Money & the Law: Navigating health care costs
Recently, I had occasion to look at a claim summary form from a health insurance company that provides “Medigap” coverage — that is, coverage for health care costs not paid by Medicare.
As usual, I was amazed at the difference between what health care providers purport to charge for their services and what they actually receive, and agree to accept, in payment. Here’s an example from the claim summary that inspired this column: aggregate charges from various providers (hospital, doctors, pharmacists, medical device manufacturers, etc.): $233,303.47. Amount paid to these providers by Medicare: $12,372.61. Amount paid to these providers by the patient or the patient’s supplemental insurance company: $3,252.40. So, basically, the providers here billed $233,303.47 and were paid, and agreed to accept as payment, $15,625.01 — 6.7% of their charges.
Also, this claim summary reminded me that health care purchases are far and away the largest purchases consumers make without having a clue what the cost of their purchases will be, and without having any effective way of doing comparison shopping. (Would you buy a refrigerator without knowing the cost?) People make health care purchase decisions based on little more than marketing, unverified reputational information, referrals from people who don’t know any more than they do, attractiveness of logos, ease of parking, etc.
State legislatures and Congress have tried in various ways to break through the health care pricing wall but with little effect. The Colorado General Assembly, for example, with great fanfare, passed the Transparency In Health Care Providers Act in 2017, with an effective date of Jan. 1, 2018. This law requires at least some health care providers to annually report data about the cost of common services they offer, and the Colorado Division of Insurance then makes this information available on its website in what it calls the Colorado Hospital Price Report. However, this information is, at best, outdated and unreliable, and doesn’t lend itself to comparison shopping by mere mortals.
Plus, what hospitals charge is the tip of the iceberg when the time comes for an inpatient procedure. There will be many other health care providers going along for the ride like, say, anesthesiologists. (Some interesting and easier to understand, but not necessarily useful, comparative information about hospital charges can be found at hospitalcostcompare.com.)
The Centers for Medicare and Medicaid Services produces a physician fee schedule (with tens of thousands of entries), but accessing and searching this data is an exercise in frustration and confusion.
Although not directly related to health care costs, one tool the Colorado Legislature has created that can be useful to health care purchasers can be found online as part of the professional licensing information assembled by DORA — the Colorado Department of Regulatory Agencies. Physicians and other licensed health care providers must file an annual “profile” that, among other things, is supposed to give limited information about malpractice claims and professional discipline. There is no system in place to verify the accuracy of this information. Nonetheless, it can be the basis for a chat with a doctor prior to employment. (“So doctor, tell me about the three malpractice cases filed against you last year.”)
But back to health care costs, we now at least have both federal and state “no-surprises” laws that put guardrails around charges by health care providers who are not a part of a health insurance plan’s “network.” This legislation pushes most of the risk of surprise billings onto health insurance companies, and limits charges to a patient to charges the patient would incur if an out-of-network provider was in fact in the network.
Bottom line, it seems to me the one area where consumers can sometimes do meaningful comparison shopping and have an effect on cost is health insurance. Then, once you make a decision on insurance, you can let the insurance company fight the big battles with hospitals and doctors over health care costs. After all, the way you increase profits if you’re a health insurance company is to beat down the costs you must pay providers in performance of your contractual obligations to the people you insure.
Jim Flynn is a business columnist. He is of counsel with the Colorado Springs firm Flynn & Wright LLC. He can be contacted at moneylaw@jtflynn.com.
Money & the Law columnist Jim Flynn. THE GAZETTE FILE
