An Insider’s Guide to the Insane World of Medical Bills

Have you ever had a near heart attack after getting a medical bill? It happened to me a few years ago after my daughter was thrown from a horse and ended up in the ER with a possible broken arm and collarbone. Turns out nothing was broken, thank goodness. But even though we had health insurance, the high deductible for emergency room care meant we received a bill for $2500 to cover the x-rays and the brief conversation with the physician’s assistant on duty.

I paid the bill, but now I feel like a bit of a sucker for not trying to negotiate. Turns out uncomplicated x-rays like she received should only cost a few hundred dollars. If I had been persistent, I may have been able to get the hospital to settle the bill for less. Who knows? But I should have at least tried.

Why are medical bills such a mess? David Belk, M.D., a practicing physician, has been delving into the issue and has been revealing some surprising facts about medical bill madness on his website TrueCostofHealthcare.org. He shared some of these in a recent interview on my radio show, Talk Credit Radio. Following is an edited excerpt describing a few key things I learned from talking with Dr. Belk.

If you have insurance, you may be overpaying for your medication.

Don’t assume your co-pay is the lowest price you can get for your medications. Dr. Belk explains why: “When you are talking about price, you can categorize medications into two types. There are brand name medications for which a pharmaceutical company still has the patent. They’re the only ones who can make it and they can sell it for whatever they like. Until the patent runs out, nobody else can make it and so regardless of the cost to produce the medication, they can just sell it for not what people will pay, but what the market will bear.

“Then, there are generic medications. Keep in mind all these medications are very easy and inexpensive to make and therefore they do that. And since anyone can make it and sell it, there’s more of an open market for it. They sell these at only slightly more than what it cost to produce them.

“Most medications commonly prescribed today are generic. The interesting paradox is that your insurance co-pay may be more than you can get the medication for if you didn’t use your insurance. And so, if your doctor gives you a prescription for Lisinopril, which is a standard blood pressure medication that works just fine, your insurance co-pay might be $10 a month, whereas you can get a whole year’s supply at Costco for about $20.

“The first thing when a patient comes into my office, I say, “What medication are you on?” And they tell me. I ask, “How much do you pay?” And they usually tell me, ‘Oh, I get a good deal, my insurance lets me have it for $10 a month.’ If I have a little bit of extra time that day and I feel a little bit theatrical, I’ll simply call Costco right in front of them and say, how much would you sell 365 (tablets) of this drug for? And they’ll tell me something like $32.95 or $26.95. Really? $26.95 for a whole year? And the patient’s jaw hits the ground.

“Sometimes, I’ll give them six prescriptions because they’re on six medications and I’ll say, ‘Take this to Costco, tell them you don’t have insurance and see how much it costs.’ And they get a whole year supply of six medications for less than their month’s co-pay.  It’s usually a shocker, but it’s my way of introducing the fact that there’s a tremendous amount of deception in this business at all levels.”

Your doctor probably has no idea how much you’re paying — or how much he or she is getting paid — for her services.

Dr. Belk says physicians are often as much in the dark about your healthcare costs as you are. Here’s why: “Your doctor probably has about 15 different or more insurance providers, all with their own arbitrary set of rules of what’s covered, what’s allowed, and how things are paid. They all pay you a different amount, each following their own system. (And by the way, no, I don’t negotiate any of these with them. I just send them a bill and they send me a check.)

“Most doctors long ago gave up on this system because it is so complicated and difficult. They contract billing companies to do all of it for them. They hand the billing company a list of patients they saw and what are called “superbills” with codes. The biller does all the billing, and does all the collecting, and gives them a check. So they have no idea what individual services got paid or how much they were paid for them.

“My wife does my own billing and I even do my own taxes. So, I know everything that goes in and everything that goes out. It was hard for me to figure it out. You literally have to look at each individual patient’s payment to say, ‘Okay, this patient has Cigna, this patient has Blue Cross and couple together the deductibles, co-pays, the co-insurance fee, the payment itself and say, for that visit, I got this much money.’

“It’s maddening and it’s really, really easy to hide a lot in a system that’s that confusing. And that’s what they’ve managed to do for the most part, since most doctors have no idea even how they’re paid. It’s not really easy for us to make good judgment on what should or shouldn’t be done in terms of medical costs.”

An Insider’s Guide to the Insane World of Medical Bills (cont.) »

Image: yosoyjulito, via Flickr

Millions of Americans don’t have access to health care because they are not allowed to afford it.

Dr. Belk contends that the result of this confusing and opaque system is that millions of Americans don’t have access to health care, not because they can’t afford it, but because they aren’t allowed to afford it. He explains:

“The standard billing charges for a medical office is maybe two to three times what we expect to get. In other words, you send the same bill to everyone and take what they give you. Insurance companies always give you less than what you ask for — unless you ask for less than what they’re willing to give you. If you ask for $100 and they’re willing to pay you $70, they’ll pay you $70. But if you ask for $60 and they’d be willing to pay you $70, they’ll give you $60. So, you build a ceiling above what anybody would pay.

“Hospitals, in particular, do that because there are dozens and dozens of services that go into a hospital stay, and each individual provider doesn’t just pay a different amount for each service, they actually cover services by different algorithms.

“Medicare for example, has this way of reimbursing where they only reimburse for the diagnosis. If you get hospitalized for pneumonia, then the pneumonia is what they pay for regardless of what’s done for that pneumonia. Whereas, private insurers each have their own individual algorithm. They’ll pay by that day, for example, or they’ll pay a certain amount for different services.

“So what a hospital does is what I refer to as ‘The Kitchen Sink Method.’ They throw absolutely everything in to the bill that anyone would pay for, in an amount well above what they would expect anyone to pay for these things. Then they take whatever is given to them.”

Learn More

We’ve received tremendous feedback from other stories we’ve written about medical billing problems. Find out more about how to handle medical billing problems here:

How to Fix Your Medical Bill Problems

Four Medical Bill Problems That Can Cost You Dearly

The Shocking Cost of Medical Collection Accounts on Your Credit Reports

Big Hospital Bill? Negotiate!

In addition, Dr. Belk’s website goes into greater detail on this issue. Visit TrueCostofHealthcare.org.

Finally, you can listen to the entire interview with Dr. Belk: Download the podcast; listen online, or get the free podcast from iTunes.