Hide your health insurance status and pay cash instead

It always has broken my heart to see a person bankrupted by the costs of their healthcare. I remember my outrage when I first learned the only people who pay full price for their medical procedures are the ones paying cash. Insurance companies use their market muscle and patient volumes to  negotiate discounts for their patients that have always been unavailable to the uninsured, individual healthcare consumer.

If you have been in practice for even a short while you have patients who have lost their homes and even been bankrupted to pay medical expenses, usually for emergencies or end of life care.

The days of paying more when you are paying cash may be coming to an end. Doctors and hospitals are starting to do what every other business has done since the beginning of time – giving a discount when you pay cash. States are beginning to require pricing transparency and hospitals and physicians are starting to publish their “cash prices” for all to see.

We may be seeing a time when the uninsured person writing a check begins to get a much needed break. This new pricing trend is causing some interesting ripples as more and more people become aware of the sometimes dramatically lower prices for cash on the barrel head.

Here are two examples:

A recent article in the Los Angeles Times reported a CT scan of the abdomen costs about $2,400 for patients insured by Blue Shield of California, while the Los Alamitos (Calif.) Medical Center cash price is only $250. That is a 89% discount by my calculation.

Another local California hospital charges insured patients $415 for blood tests that cost only $95 in cash. This time it’s a mere 77% discount.

Now, there are some interesting rules to the cash discount game.

First, to get the discounted prices, patients would have to withhold insurance information from hospitals. If you tell them you have insurance, they will be bound to charge you the insurance company’s negotiated rate. Those are the up to 89% higher fees documented in the previous paragraph.

However, if you don’t tell them your insurance and pay cash instead, the cash payments don’t apply to your annual out-of-pocket spending limits.

For a 89% discount, I am pretty sure there are times it would be worth it to keep your little secret. If you are healthy and only need an occasional visit to the doctor you now get to make the judgment call on cash discount vs. paying five times as much and applying it to your deductible.

Hospital executives say they don’t like to charge insured patients more, calling it a result of the country’s broken healthcare system. “We end up being forced to charge a premium to health plans to make the books balance,” said John Bishop, the hospital’s finance chief of Long Beach (CA)Memorial Medical Center. “It’s a backdoor tax on employers and consumers.”

In perhaps the most interesting reaction to cash discounts, a patient who was unaware of the discounted cash pricing last month filed a lawsuit against Blue Shield of California for unfair business practices, breach of good faith and misrepresentation over her medical bills after she was charged $2,336 for a CT scan that would have cost her $1,054 in cash.

Blue Shield said it “cannot promise or represent that there could not be providers who will charge someone less out-of-pocket cost for a service than she would pay if the Blue Shield contract rate applies.”

In my mind it is only fair that the cash price gets a discount. I must admit the size of the discounts being offered certainly raises my eyebrows. However, it is just the latest in a long string of things that don’t make sense when it comes to healthcare pricing in America.

At least now, the people unfortunate enough to have only cash to pay for their medical expenses can finally get a break.

Dike Drummond is a family physician and provides burnout prevention and treatment services for healthcare professionals at his site, The Happy MD.

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  • http://www.facebook.com/fkimemia Frederik Joseph Kimemia

    -Totally agree. When you are buying goods on cash you should pay less. It’s based on the fact that once you pay out you don’t get to benefit from earning on the money or benefiting in any way from the proceeds of the same cash. Individual clients may not have a chance to further negotiate for price changes or discounts while large companies will definitely benefit from the economy of scale- the units they bring to the provider.
    Am one believer in functional community based health insurance scheme- schemes that believe that communities have the biggest role to play in their own health. My Health insurance trainer taught me two most important things I will never forget. You manage health risk by either reducing the risk or insuring the risk. When you have a group on their own scheme, first they have an upper hand and they control the BIG fishes i.e. the provider and the insurer. They dictate terms.
    -Yes paying on cash is good. Ideally the best could be through a community based kitty or a functional MFI. We are piloting one in some settings in Kenya and I find it very effective. From patient’s perspective, and for many health risks, insurance is not the ideal health financing schemes. This explains why despite many promotions private and public health insurance have been found to complicate health care. Models in India are excellent. When communities save their money to protect their health there are controls both at patient side and the providers. It’s the most cost effective strategy. Health insurance will be ideal only for several/few health complications that are unseenFrederick J email: kimemia@hespa.org

  • http://www.facebook.com/pam.noonan.3 Pam Noonan

    Of course there is the other scenario ….I was charged $175 for a 10 minute chat session.  Was told after the fact if I had paid the day of service I would have received a 20% discount, which they REFUSED to give me.  If that appointment would have been paid by Medicare it would have been about $40.  So who got screwed on this one?  Me the one with out health insurance!

