This One Weird Consequence of Obamacare Could Either Save - or Cost - You Big Time
When it comes to the world of health care and health insurance, the rabbit hole is deep and winding. The Affordable Care Act, aka Obamacare, has certainly gone a long way toward providing more Americans with health care, and the newly insured can rest a bit easier when confronted with catastrophic health care costs, but in the wonderland of health care, it turns out that in certain cases, having insurance can cost you more money, not less. In fact, a lot more money.
Let’s take the case of one patient in California, whose insurance company was charged $408 for five common blood tests, a little more than $80 per test. Her insurance company paid about $140 to the medical center, and the patient was responsible for the rest, about $270. Frustrated at having to pay so much for the tests, the patient called the center and asked why the tests were so expensive. Much to the patient’s surprise, she was told that, had she paid cash, the tests would have been cheaper, an eye-popping $65 per test less. That’s right—with cash, the patient could have paid just $15 per test.
Or there’s the case of a patient in Colorado who needed a knee X-ray, and was responsible for $600 of the cost, only to discover that if she had paid cash, the fee would have been $70. An MRI for the same patient? $1,100 through her insurance company, just $600 if she paid out-of-pocket cash up front. A tonsillectomy in Arizona costs $5,400 through insurance, $2,850 if paid cash up front. A foot MRI in Flint, Michigan, costs $445 through insurer, $379 in cash.
Instances like this abound across the country. The assumption on the part of insurance policy holders that, because of the huge pool of potential patients, the insurance companies are in a position to get the best possible price for medical services is, to put it bluntly, false.
There was a time when an uninsured patient forced to pay cash was faced with a much higher fee than an insured patient. Obamacare, in part, is responsible for changing that reality. Under the Affordable Care Act, in order to eliminate price-gouging, tax-exempt hospitals cannot charge low-income patients more than the negotiated rate that Medicare pays. This, combined with an effort by many medical institutions to grant discounts for up-front cash payments in order to avoid later administrative and debt-collection difficulties, has contributed to changing the fee structures.
Insurance companies (and the federal government, through Medicare and Medicaid) must regularly negotiate the fees they will pay hospitals and doctors for their services. At the same time, more and more hospitals nationwide have merged, making for less competition in the marketplace and more leverage in their negotiations with the insurance companies (since, in the new merged-hospital reality, they no longer have to worry about a competing hospital undercutting costs). The result is that hospitals, in order to make up for the lower costs they now must charge poor patients, are cutting better deals for themselves and (some would say) fleecing the insurers (and, of course, the policy holders, to whom the costs are ultimately passed down.)
As more and more Americans opt for high-deductible policies in order to save money on their monthly premiums, the insured policy holders who have not met their high deductibles find themselves paying the full insurer-negotiated rate for medical services, which just happens to be a lot higher than the discounted up-front cash rate the uninsured are paying. As the aforementioned patient from Colorado told the Wall Street Journal, “I thought insurance companies negotiated good deals for us. Now things are totally upside down.”
Obviously, paying cash up front, which does not go toward your policy’s health cost deductible, is not always the best option. If you have a low deductible, and your service is only costing a small co-pay, or if you have a high deductible but know that your health care costs will be high in any particular year and you must meet that high deductible in order to have your additional services covered, then going through your insurance is the way to go. (For instance, you know you will have a $20,000 hip surgery later in the year but must meet a $5,000 deductible before the rest of the cost of the surgery is covered.)
But in many cases, especially if you have a high deductible and do not anticipate a health crisis (which is the case for most younger policy holders), it might make sense to forgo paying through your insurance and just pay cash. But be sensible. It’s a judgment call, and if you have had serious health issues in the past, it’s probably not worth gambling. You can also use your health savings account, if you have one, to pay the up-front cash (although it will not count toward your deductible).
Paying cash for medical services, when you are insured, can be tricky. There is some work involved, but the savings are potentially substantial. The key is to ask questions of both your medical services provider as well as your insurance company. Under federal law, patients have the right to request that medical providers not bill their insurers. Once a patient has gone through the insurer, she cannot change her mind and request to pay the cash price instead, so it behooves a patient to investigate her options. This is not always easy. Some institutions are reluctant to be open about their discount cash rates, fearful it will weaken their negotiations with insurance companies. Others, though, are happy to be transparent, seeing it as a way to bring in more business (and make no mistake, health care is Big Business).
On the insurance side, finding out the negotiated rate for a medical service, in order to comparison-shop, can be equally tricky, but you can usually navigate your insurance company’s website and find the rate for most services. There are also websites like Clearhealthcosts.com, Healthcarebluebook.com and Pricinghealthcare.com, which have gathered a lot of information comparing costs. On websites like these, you might find a mammogram in New York City could cost you $607 or it could cost you $50. Or you could get a vasectomy for $3,500, or take a train to Yonkers and pay $450. The choice is yours.