When “The Medical Billing Shell Game” was published Friday, a follow up post was not expected to be written, but here we are. Another bill arrived this weekend that further highlights how irrelevant retail medical billing can be.

If you read that article, you will recall our subject “Joe” had received multiple versions of a bill related to the implantation of a new pacemaker. To quickly recap, he initially was billed $125,000 for the procedure. The bill was then submitted to Medicare, which applied an $80,000 discount and paid $14,000. Joe then received a revised bill for almost $30,000. The hospital confirmed for us that Medicare had denied some charges, and they were resubmitting the bill with additional documentation.

In the previous article I almost speculated about how much of the additional amount would be “discounted” by Medicare. I decided not to go down that path, but with the receipt of the new bill this weekend, we have our answer. 

Damn near all of it.

After the hospital resubmitted the billing with whatever additional documentation they needed, Medicare accepted the almost $30,000 charges and then discounted $28,500 of them. They paid no additional funds, and now Joe owes just $1,400. In the end, this $125,000 bill was discounted by almost $109,000. The hospital and providers will receive just under $16,000, or about 13% of what was originally charged. 

No one is complaining about Joe’s $1,400 obligation. Given the scope of the life enhancing procedures and the retail cost, it is a veritable bargain. But we find ourselves asking, what’s the point? What administrative cost is involved in funding this shell game? What time and expense went into gathering, submitting, reviewing and approving this “additional documentation” simply to redline the cost with a single stroke of a pen?

Does this make any sense to anyone other than those who are paid to push the paper?

As a federal taxpayer I am happy to see that my tax dollars are not being frivolously spent on outrageous medical bills. As a local taxpayer I am concerned that someone has to pick up the losses at our local county hospital. A few years ago, this specific facility received over 64% of its annual revenue from Medicare (we are, after all, in Sarasota, Florida). With steep cuts in Medicare reimbursements, along with negotiated discounts with a host of private insurers, where is the financial burden being placed?

And how can we really tell what medicine costs, when the retail pricing for 80% of the population means absolutely nothing?

When you think about it, we have developed a perverted system that is completely inverse from what would normally be applied in most economic models. In many other sectors of our economy, people paying cash get discounts. Some stores give them to discourage the use and expense of credit cards. Gas stations often give a four or five cent per gallon discount for cash over credit. Not in the medical community, however. In that sector cash buyers often pay full retail, when the people using “credit” in the form of pending insurance payments get steep, steep discounts. Never mind that with the insurance coverage comes additional paperwork and payment delays – in the world of medicine cash is definitely not king.

In my view, some of this has evolved because, for all of our whining and ruminations, the model of insured medical has been pretty successful. I know that millions remain uninsured in this country, but the fact remains that the vast majority of our citizens have coverage of some sort. 121,000,000 are now covered by government programs. The majority of the rest have private or employer sponsored insurance. If forty million people in this nation lack insurance coverage, that means that over three hundred million have it, and they don’t generally give a rat’s fanny what a medical procedure costs. They don’t think about it beyond their co-pays or deductibles. We have developed a model where it appears someone else foots the bill, and we do not pay attention to what goes on behind that curtain.

Except, of course, for the forty million uninsured. They either pay full retail, stick it to the taxpayer or simply go without.

This is an extraordinarily complex issue, and I in no way am knowledgeable on the subject (or solution). It seems to me, however, that this entire system could benefit from improved transparency and a modification towards some individual cost responsibility. If medical providers were required to post their fees for services, and we shifted people to high deductible insurance plans combined with Health Savings Accounts, we would generate much better awareness of REAL medical costs within our communities. Making people responsible for the initial costs of their care and creating a more competitive environment would make us all more responsible health care consumers. As a bonus, it might just streamline and simplify the billing process as well. 

Until the time something is done, however, the shell game will continue. That is an unfortunate cross we will all continue to bear.

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