Paying Less … Without Health Insurance

(Photo: Zdenko Zivkovic)

(Photo: Zdenko Zivkovic)

Writing for the Wall Street Journal, Jeffrey Singer describes a patient who came in for a “simple outpatient surgical procedure” and discovered it was cheaper to just ignore his “low-cost ‘indemnity’ type of health insurance policy.”  The patient’s estimated costs had he used his health insurance plan: approximately $20,000 (out of the estimated hospital charge of $23,000).  After speaking to the patient, Singer realized that he wasn’t bound by a “preferred provider” contractual arrangement and offered the patient a solution that saved him $17,000:

I explained that just because he had health insurance didn’t mean he had to use it in every situation. After all, when people have a minor fender-bender, they often settle it privately rather than file an insurance claim. Because of the nature of this man’s policy, he could do the same thing for his medical procedure. However, had I been bound by a preferred-provider contract or by Medicare, I wouldn’t have been able to enlighten him….

Most people are unaware that if they don’t use insurance, they can negotiate upfront cash prices with hospitals and providers substantially below the “list” price. Doctors are happy to do this. We get paid promptly, without paying office staff to wade through the insurance-payment morass.

So we canceled the surgery and started the scheduling process all over again, this time classifying my patient as a “self-pay” (or uninsured) patient. I quoted him a reasonable upfront cash price, as did the anesthesiologist. We contacted a different hospital and they quoted him a reasonable upfront cash price for the outpatient surgical/nursing services. He underwent his operation the very next day, with a total bill of just a little over $3,000, including doctor and hospital fees. He ended up saving $17,000 by not using insurance.

(HT: Jason Hirschhorn)

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  1. DanSanto says:

    The big question is how common this situation is. If you’re talking a tenth of a percent of situations, then it’s not worth much effort on anyone’s part, except possibly patients.

    If, however, this is something that could be happening in 10%, 20%, or more of the time, then it’s a major opportunity/problem to be addressed.

    At the very least, it it would suggest that the structure of the insurance system is wildly bloated if a doctor comes out more or less even when he receives $3000 for a procedure being self-paid compared to receiving $20,000 with insurance.

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  2. J.B. Farrell says:

    As a self-insured person, I understand this very well. Including prenatal, delivery, hospital charges (two night and meals), plus pediatrician bill. All in was less than $5,000!!!

    If only we could get rid of insurance coverage for routine procedures and visits… I suspect our healthcare costs would be drastically reduced!!!

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    • Bob says:

      To me, the situation looks very similar to the situation with car insurance. Insurance semantically means protection against risk/loss. Health insurance is being used to pay for anything related to health care, not to protect against accidents or sudden illness. It’s like the situation mentioned here with minor fender benders. If you bump into someone coming out of the parking lot, it will save both people time and money to settle it privately. Similarly, if you need a checkup, it will save you money, and save the doctor’s office time in billing, to settle it privately.

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      • James says:

        This is sometimes true even of not-so-minor fender-benders. Some years ago I was rear-ended, causing quite a bit of cosmetic damage to my newish hybrid. This resulted in a year-long squabble with the other party’s insurance company, which wanted me to scrap a perfectly driveable car because it would be too expensive to restore the aluminum bodywork to as-new condition. After who know how much expense on their part, and no little aggravation on mine, they finally paid me cash – which I promptly banked, and have been driving the unrestored car ever since.

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    • KJ says:

      Do you mean to say that if we subtracted the salaries, bonuses, dividend payments and other administrative expenses of insurance companies, health care would cost less. Wow.
      I wonder if you pared down the salaries, bonues and dividend payments surrounding the 5 star hotel-like hospital conglomerates costs might come down even further.

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  3. Bob says:

    I remember John Stossel had a bit on this a while ago when he was still with ABC on how health insurance inflates the cost of health care. Basically, rising health care costs correspond to the rise of insurance as a method to pay for health care. Without consumers deciding the cost of health care, there are no cost controls. The insurance companies can charge what they want and pass that cost on to people paying for health insurance. The only way to get cost controls in this system is for the government to step in and decide the prices. How exactly the government should step in continues to be a matter of debate.

    Here is an example of a patient shopping around for health care and receiving a substantial discount from list price. Accounts like this are anecdotal, of course, but if you can find 85% savings without using health insurance, I think that dropping health insurance should be explored as an option to control health care costs.

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    • Clancy says:

      Hidden due to low comment rating. Click here to see.

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      • Clancy says:

        What exactly did I say here that attracted such universal dislike? Is the idea that insurance companies try hard to pay less for medical procedures such a controversial claim? Seriously, I made a totally apolitical point about the way insurance pays hospitals and I was immediately voted off the island with no explanation.

