Mamma Said Knock Me Out (But, first, make sure you are in-network)

This week the California assembly passed a bill AB72 that addresses the problem of surprise medical bills.  It awaits the signature of Jerry Brown.  Its goal is to prevent excessive bills from out of network doctors.  It limits the allowable charges for such OON doctors to the average insurer's contract rate or 125% of the Medicare rate, whichever is higher.  Most importantly, it prevents the OON doctor from balance billing for the difference between their rate and the aforementioned limit.

This new law is great, then, right?  Not necessarily.  It can actually deincentivize insurers from negotiating rates if the doctor's rates become controlled by legislation.  That leaves the rates for this part of the health scare system still unregulated.  The result is that these doctors would raise their rates in order to compensate for the lower reimbursements dictated by law.  Who suffers?  The under or uninsured.

What are surprise bills?  The most common example of a surprise, OON bill is for anesthesiologists.  My family has had perhaps a dozen or two procedures over the years requiring general anesthesia.  In every instance, the anesthesiologists were OON even though the hospital and the surgeon were in-network.

Similarly, ER physicians are almost never in network even if an ER facility is.

This has resulted in some very large bills for me because the doctor charges whatever they want and is not bound by any contracted rate with an insurer.  In an emergent situation, an insurer is obligated to process the doctor's bills as in-network and their full amount.  But there's a catch.

If the doctor charges $1000 and the in network contracted rate is $500.  The insurance company will pay 80% of $500 (or whatever percentage is in your plan).  That's $400.  Normally, if the doctor was in network, the patient would be responsible for paying $100.  However, the doctor is allowed to balance bill for the $500 that exceeded the insurer's contracted rate.  So now the patient owes $600!  (Note:  there are restrictions for balance billing in some HMO plans.)

With anesthesiologists, sometimes they will honor the contracted rate and not balance bill the patient.  That has happened about 75% of the time with my family's procedures.  When it doesn't happen, then the patient gets hit with a large bill like above.

So you say, "Just make sure that the ER doctors and anesthesiologists are in network?"  Trust me, that's practically impossible.  I've tried to do this for the local ERs and gave up when no one could help.  For gas-passers, you never know who it is going to be until just prior to surgery.  Surgeons definitely do not like the patient demanding a new anesthesiologist minutes before a surgery.  In fact, they would likely cancel the procedure in such a situation.

Something has to be done about balance billing.  Those bills are a primary cause of medical debt and bankruptcy.  AB 72 is a great start.  However, it is still incomplete and will certainly be challenged in the courts for rate fixing.   I hope that Jerry Brown signs it and we can begin the process to solve this large problem.

Deciphering your hospital bill - Good luck with that!

David Lazarus, a consumer rights columnist for the LA Times, just wrote an excellent article about hospital bills and how complicated they are.  In light of my recent post about this very same subject, I thought I'd repost his article in full (in case you are blocked by LATimes.com which sometimes happens).  

This column is also very relevant to me because like the subject in this piece, I had emergency gall bladder surgery in January 2015.  My hospital charges only came to ~$80,000 thankfully.  :)

(Here's the link to the article:  LA Times)

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Denis Robinson wasn’t bothered in the least that he was billed nearly $100,000 by Providence Tarzana Medical Center for the recent removal of his gallbladder.

“What do I care?” he said. “I have Medicare Plan F, the Cadillac of Medicare plans. They covered every dime.”

Actually, Robinson, 69, should care a great deal. Medicare is a taxpayer-funded system, so any claim submitted by a doctor or hospital affects the financial integrity of the entire program. The fact that Medicare paid less than $4,000 for a $97,000 claim — we’ll get back to that in a moment.

What sizzled Robinson’s bacon was the explanation of benefits he received from Blue Shield of California, through which he purchased his supplemental Medicare coverage and which covered about $900 of his massive hospital bill. It features three pages of itemized costs, each listed only as “surgical services.”

