Blogosphere is all over Steven Brill’s long, long (>20K words) article about medical bills. In reality, the story is pretty short, but it says something profound about the role of a health insurer.
If you have health insurance you are familiar at least with the outlines of a claim:
- Your medical provider bills you for a ridiculously large amount, like $240 for a single session of physical therapy.
- Because you have insurance, the provider agrees to settle for less, say $88.
- The insurance company pays part of the amount in Step 2 above, say $26.40.
- You are responsible for the remainder. Here that would be $61.60.
Brill focuses on price No. 1, which he calls the chargemaster. If you have insurance, the chargemaster is meaningless. Recognizing how absurdly high it is, I call it the Fairy Unicorn Price – FU Price for short.
But if you don’t have insurance, that’s the price you pay.
Much of Brill’s article is example after example of the absurdity of the chargemaster. One woman thought she had a heart attack, but it was a false alarm. She was billed $21,000. Another woman fell down in her backyard and was billed $9,400. And he’s unhappy, of course, that the uninsured – presumably the least able to pay – get billed the most.
I have to agree. We had a close brush with the chargemaster.
My wife broke her elbow last Aug. 4. A couple days earlier (Aug. 1) our insurer changed Liz’s policy number. Unfortunately, the insurer waited till Aug. 8 to tell us what they had done.
That meant Liz’s ER bills were all rejected – a pretty big deal because she ended up spending a night in the hospital after surgery. We were able to clear up the billing SNAFU, after a couple months. But it looked, however briefly, like we would have to pay the chargemaster.
And it meant I kept very, very close tabs on medical expenses. Last week, we paid the final bill. (I think.) All up, the chargemaster hit us for $72,346.66. We paid $4,529.14. Insurance paid $3,239.88. The rest was the insurer-negotiated discount. The chart tells the story.
This chart implies that the main value of a health insurer is as a price negotiator. In our case, the insurer’s indemnification was worth $3,200. Its negotiating power was worth almost 20 times as much, winning us a discount of almost $65,000.
Brill, I think, would disagree. And he argues that insurance companies like the chargemaster “because they can then make their customers feel good when they get an Explanation of Benefits that shows the terrific discounts their insurance company won for them.”
He makes the entirely valid point that the chargemaster price is absurdly high. Hospital reps he talked to agree.¹
Heck, I agree. Who could argue? That’s why I call it the FU Price. No way a broken elbow should cost $70,000. But had we lacked insurance, that’s the bill we’d be negotiating.
And its hard to negotiate down from the chargemaster. Brill talks to medical-billing advocates – people who bargain against the chargemaster for a living. Rarely do they get a price as low as an insurer’s. That $9,418 slip-and-fall chargemaster, for example, only got reduced to about $8,900.
So these days, a health insurer’s ability to negotiate is more important than its willingness to pay claims.
¹ The hospital reps said the chargemaster was just an opening bid toward negotiating a final payment. Of course, it’s an odd negotiation wherein the patient is at a disadvantage. He is forced to make a counteroffer after he has signed a contract to pay what he has been billed.