Not too long ago, I visited an orthopedic surgeon for treatment of a hammertoe. The solution was surgery, a simple procedure that could be done on an outpatient basis. He quoted me a price of $1500, and a week later I had the surgery. No hassle, no fuss, and I was back on my feet in ten days.
While I was recovering, I spoke with a friend of mine who told me he’d had the same procedure done a few months before. That in itself was not surprising—hammertoe is a common problem, and the surgery is standard treatment. What was surprising was how much he’d paid. Where I had paid a mere $1500, my friend’s surgery, performed at the same facility and by the same surgeon, had cost him an astonishing $5000—more than three times what I had paid.
The difference? My friend’s surgery was “covered” by his insurance, whereas I had opted to pay cash.
The secret no one tells you about medical bills
While this story might sound shocking, it happens every day. The “healthcare” industry has a big secret, one that the insurance companies don’t want you to know about because it hurts their bottom line. It’s simple: doctors, hospitals, and other medical providers often have two completely different fee scales. One for insurance companies, and one for those willing to pay cash. And while you’re told that your insurance company gets the lowest rate, the truth is often just the opposite.
One particularly stunning example of this was shared by Dr. Jeffrey Singer a couple of years ago. Dr. Singer had scheduled a routine hernia repair for a patient. When the patient showed up at the hospital, he was told he had to pay his portion of the bill up front—a bill which, after the $5000 his insurance plan covered, still came to twenty thousand dollars.
The surgery was canceled and rescheduled, this time without the patient’s insurance. His final bill?
$3000. Seventeen thousand dollars less than his portion would have been if he’d used his insurance, and twenty-two thousand less than the total bill with insurance. This is simply insane. While granted, this is an extreme case—the fact is that "self-pay" patients almost invariably pay less than those with insurance, especially in a hospital setting.
You’re paying for the privilege of paying more
If you have health insurance, you may not give a lot of thought to how much your medical care costs. You visit the doctor or the hospital. You pay out-of-pocket till you meet your deductible. After that the bills are submitted to your insurer and sometimes you never even know what was paid for any given item. You're at the mercy of your insurer.
If you have a very low-deductible plan, this system may work fine. But if—like most people since the advent of the so-called “Affordable” Care Act—you have a plan whose deductible runs to multiple thousands of dollars, you may be paying these inflated prices out of your own pocket. In this case, the only one your insurance “benefit” is benefiting is the insurance company.
And they know it. But here’s what they don’t want YOU to know: just because you have insurance doesn’t mean you have to use it.
Doctors are happy to cut out the middleman
Doctors hate insurance companies as much as patients do. And many are happy to cut them right out of the picture. It means they get their money up front, without untangling miles of red tape. It means they don’t have to wait weeks to get paid. But even with these added incentives, why would a doctor be willing to take half of what he’d make from the insurance company?
Because the price you pay when you’re trying to meet your deductible and the price the insurer really pays are completely different things.
Let me explain.
Insurers vary wildly in how much they’ll pay for any given procedure or item. One insurer may be willing to pay $5000 for a given service while another is only willing to pay $1000. And there are many, many insurance companies out there. So, to make sure all their bases are covered, doctors often set prices that are considerably above what the insurance companies will actually pay. This way, they get the maximum from each insurer. It’s kind of like the manufacturer’s suggested retail price as opposed to the actual retail price.
Unfortunately, because of the way insurance contracts are written, doctors are often forced to charge insured patients the full MSRP, even when the patient is paying out of pocket because they haven’t reached their deductible.
What does this mean for you?
It means that in some cases, it might be better to keep your insurance card in your wallet. If you seldom meet your deductible, then paying cash might be an option. The big drawback to paying cash even though you’re insured is that the fees you pay don’t go toward your deductible. But, if it’s a question of saving hundreds or even thousands of dollars, the benefit may very well outweigh the drawbacks. Here are a few things you can do to make the decision and to make the transaction go smoothly if you do pay cash:
- Be bold. If you’re having a medical procedure done, ask how much it’s going to cost you and don’t take “I can’t tell you that” for an answer.
- Ask if the practice or provider gives discounts for those who pay cash.
- Weigh your options. If the discounted price is less than your insurance will pay, cash might be a good option.
- Don’t simply say you have insurance but you’re not using it. Some contracts force providers to use the “insured” price if they know you have insurance, even if you’re paying out-of-pocket. Instead, tell them, “My insurance isn’t going to be covering this,” or something equally vague.
The skyrocketing cost of healthcare has nothing to do with the real cost of medicine. It has to do with pure greed. If you take the middleman out of the picture, medical care becomes what it ought to be. A transaction between you and your doctor, not you and your insurance company.