    • http://www.thehappymd.com/ Dike Drummond MD

       Thanks for the comment Pam. That is just the kind of scenario I used to see when I first started practice. The folks who pay cash paying WAY more that the insured. Looks like that is still happening … so sorry it happened to you. I hope and pray that rational pricing comes to our healthcare system at some point. Perhaps this “pay less for cash” trend is a beginning.

      Just so you know … it drives the doctors absolutely crazy too.

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

  • http://www.facebook.com/people/Joe-Accounting/100003253418341 Joe Accounting

    The other thing that comes into play is the clause in the contract between the insurance company that says they will pay the “lower of the charge or negotiated rate”.   If the charge is $1000 and negotiated rate is $700, it’s an easy calculation.  But if the provider or hospital gives a discount for cash and collects $600 every time, then what really is the charge?  Some would argue it is $600 not $1000. 

    So recognizing NO ONE actually pays list price, providers should be sure their cash discount price is still above the insurance rate.   This would eliminate need to “hide insurance status”. 
    And better yet, lower your charges to something reasonable.  Unfortunately, there are still insurance plans that pay “% of billed charge” so the provider has incentive to keep the charge high.

    • http://www.thehappymd.com/ Dike Drummond MD

       Thanks for the comment Joe,

      So appropriate you are an accountant .. it takes someone with your skills to explain two things.
      The Tax Code
      Healthcare Charges
      I think BOTH of those should be things one can actually understand without a CPA after their name. I sincerely hope this rational cash pricing is the beginning of that transformation.

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

  • cnshap

    My husband and I both work as RN’s for a large hospital system in Asheville, NC.  We have a combined 25 years of service. Last year, our younger son required an adenoidectomy and myringotomy.  We were able to cover the majority of the $2600 cost with rollover HRA funds.  However, since we no longer have that HRA cushion, should we or our children require another minor procedure in the future, we plan to go to a competing hospital system, claim “no insurance” and obtain the 40% discount quoted us while researching our son’s procedure.  Sad.

    • http://www.thehappymd.com/ Dike Drummond MD

       Thanks for the comment cnshap,

      I am not sure that is “sad”. Saving 40% is saving 40%. The quality of care will be the same. And that pricing structure actually makes sense … the way it ought to be.

      My two cents,

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

      • cnshap

        So, Dr Drummond, we pay $15000 every year to responsibly insure our family…while some of our friends afford more frequent holiday trips and monthly fitness memberships at nice “clubs”…yet are somehow unable to afford health insurance for decades.  And, when we require a minor outpatient procedure, we are left with this choice:  pay hundreds or thousands out-of-pocket (required by our Consumer Driven Health Plan) within our own “network” OR  present to a competing hospital, LIE about our lack of insurance coverage (because they will ask), and utilize physicians and a facility unknown to us in order to obtain the 40% discount not afforded to us within our own system.  Not exactly my definition of “the way it ought to be…”     

        • http://profile.yahoo.com/55BSPWKL7YMNMTWXOUV7AFHUXQ Kathleen

          “to responsibly insure our family”

          That’s part of the problem. Those of us without health insurance are demonized while those who choose to pay into a terribly broken inefficient system are responsible angels saving the country. 

          I can afford traditional health insurance, but I don’t pay for it. Until enough of us vote with our wallets, the people making money hand-over-fist off the backs of sick people (and the rest of us) won’t listen. We have to fix the way we practice medicine. Supporting the bloated employment-based insurance company system is not the way to do that.

          What do I do? I’m a health freak who takes super good care of myself with proper nutrition, exercise, and attention to my peace of mind. I don’t run to the doctor for every virus or musculoskeletal ache. I pay for preventative services out of pocket. And when I’ve needed serious care, I’ve gone to other countries where the medicine is just as good, the prices transparent, and the cost much less. I have an account to handle unexpected medical emergencies when I’m in the States, and I’ve made it clear to my family and in legal documents that I don’t want care that unnecessarily prolongs my life. I love life, but I’m not afraid of dying naturally. I don’t want expensive chemo that will give me another year of quantity over quality. I don’t want my chest cracked open for CABG – I’ll sign up out of pocket with Dean Ornish instead. Why should I pay for services for everyone else when I wouldn’t use them myself?

          Won’t work for everyone, you say? Maybe. And that’s how they get you. We are guilty of not taking care of others if we do what is best for us. And we want to be “responsible” good people who take care of others. So let’s let go of guilt and fear and do it smart. Let’s take care of all our people within a framework that makes sense and stop supporting a system that doesn’t.

        • http://www.thehappymd.com/ Dike Drummond MD

           OK – now I see the whole picture. Thanks for the clarification. What USED to happen is you didn’t have the cheaper option. If you didn’t have insurance you paid WAY MORE that the folks who do. This option is an improvement and of course … THE BEST OPTION is to pay a reasonable and uniform price no matter whether you are paying cash or insurance … a LEVEL PLAYING FIELD if you wish.

          my two cents,

          Dike
          Dike Drummond MD
          http://www.thehappymd.com

  • karen3

    How about we do things like they do in Japan. One price for all takers.  

