I do a lot of contract programming, so I often don't have health insurance. And I recently had the pleasure of an emergency room visit. One hour in there, and 18 hours in the hospital room, and the bill is $8000.
This is obviously a silly amount of money so I started doing some research. The first thing I learned about were CPT codes. All medical services are categorized by Current Procedural Terminology codes. The codes are partly searchable on the AMA website. For example, there are 5 levels for "Emergency department visit for the evaluation and management of a patient" with codes 99281-99285. The description for level 4 is
Emergency department visit for the evaluation and management of a patient, which requires these 3 key components:
A detailed history;
A detailed examination; and
Medical decision making of moderate complexity.
...
You can find the CPT codes for the items on your bill on your insurance claim form. This is supposed to be enough information for the insurance company to know what was done. They then make adjustments according to their prenegotiation with the hospital.
This prenegotiation is very important. It means the hospital has to charge a fair price for a given service, or lose patients. It also leads to hospital fraud #1.
HF1: Fraudulent CPT codes
The insurance company is in a poor position to validate what was actually done. But I was in a better position. For example, the actual medical history and decision making in my case would have been accurately described by 99282 (level 2), which costs about one third of 99284. But they actually billed me as 99285, the highest level. This is the same CPT code they would use to bill for multiple gunshot wounds to the chest (I actually had a rash).
A related fraud involves procedures that are partly performed by the hospital and partly by a contractor or lab. In this case the CPT code is supposed to include a modifier for partial payment, but sometimes they skip it. This hospital fraud #2.
HF2: Double billing
The next fraud depends on the quality of your health insurance. If you have a good plan, the insurance company will send you a statement telling you what you owe the hospital. It's part of the prenegotiation. If you have a bad plan, the insurance company will simply tell the hospital what it is required to pay, and then leave you to the dogs. The hospital then bills you for the rest. Since the full "billing price" is not set by prenegotiation, they can charge whatever they think they can get you to pay. This hospital fraud #3.
HF3: Ignorant policyholder gouging
This fraud is so common that there are formal methods of complaining about it. I have no idea if these methods work.
So just how inflated are these charges? The amounts insurance companies pay are proprietary, but the AMA website lists amounts that Medicare pays for some of the codes. For these codes, I found the charges on my bill varied from 5 times to 21 times the Medicare payment. This is hospital fraud #4.
HF4: Arbitrary prices
In fact there are hospitals that do not accept Medicare patients, but most do, and if they do they must accept all emergencies without regard to ability to pay. The fact that most do indicates that Medicare payments are unlikely to be below cost.
Legality ***********
Is it legal? No, but you're not about to see a criminal fraud case brought against a hospital. On the other hand you have a strong case if they try to collect in civil court. Here's the legal reasoning:
1. Whether you signed a contract or not, you probably did not negotiate a price in advance.
2. In most states there is a statute for this situation that says the price will be 'reasonable'.
3. The statute may also specify that if one party does not specify a price afterward in good faith, then the other party should cancel the contract or set a price himself.
4. Since you can't give back the services, you need to set a price in good faith yourself.
5. It would be a good idea to document your extensive efforts to set a fair price, including your methodology (such as "double Medicare charges")
(Disclaimer: I'm not an attorney, so don't consider this as legal advice)
In Temple University Hospital, Inc. v Healthcare Management Alternatives, Inc. [832 A.2d 501] the judge rejected a hospital's billed charges and held that the hospital cannot "unilaterally set a price for its services that bears no relationship to the amount typically paid for those services ... In the absence of an express contract, the law requires the payment of reasonable value". That case involved an out of network provider, but the legal theory is the same.
Unfortunately, I haven't yet figured out how to beat the guys who don't sue, but just ruin your credit rating. It's technically defamation, but you have to prove damages, such as being turned down for a loan or a job, or paying a higher mortgage rate.
Finally, if you are persistent, you may find that the hospital has a "Patient Representative". I suspect this is just a way of buying off stubborn folks like myself, instead of paying a lawyer for a losing case. My patient representative did some digging, got my "level 5" reduced to "level 4", and offered a "standard" 50% discount for quick payment. Funny they didn't tell me about this discount at first. The final bill was $3000, which was just low enough that I didn't want to fight it.
How to fix it. ***************************
There are lots of opinions out there for how to fix health care. Most of them seem similar to each other, as ultimately somebody has to pay the bill.
Here are some basic proposals to at least eliminate the fraud.
1. The CPT database should be fully searchable.
2. The algorithm for determining Medicare payments from CPT codes should be available to everyone. If it is complex, software should be available to enter a coded claim, and determine the corresponding Medicare payment for comparison. Alternatively, third party businesses could offer this service for a fee.
3. Specific consumer legal remedies should be available for HF1-HF3
4. Providers should be required to explain, on request, why specific services were chosen instead of less expensive alternatives.
5. Providers should be required to publish an upper limit on their Medicare multiplier, or otherwise publish their pricing against CPT codes.
And just for the record, here's two other reforms needed to fix outrageous costs:
1. Any hospital that publishes its Physician performance records should be immune from punitive damages for malpractice.
2. Allow medical schools to accept as many students as want to be doctors. Today the AMA uses its monopoly to force artificially high doctor salaries by limiting the supply of graduates.
The Public Option **********************
Much of the debate leading up to the recent passage of health care reform centered around the 'public option'. It was claimed that the public insurance company would be revenue neutral, and would be competitive with insurance company's offerings. But this seems impossible. How can a government agency be as efficient as private enterprise? That has never even come close to happening before. The belief is that it is impossible, and once implemented, we will have no choice but to give up revenue neutrality, thus expanding the deficit (and socialism).
On the other hand, proponents argue that it would be just an expansion of Medicare to everyone. The math seems to indicate that it could easily do exactly what is claimed.
So what gives? Medicare has an advantage that it can virtually dictate 'fair' prices. This is such a big advantage that the insurance companies cannot be competitive regardless of their efficiency. Therefore the insurance agencies would inevitably go out of business.
