astounding to me. While small in dollars, the "blood draw" fee was interesting because the insurance never paid for it (just for the tests) and that fee was always written off.

Yes, having insurance seems to give much discounted fees. I can;t recall the exact details now, but a few years ago I had services from a podiatrist, much of which was covered by insurance. There were a few optional (for me) things, and I received the insurance company rates - not the list price (which was quite a difference as I recall)

[rpike]

I agree that having access to the negotiated rates is a huge advantage of having insurance. I personally like the high deductible HSA plans for that reason. You pay a much lower premium and you essentially self-insure for the first portion but at negotiated rates and with pretax dollars. Once you use up your deductible everything is covered so it works as catastrophic coverage. It also makes me think about how I allocate my health dollars. Do I really need that MRI be abuse my knee hurts?

+1

However, on an HDHP it isn't so easy to find out how much something is going to cost. My wife once was written an antibiotic prescription that turned out to be $70 at the pharmacy. When asked about the cost, they said this was a 1x per day dose and same drug in a 3x per day dose was $7 but would require a new prescription from the doctor (and a few extra hours).

A typical exchange goes something like this:

Me: How much is that going to cost?
Provider: I don't know. Don't you have insurance?
Me: Yes, but it is not the kind of insurance that pays for things; it is the kind of insurance that negotiates the prices that I pay!

[dm200]

I agree that having access to the negotiated rates is a huge advantage of having insurance. I personally like the high deductible HSA plans for that reason. You pay a much lower premium and you essentially self-insure for the first portion but at negotiated rates and with pretax dollars. Once you use up your deductible everything is covered so it works as catastrophic coverage. It also makes me think about how I allocate my health dollars. Do I really need that MRI be abuse my knee hurts?

+1

However, on an HDHP it isn't so easy to find out how much something is going to cost. My wife once was written an antibiotic prescription that turned out to be $70 at the pharmacy. When asked about the cost, they said this was a 1x per day dose and same drug in a 3x per day dose was $7 but would require a new prescription from the doctor (and a few extra hours).

A typical exchange goes something like this:

Me: How much is that going to cost?
Provider: I don't know. Don't you have insurance?
Me: Yes, but it is not the kind of insurance that pays for things; it is the kind of insurance that negotiates the prices that I pay!

I had something similar a few years ago. My plan had three tiers for prescriptions - lowest wasgeneric, then brand where no generic available, then (highest) brand where generic available). I filled a presctiption and was charged the highest price. When I inquired, the pharmacy told me there was a generic available. I asked why I didn;t get the generic (and lowest price). The said they didn't have it in their inventory and they only had the generic in pills that were 1/2 the pills in my presecription. OK, I said, why can;t you just give me twice as many pills. They said, that's not the way the prescription is written.

So, the next time I saw the doctor, I asked her to write the prescription for two pillsa day. Then I got the much lower price for a generic. What nonsense!

[tj]

I had some blood work done and the EOB confused the heck out of me.

The "claim" was for $2145.00, "patitent savings" $2008.09 with $136.91 due to be applied to deductible. The insurance company evidently paid absolutely nothing but apparently negotiated $2000 off the bill.