    • http://www.thehappymd.com/ Dike Drummond MD

       Hey karen3 … if you look ANYWHERE in the world you will see their healthcare system makes more sense. Japan is just one of many example of uniform pricing. It’s a great idea AND I bet their prices are much lower than ours too.

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

  • http://www.facebook.com/Eric7480 Eric Cox

    Almost 10 years ago several practices started offering uninsured patients the Medicare cost of services. Then they encountered the very issue that is stated in this article. Patients with commercial insurance were being charged double or triple in out of pocket cost. I personally hope that this trend continues and does not fall by the way side! Oh and if you need another reason to pay cash… How about cash transactions are not reported to the MIB (Medical Information Bureau). This means unless you are using your primary care physician(it is included with all of your other medical history) or unless you provide the information to an insurance company there is no way to truly trace pre-existing or even accurately gauge a true risk liability. 

    • http://www.thehappymd.com/ Dike Drummond MD

       Thanks for the comment Eric … sounds like cash option in that case is not only cheaper … it is off the medical information grid so to speak … interesting.

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

  • http://www.facebook.com/Eric7480 Eric Cox

    As a Revenue Cycle professional with over 10 years of experience let me shed a little light on why the cost is significantly higher when using commercial insurance.  First, if you ever actually read a full length contract between an insurance company and the hospital you would see that they have become almost as ridiculous and full of loop holes as our government legislation.  Further more most major medical companies have been the one to shift the cost of service to the patient.  During that process they put the burden of proof (i.e. medical necessity and pre-certifications) on the hospitals and patients.  This requires patients to educate themselves and hospitals to hire an entire team of Patient Financial Services representatives to recover payment.  Unfortunately most patients do not take the time to educate themselves further placing an additional responsibility on the hospitals.  All that being said there are two sides to every story and I could effectively argue the insurance companies side as well.  However, the bottom line is that our healthcare system is very broken and the only way to fix it is to open the lines of communication between all involved parties, not by adding more red tape and legislation!  The economic principles of supply and demand have been very successful in a free market, and if more providers moved to this style of cash reimbursement the market would drastically change.

    • http://www.thehappymd.com/ Dike Drummond MD

       Thanks for your comment Eric. I am certain there are all sorts of twists and turns in the “how we got here” story … just like the story of our current Tax Code. And we agree … both the tax code and our healthcare payment system make no sense …. regardless of how we ended up here.

      Supply and Demand … interesting concept to apply to healthcare … especially if we remove insurance from the payment spectrum. Imagine healthcare in a free market, cash payment world. This little “taste” of what happens … prices falling precipitously when cash is accepted … is an interesting indicator of the balance. Something to watch closely me thinks.

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

  • katerinahurd

    although your proposed alternative to a commitment to an insurance plan relieves the finaancial burden on the future patient, it also makes me wondwe about the firm association of employment and health care.  Waht about graduate students with an unclassified employment status without health insurance.  What would be your answer?

    • http://www.thehappymd.com/ Dike Drummond MD

       Hey Katerina — I am not making any proposals here. What I am commenting on what MAY be signs of a new movement towards more rational pricing for people who pay cash. If you don’t have health insurance and fall in the gap where you don’t qualify for Medicaid and can’t afford to purchase your own insurance … this ability to pay up to 89% less if you write a check is a big deal. It used to be that the person writing a check paid the most of all. I am hopeful those days are coming to an end.

      A combination of a high deductible, relatively inexpensive insurance policy and cash payments for routine items might begin to make sense for many people who find themselves in the gap between medicaid and employer provided insurance. AND I am not an insurance advisor.

      Dike
      Dike Drummond MD
      http://www.thehappymd.com

  • http://www.facebook.com/rebekah.green.50 Rebekah Green

    I was reading about a small business owner who decided to offer insurance to his employees by setting up a payment plan for each one by the company itself. They used the same basis as insurance to figure out how much the minimum would be using statistics and Actuarial math. And then to offset cost for catastrophic care or greater than $75K, he hired an insurance broker to find a gap insurance that offered the best option for the lowest price. The two options were combined and the employees received an affordable insurance alternative to the Wall Street Based for-profit insurance companies or non-profit insurance companies (that often aren’t much better.) I’m wondering and keep asking if hospitals and doctors co-opted together that they might be able to come up with a similar option. Allow discounts similar to insurances for basic care and add a monthly fee for the gap insurance. Many of us use self care, proper nutrition, and rarely use the medical institutions and this would be a more affordable solution that would give us ASSURANCE rather than paying rich insurance middle men that interfere with our care. At the same time, it would allow the ability to adapt to the occurance of a catastrophic occurence should one arise. The problem would be in developing a plan that would work.

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