While preparing HealthView’s 2016 Data Report, I learned something thought-provoking about out-of-pocket medical expenses. As I was reviewing some data, I uncovered what appeared to be a statistical error: the Report was projecting that pre-retirement out-of-pocket expenses would increase by around 7% annually, compared to an in-retirement rate of 3%-3.5%.
Put another way: a 40-year old would pay more than a 70-year-old for the same out-of-pocket medical product or service. And the following year, a 40-year old will pay even more than a 70-year old because of an accelerated inflation rate. This just didn’t make any sense, so I brought the issue to our actuaries and technicians.
Here is what I learned.
Medicare has restrictions on the total amount providers can charge patients. As a result, providers make up the difference by charging an additional fee to pre-retirees covered by commercial plans—hence the difference in current and future cost.
I wonder if this added expense should be viewed as a pre-retirement tax of sorts…
Fast forward a few weeks. I was participating in a Massachusetts Health Policy Commission hearing where I learned that (in many cases) a patient’s insurance policy may not cover ambulatory, anesthesiology, or radiology services. Ultimately, this means that a person who has a scheduled surgery at an in-network facility presumably covered by insurance could still receive an anesthesia bill for thousands of dollars.
That’s enough to knock anyone out. Why does this happen?
The anesthesiologist (who happens to be a third party working at the hospital) may not be considered an in-network physician under the patient’s policy. Also, the amount paid by the patient may far exceed the price negotiated by an insurance company.
I guess surgical pain is not strictly limited to the procedure.
It’s the same with emergency services. Someone dials 911 for an ambulance because a relative is unconscious on the floor. An ambulance transports the patient to the hospital, where it is later learned that s/he had suffered a heart attack. The patient then experiences a subsequent heart attack after opening an invoice for thousands of dollars from the ambulance company.
Same as the anesthesiologist, the ambulance company was not an in-network provider under the patient’s policy; and once again, the fee for services is likely to be higher than what an insurer, the state, and Medicare would have had to pay.
A number of states around the country, including Massachusetts, are looking to protect residents by placing restrictions on these alarming out-of-network costs.
So what’s the point here? The health care system is far more complicated than most people realize.
A few days ago I mentioned the issue to a friend who happened to be in the ambulance business. He was sympathetic, but emphasized that there is more to the story.
As an attorney, he first informed me that all of our insurance contracts clearly state that utilizing out-of-network providers may lead to additional out-of-pocket expenses.
But, here’s the problem. Before a surgery, how many of us bring our insurance contracts to an attorney for review? Or, do we spend precious moments insuring that the local ambulance service is a covered supplier before we dial 911 for a dying family member?
Of course, as with most things in life, there are two sides to every story.
My friend, Bill, went on to explain the ambulance company issue in a little more detail. Apparently, firms have strict billing limitations imposed by Medicare and Medicaid. As a matter of fact, it is rare for firms to receive Medicare or Medicaid price increases. The last time firms successfully generated a price increase in Massachusetts was close to ten years ago (which was actually the result of a lawsuit against the state).
Consequently, as expenses rise over time, providers throughout the system shift the additional cost burden to those who utilize out-of-network services.
Let’s face it: anyone who dials 911 for an ambulance would certainly want a properly maintained vehicle that is staffed by well paid, experienced, and trained EMTs. But as we all know, businesses can’t function at an optimal level unless they can pay their bills and generate a reasonable profit.
Therefore, in many areas of the country, the consumer has become responsible for fees that offset losses and very low margins related to government and insurance-company contracts.
As it stands today in Massachusetts, the Health Policy Commission is attempting to balance the playing field so that the group with the least amount of negotiating power does not become totally responsible for the added expense tied to out-of-network services. Unfortunately (and unintentionally), these outlier costs have evolved into a regressive tax imposed on people in vulnerable positions.
As mentioned earlier, the good news is that many states are attempting to develop solutions to protect consumers, providers, and insurance companies alike. Let’s hope this serious issue can be resolved in an impartial manner so that the responsibility for outlier costs is more evenly distributed.