Seriously. Three pages of individual charges, ranging from $1 to $66,607, and no way to tell what any particular one might be for, or whether there were any errors or instances of double billing, or just the perverse satisfaction of knowing that $100 was paid for a Tylenol.

I pointed to a charge for $49.50. What’s that for? What about this one for $132.04?

“I have no clue,” Robinson replied. “I have no way of knowing.”

He could narrow down the possibilities. Each listing for a surgical service was accompanied by a billing code. A little rooting around online will reveal, for instance, that code 0636 is pharmacy-related. But it’s anyone’s guess what that may be.

This is, to put it mildly, nuts.

How can a hospital charge $97,000 for a procedure that Medicare and Blue Shield say is fairly valued at closer to $4,500, the total Providence received? Why aren’t all costs made clear to patients in their explanations of benefits, which insurers send policyholders ostensibly to shed light on the billing process?

“The way it’s set up, medical billing isn’t at all useful to the patient,” acknowledged Paul Ginsburg, director of public policy at the USC Schaeffer Center for Health Policy and Economics. “It’s not designed to let you understand things.”

A key problem is that almost the entire financial conversation regarding healthcare goes on behind closed doors between insurers on the one hand and doctors and hospitals on the other. The patient, who typically pays only a fraction of the overall cost, is little more than an afterthought.

However, that system was established before the current era of rising deductibles and co-pays, leaving patients responsible for an ever-growing share of medical costs, and before hospitals started defraying overhead expenses by charging $10 for a Band-Aid, say, or $50 for a piece of gauze.

“Hospital spending is so difficult to get under control because the patient has no idea about actual costs,” said Craig Garthwaite, an assistant professor of strategy at Northwestern University who focuses on healthcare.

The explanations of benefits that patients receive typically contain “fictional numbers that have no relation to the economics of what’s going on,” he said.

Clinton McGue, a Blue Shield spokesman, demonstrated the lunacy of medical billing by explaining that even though the insurer receives its own receipt from the hospital for all services rendered, spelling out details of each and every cost, Blue Shield feels no need to share such information with policyholders in its explanations of benefits, or EOBs.

“Blue Shield provides industry-standard EOBs to its members,” he said, in effect admitting that the company denies patients helpful information because everyone else does. McGue said that if people want a proper explanation of benefits, they can request one from the hospital.

I pointed out that since Blue Shield is sending out an explanation of benefits anyway, why not include real information?

“We adhere to an industry standard with EOBs,” McGue reiterated. “We will provide the detail if asked, but we think that it is best for the member to review and discuss the services with the provider.”

Patricia Aidem, a spokeswoman for Providence Health & Services, which runs half a dozen hospitals in Southern California, acknowledged that the billing system can be a challenge for most people.

“This is absolutely something that needs to be fixed and Providence is working to create and implement solutions that will make this easier for patients,” she said.

Well, let’s start with Robinson’s bill. Providence charged $97,000 for his operation and then, according to the explanation of benefits, willingly wrote off more than $90,000 as the “amount saved by using a network provider.” That’s a pretty hefty markup for anyone visiting the hospital on an out-of-network basis.

Aidem declined to elaborate on how the hospital arrived at these figures. She said only that “Medicare pays a preset, non-negotiable rate for diagnoses and procedures” and that “hospitals almost always lose money on Medicare cases.”

The federal Medicare Payment Advisory Commission says the average hospital is paid about 95 cents for every dollar spent treating a Medicare patient. Hospitals recoup some of those losses from the rates they charge private insurers. Hospitals also balance their books by charging uninsured patients about three times, on average, what Medicare allows, according to the journal Health Affairs.

If that sounds like a profit grab, Providence’s initial bill to Robinson — the starting price, presumably, for someone without coverage — was more than 20 times higher than what it received from Medicare and Blue Shield.

“This just shows that the system is crazy and that it’s manipulated by healthcare providers for their benefit,” said Alain Enthoven, a Stanford University health economist.

Here’s a thought: How about a requirement that explanations of benefits truly explain benefits, clearly and precisely?

Or we can just keep things as they are, forcing patients to seek explanations for their explanations.