PLANNING AHEAD: Medical costs are expensive, especially for the uninsured

If you ever wondered about medical bills and summaries you receive after a recent hospitalization or summaries received from your insurance carrier concerning recent medical expenses and then question the difference between the amount charged and the amount owed then this column might help.

Note, however, first, that medical bills are mystifying to all of us at times, myself included. Still, recent articles in an on-line source, STAT, to which I subscribe and the Wall Street Journal, describe just how disadvantaged the uninsured are in the overall medical payment scheme. If you have medical insurance of whatever type, whether through your employer, business group, Medicare or one of several other government alternatives including under the Affordable Care Act and others you are still better served than by being uninsured. Here are some sources that describe why this is so.

First, the STAT article titled “How a major hospital shows just how inflated hospital list prices are,” by Bob Herman, Nov. 20, 2023, described hospital listed prices as released by one hospital system in Los Angeles, Cedars-Sinai <although similar concerns related to others as well> and compared them to actual costs charged health insurers and government programs versus costs charged to uninsured patients. According to the STAT article:

“Hospitals’ list prices for surgeries, therapies, and other procedures always come with massive discounts. Financial documents at a prominent hospital system in Los Angeles show just how large those discounts are — and how raw of a deal uninsured patients could be getting…

“<The hospital system> reported more than $10.2 billion of gross patient revenue in the most recent three-month period that ended Sept. 30, according to new financial documents. That’s the total amount the hospital system billed various health insurers and government programs based on its chargemaster rates — …before negotiated discounts were applied…

“Total deductions, which mostly included those negotiated or mandated discounts, were more than $8.6 billion in that same quarter. That means more than 84% of <its> gross charges disappeared into the either…”

The reason, the article makes clear, for the large discrepancy between initial prices and vastly discounted prices is the bargaining leverage for insurers private and some government.

The article goes on to explain …

“Importantly, uninsured and cash-paying patients face the list prices, although the hospital could write the debt off depending on the patients’ circumstances. But if people don’t qualify for financial assistance, they could be forced to pay those hefty prices, while those with insurance get those significant discounts…”

A second article, this from the Wall Street Journal, “Hospitals Often Charge Uninsured People the Highest Prices, New Data Show,” July 6, 2021, the authors describe a patient at Avera St. Luke’s Hospital in Aberdeen S.D. rushed to the hospital with a potentially life threatening tear in the lining of his largest artery. Abdominal, pelvic and chest scans were performed and he remained in Avera’s heart hospital unit for three days.  His hospital bills came to $59,800. The article pointed out that “a then new federal rule required hospitals to make prices public and allowed for the first time a comparison of what deep-pocketed insurers pay hospitals versus rates that hospitals set for patients who pay cash.” It further noted, that “Time and time again, the Journal’s analysis revealed, cash payers are charged among the highest prices … Patients typically pay these cash prices either because they are uninsured or because some services aren’t covered by their health plans.

“Among the Journal’s findings: Hospitals <surveyed> routinely bill uninsured patients at their highest rates. About 21%, or 319 of the hospitals did so for the majority of the services included in the analysis. At 171 of those hospitals, the cash rate was higher than all of the rates billed to insurers, or tied for the highest rate, for every service in the analysis…”

For a reason why this trend occurs it may be helpful to refer back to a study cited in the STAT article, a Human Affairs study published in 2017.

“…High list prices might ‘strengthen hospitals’ bargaining positions,’ the study’s authors wrote. Health insurers may agree to higher in-network rates so their members don’t get subjected to the hospitals’ out-of-network rates, which are the list prices. Hospitals may also use high charges as part of a ‘flea-market strategy in which an excessively high initial price may increase the final negotiated price.”

Janet Colliton Esq. is a Certified Elder Law Attorney by the National Elder Law Foundation recognized by the Pennsylvania Supreme Court and the American Bar Association and limits her practice, Colliton Elder Law Associates PC, to elder law, special needs, guardianships, Medicaid and estate planning and estate administration with offices at 790 East Market St., Suite 250, West Chester, 610-436-6674, colliton@collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones CSA, co-founder of Life Transition Services LLC, a service for families with long term care needs.