Show 1471: Broken Bills: Why Americans Pay Twice as Much for Less Care

Americans often boast of having the best health care in the world. It is certainly the most expensive health care. We pay twice as much as people in many other industrialized nations. Are we getting our money’s worth? Some population statistics, such as life expectancy, suggest we could be doing much better. How can we make sense of the complexity of American health care?

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Why We Pay Twice as Much for Health Care

One reason Americans pay twice as much is the complexity of our health care services. We often call it a health care “system,” but it often doesn’t feel as coordinated as a system ought to be. Many other countries have universal health insurance coverage in one form or another (and there are many). That means the government has an incentive for keeping costs down. With so many different payers and players in the US, the incentives frequently go in the other direction.

You may notice this if you examine an explanation of benefits from Medicare or a private insurance company. There may be a sizable gap between what the provider charged and what insurance approved. Who pays the retail price? Only people who don’t have insurance, who are usually those least able to manage a big bill. If you find yourself faced with a hospital bill and no insurance coverage, it is important to talk with the billing department. Nonprofit hospitals should have a mechanism for patients without coverage to negotiate a lower total or a longer time frame in which to pay. Even some for-profit hospitals and medical practices are open to negotiation, but starting the negotiation as early as possible is key.

How Much Does an Emergency Cost?

Nobody plans for a medical emergency. That is the nature of emergencies–they are unexpected. If you need an ambulance to get you there, if you have to be transferred to another hospital with a better ability to care for your problem, if the doctors must do multiple tests to make a diagnosis will all influence your bill. As a result, emergency visits could cost from tens of thousands of dollars to a million or so. With high-deductible health insurance, a person or their family could end up owing more than they can pay. That is how some cases of bankruptcy are rooted in high healthcare bills.

We Pay Twice as Much Because Providers Make More

In the US, doctors were once in the same category of professionals as teachers or firefighters. Those days are long gone. Healthcare providers here are compensated more generously than providers in many other places, such as Canada, Japan or Israel. Moreover, just as there are middlemen in the prescription insurance business (called pharmacy benefit managers, PBMs), health insurance has its own middlemen. The result is a great deal of complexity, very little transparency, and a lot of parties trying to make money on each transaction. That also leads to a great deal of administration, which further increases the cost.

Why Don’t Market Forces Control Costs?

Some analysts suggest that the free market should be able to control costs. But for market forces to work, you need competition and transparency. Over the last decade or so, there has been increasing consolidation in every sector of health care. Competition is limited in most areas. Moreover, transparency is in very short supply in health care. For years we have been talking about how hard it is to do comparison shopping for health services like MRI scans or colonoscopies. If consumers cannot compare costs or value, they cannot make the rational decisions that would help moderate prices.

How Administrative Costs Increase Bills

Part of every insurance premium goes to paying administrative costs. Insurers pay people to review claims (and deny some). Preauthorization also adds to administrative costs.

Manage the Hospital Bill So You Don’t Pay Twice as Much as You Should

Years ago, we interviewed Marshall Allen, who titled his book Never Pay the First Bill.  Our guest for the current episode counters always request an itemized bill. That way you can check it to make sure that simple items such as names, dates and insurance policy numbers are correct. Then look at whether the services billed are actually the services received. An estimated nine of ten hospital bills contain mistakes. The sooner you catch them and contest them, the less likely you are to have to pay them. To determine what you must pay, you may need to review the summary of benefits on your insurance policy. That lays out in detail exactly what the insurance will cover.

What Can Patients Do So They Don’t Pay Twice as Much?

• Ask for an itemized bill and check it carefully in every detail.
• If you find a mistake, contest it. Sooner is better, even though you may be trying to recover from a serious illness.
• Ask the billing office about patient assistance or a negotiated payment plan.
• Check with the Patient Advocate Foundation. They may be able to help in an individual case.
• Find out if your state has a consumer assistance program in the department of insurance.
• Notify an intractable billing department that your story will appear in your social media feed. This should probably be the last step if the previous ideas don’t work. But hospitals really don’t like bad publicity, so it might give you leverage you wouldn’t have otherwise.

This Week's Guest

Linda J. Blumberg, PhD, is a research professor at Georgetown University’s McCourt School of Public Policy. She is an expert on private health insurance (employer and nongroup), health care financing, and health system reform.

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Linda J. Blumberg, PhD, describes why we pay twice as much for healthcare[/caption]