My son is gong to a doctor that charges 40 to 50% of the standard cost and does not work with insurance companies. The doctor said insurance only pays 40%. If the cost is 1000 they send him a check for 400 marked paid in full after 3 months and a big hassle. For a 1000 procedure he used to collect 20% from the person. $200 Then send the paper work to insurance which sends him the other $200 if all the paper is right, etc. Now he gets 50% with no one looking over his shoulder. He certainly does not like the government saying which drugs, what procedures, how many in a day, what price, and who is sick/not sick.
That illustrates is a very good point that should not be missed. The history of inflated charges compared to actual reimbursement dates back several decades. Some insight into that history may make the crazy system we have in the US seem a little more rational.
One of the biggest clouds hanging over the advent of Medicare (mid-1960's) was the fear by the AMA that it would lead to a national fee schedule. To address that, Medicare paid a fairly high percentage of the usual, customary, and reasonable (UCR) charge made by physicians and hospitals. In the early 1980's, TEFRA (
https://en.wikipedia.org/wiki/TEFRA) and related legislation put an emphasis on controlling costs.
The percentage of UCR was ratcheted down to attain that goal. What a stroke of genius that must have been for some bureaucrat.
Every time the percentage was lowered, hospitals and physicians ("charges") raised their fees. It did not take very long (1982 to 1990) for charges to go from a realistic amount that was actually paid by self-payers to to a ratio of at least 4:1; that is, a provider had to charge $4 to get $1 in collected revenue.
The silliness of that situation finally became apparent in the late 1980's, which sparked several efforts to rationally derive a reimbursable cost for a particular service (see: RBRVS, Dr. Hsiao,
https://en.wikipedia.org/wiki/Resource-based_relative_value_scale). From that point on, there has been effectively a national fee schedule.
However, its history has left a legacy:
1) If one charges less than the fee schedule, you get only what is charged. Sometimes, the provider doesn't know what the Medicare allowance will be, so fees have stayed set high enough to cover any eventuality.
2)
It is clearly against the law to charge Medicare one fee and other payers another (lower) fee.
3) Almost all insurance payers have adjusted to the system and set their own, fixed reimbursement schedules. I am not aware of any insurance company that says flatly, we will pay "x" percentage of Medicare, but anyone in practice knows what the average comes out to be. In some specialties, it is more than Medicare, such as 130%; in other specialties it is less than Medicare (e.g., 90%).
Pre-Medicare and the fee explosion, many people were self payers. If one was healthy, why pay insurance premiums, because self-pay could easily be less on an annualized basis. Today, true self-pay is almost non-existent. (The Amish is one identifiable group that actually self-pays.). Self-pay today is basically synonymous with "no-pay." A great many physicians are quite uncomfortable with the ethics of charging such high fees to the few remaining true self-paying patients. That is particularly bothersome in areas of our Midwest that have large Amish populations.
Two solutions exist for that dilemma that are legal or quasi-legal:
1) Charge the inflated fee but don't pursue a patient for not paying the whole fee. (On an individualized basis, patients can negotiate the amount they pay.)
2) Become a cash-and-carry provider.
The problem with a provider following the first method is that, if it were to become a big part of total billed revenue, it might spark an investigation by Medicare for fraud and abuse. The second method is cleaner in that respect. The tables are tipping quickly. In some markets, as much 20% of providers are cash and carry and the percentage is growing rapidly.
John
