Monday, March 23, 2020

THE BIG SCAM: Understanding How Hospitals Price Individuals Versus Healthcare Insurance Companies

I see there is some confusion at my post, Beware Hospitalization Data, with regard to how hospitals charge individuals versus health insurance companies.

I wrote:
Just consider the outrageous fees they charge individuals without insurance and the significantly lower fees they charge insurance companies for the same procedure. This is nothing but a crony deal between hospitals and insurance healthcare companies to push individuals toward buying health insurance.
One commenter wrote:
I have experienced the opposite. I have paid for treatments that were not covered by insurance. I was charged less than what was to be charged to the insurance company.
Another wrote:
I was thinking the same thing. I thought that hospitals charge less to uninsured individuals, and more to insurance companies (third-party payers, which are a reason for rising prices).
In response to these two comments, I note that hospitals and insurance companies make things very complex so that it is difficult to understand what is really going on.

I recommend the book, The Great American Healthcare Scam: How Kickbacks, Collusion and Propaganda have Exploded Healthcare Costs in the United States by Drs. David and Paul Belk.

From the blurb:
The purpose of this book is to effectively untangle and expose nearly all of the deceptions that occur in medical billing, prescription drug pricing and the health insurance industry in the U.S. Throughout the book I use actual medical bills and receipts along with data I've obtained from the financial disclosures of hospitals, insurance companies, pharmaceutical companies and government databases to back up each and every claim I make.I guarantee this book will make your head spin because, as bad as you think our healthcare system is, it's actually far worse and this book will show exactly why and how that's the case. Also, even though many people think they know what the health insurance companies are attempting to do, they're probably wrong.David Belk got his medical degree from the University of Southern California School of Medicine and has a solo practice in Alameda California. He began exposing irregularities in medical billing and prescription drug pricing with his website The True Cost of Healthcare in 2011.His brother Paul Belk got his PhD in medical physics from a joint program at the Massachusetts Institute of Technology and Harvard Medical School. He works as a senior scientist in the medical industry.
They write (with bills and data to back it up):
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....

When a business sends a bill, to you or to another business, you pretty much expect the bill to show the value of what they provided, and therefore what they expect to be paid. But an insurance company pays the hospital based on pre negotiated rates, no matter what the bill asks for. The hospital can turn away all patients with that insurance, of course but, for each insurance company, that would mean turning away a lot of patients...

So because the hospitals know that they’ll only ever get less than what they bill, the process of hospital billing has stopped being a normal business transaction, and turned into something more like a kid daydreaming about his Christmas list. But it works, (well, not really), as long as it’s just a game between the hospital and the insurance company...

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...

This problem of excessive mark-up doesn’t just apply to people who are hospitalized. Hospitals charge the same amount for a service regardless of whether or not the patient is in the hospital. Anyone getting routine tests or a diagnostic workup from a hospital is likely to be charged five to ten times what an insurance company would pay for it (five to ten times what the service is really worth)...

 As I said at the very beginning, one of the biggest problems with medical costs is that the real costs are so well hidden in all these games that almost no one even knows what they are, let alone what to do with them.


  1. Specifically when I experienced the opposite:

    Care for broken arm including two surgeries. Sometime after the first surgery I learned that the medical insurance I had through a labor union did not cover the care because the injury occurred during a motorcycle accident (should have read the fine print). The surgeon, anesthesiologist and surgery center all reduced their invoices.

    I have paid for an MRI out of pocket. I was informed the amount the facility would have billed the insurance was more than what they charged me by hundreds of dollars. I did not substantiate the claim.

    Also, my doctor’s office has x-ray facilities in house. There was a time that my medical insurer did not cover this in house x-ray. I was given the option to set an appointment to have the x-rays done at another facility that the insurance would cover or pay to have the x-rays done in house at once “at reduced fee”. Based on the billings I received and see now that my insurance covers in house x-rays, the bills were reduced.

    1. In don't think you understand the nature of the scam. The insurance companies don't pay anywhere near the invoiced amount.

      Their reductions are almost always better than anything you could negotiate. Or do you think you can negotiate a better rate than insurance companies?

    2. There was no negotiations. The discounts were offered. But to answer your question no.

      The doctors I see now I also see outside their office; we all cycle. I like to think they are doing what they can. They are part of a health center with two decent sized facilities so they may be limited on adjusting charges. I doubt I could negotiate with the health center as effectively as the insurance companies. I could be way off but my speculation is that I was charged close to what they typically are paid by insurance companies. I’ll ask.

      I am relatively sure the surgeon that worked on my arm cut his fees to the bone. This was back in the 80’s when I was just a kid working as a laborer. The injuries kept me from my normal income for about eight months. The surgeon was not part of a larger practice so I assume what he charged was his soul decision. I could be way off on this also but feel like he helped me though a bit of a situation while making less profit than normal.

    3. Denzel is correct. A couple years ago, I called a couple local ENT guys and asked for a no-insurance proce on getting ear wax removed. Take guess? Five bills. This is a minor, routine procedure that takes 10-15 minutes, if that. Do you think the insurance company pays that ENT $500 for a covered patient?

  2. In my experience, individual doctors and testing centers will often offer discounts for uninsured cash payments, but hospitals, not so much, and as Robert says, even the discounted price may be higher that what the insurance company actually ends up paying.

    For example, I have paid cash for several years for a therapeutic blood draw. Price is $75. Then one day they ran it thru my insurance; insurance rejected the claim so they billed me $105 which is what they billed the insurance company. I called and complained and they let me pay the usual $75. So that's fine, but what I imagine really happens is they bill the insurance company $105 and when it is covered, the insurance company might pay say, only $40. So they are happy to take my $75 cash payment.

  3. As a geezer welfare queen, I don't pay for any "supplemental" coverage. I figure those are a righteous ripoff, else, they wouldn't offer it.
    Anyhow, I just had an office visit: x-rays, cortisone shot, real doctor, and it cost me $200 bucks out of pocket. BFD. How much is that "supplemental" gonna cost, again??

  4. Earlier in my career, I worked at a software company that made software that would automatically analyze what the hospitals were charging and what the insurance companies were paying. Hospitals, clinics, etc. would use the software to systematically increase rates if insurance was not making denials on a claim/code. I got out of that job after just over a year. I still feel bad that I took part in that racket.