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      • Dr. Dave says:

        Here’s why you were voted down. Medicare and the insurance companies add unbelievable amounts of money to the overhead for medical services. It used to be that the doctor would provide the medical service with the assistance of a nurse. There might have been a full- or part-time receptionist in the front. Now, as I said in my other comment, there are more man-hours spent proving to Medicare/insurer that the service was provided than there were spent providing the actual service. Now we have coders, billers, internal auditors, and office managers on the pay-roll. If I could cut out all the paperwork and billing, I would be happy to work for the same hourly rate as many plumbers…

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      • Enter your name... says:

        I spoke to a (recently retired) oncologist, who was firmly in the Medicare-for-all camp, specifically because Medicare had very little paperwork. He provided the service and billed them, and they paid. Dealing with HMO-type insurance, on the other hand, required all sorts of pre-approval and special justifications.

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    • Mike B says:

      Surprisingly in Europe patients pay a larger percentage of their direct Medical costs than most Americans do and its usually in the neighborhood of 20% of the bill. The national health plans cap the total out of pocket expenses, but for most patients enough skin is in the game to get them to shop around.

      Another popular tactic is that the State requires uniform pricing for all payers from all providers. A variation is that each provider must provide a single price for all payers (or all payers of each payment class). This way you don’t have 5 different insurers paying 5 different prices.

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    • pawnman says:

      There’s another way to control prices. Levitt’s mentioned it a couple of times. That is to make consumers pay the costs for the services they are buying, rather than forcing employers to pay it. Then consumers will create competition, rather than having a large corporation bring thousands of clients to a large insurance company.

      Make health insurance function more like car insurance, and you’ll see competition and reduced prices in fairly short order.

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  4. Clancy says:

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    • Nate says:

      Why? Because insurance companies and hospitals are philanthropic organizations? Hardly. If a car dealer could set a price that the consumer would never see but had to deal with in order to drive, they would set prices that met whatever profit margin they want. So it is with insurance premiums and hospital costs today. And government regulation as a solution? Try again. Name one program where adding an inefficient bureaucracy has helped control costs. There aren’t any. Because a dollar spent by an individual for the product or service of another individual will ALWAYS be more effective than one spent with agencies in the middle. No, not every person will have such a rosy story but if we are truly concerned with making the system as a whole better for the people as a whole, then we should do what is best for the entire population. Then figure out how to help out our neighbors, friends, and family from falling through the cracks when they end up in the statistically less likely scenario. Government assistance isn’t needed. Personal and community responsibility is. Just a thought.

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      • Clancy says:

        “Name one program where adding an inefficient bureaucracy has helped control costs.”

        Medicare.

        They pay far less for healthcare than almost any insurance or savvy individual negotiator. And their administrative costs are something like 4% of total expenditures.

        Also Medicaid, also Canada’s “Medicare” and Britain’s NHS and France’s health system, and Germany’s, and Australia’s, and Sweden’s, and Finland’s, and Italy’s, and Japan’s, and every other country that has some kind of national healthcare system pays lower prices for healthcare than the US.

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      • Jeff P says:

        Nate wants a program where an inefficient bureaucracy helps control costs. You could define “inefficient” to mean “doesn’t control costs”, in which case his request is empty of meaning. But here are two programs where bureaucracy does help control costs, both highly relevant because they are about insurance:
        1. Worker’s compensation insurance: Many U.S. states control costs by running their own unsubsidized insurance companies to compete with the private ones.
        2. California earthquake insurance: exists at a reasonable price only because of a self-funded government insurance operation

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  5. Peter Drier says:

    The problem is obviously Medicare’s preferred-provider contract.. Not in any way shape or form that the “list” prices are ridiculous starting points designed to game the Medicare & other insurance systems…

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  6. Sean Parnell says:

    The experience of Dr. Singer’s patient isn’t uncommon for self-pay patients who know how to find real prices for the healthcare they need, instead of simply taking the wildly inflated ‘chargemaster’ prices the hospitals often give out. The patient in this case appears to have had a fixed-benefit policy (described in the article as an indemnity policy) that would give a fixed amount for a given procedure, with any balance left to the patient. These policies can be a great option for people as they are typically much, much less than ‘comprehensive’ health insurance (it should be noted that these policies are not compliant with Obamacare and that while they will continue to be sold after 2014, people holding them will likely be considered ‘uninsured’ and thus subject to the penalty tax), but if you don’t understand how health care pricing works (or doesn’t work, really) then you could be in trouble. Fortunately there are sources of information on how self-pay ‘uninsured’ patients or those with high deductibles can get real prices and quality, affordable care, I’ve actually launched a blog (The Self-Pay Patient, http://theselfpaypatient.com/), to be a source of this sort of information. I actually blogged about Dr. Singer’s patient yesterday, here: http://theselfpaypatient.com/2013/08/22/fixed-benefit-insurance-policies-an-alternative-to-comprehensive-insurance/

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  7. Shane Finn says:

    Not enough details in this article. What insurance plan? What procedure? How many more cases are there like this? I`ve been quoted for cash and insurance for many procedures and never had the cash price be less. More research is needed! Thanks for the thought.

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  8. Paul says:

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