Homes and cars tend to be two of the most expensive items we purchase for our own consumption and enjoyment. Have you ever bought a house or car without knowing how much it cost? Have you ever bantered back and forth with the seller to bring that cost down? Do you evaluate different loan packages, examining closing costs, down payments, interest rates and terms?
Healthcare can be just as expensive as cars and paying for it will soon feel like another mortgage installment. Yet rarely do we obtain cost estimates, bargain with payers and providers and/or explore financing options to pay for it.
Why is healthcare immune to our usual scrutiny and due diligence?
Time to start caring
Healthcare costs are skyrocketing, and the patient’s responsibility of those expenses is continuing to rise. In the near future, patients will be responsible for 30% of their medical bills—and this growth isn’t likely to slow anytime soon.
The average American spent $10,348 on healthcare in 2016, which was up significantly from $7,700 in 2007.
This average is 31% higher than Switzerland, the next highest per capita spender.
Health care spending per person is expected to march steadily higher to $14,944 in 2023.
Private health insurance spending grew 5.1% to $1,123.4 billion in 2016.
Out of pocket spending grew 3.9% to $352.5 billion in 2016.
And if you need more data….
I’ll share a few personal stories I have experienced and/or heard about recently. My shoulder replacement surgery last December cost ~$44,000, excluding physical therapy (yes, I’m still paying it off). I interviewed a breast cancer survivor who owed almost $15,000 out of pocket after a double mastectomy and reconstructive procedure (and still counting since appointments and imaging tests continue). I talked to a mom who owed thousands out of pocket for her child’s ACL repair.
Do you have thousands of dollars lying around for unexpected medical costs?
(Even if you if you do, there are lots of us who don’t.)
I’ve learned a lot about how to save money and navigate the system more effectively through recent patient interviews I have carried out for clients. I’m sharing what I learned in hopes of saving others money, time and heartache. And more importantly, if we all become more prudish about healthcare choices, then perhaps the entire system will benefit.
Be part of the solution.
Low deductibles, while healthy for the pocket book in the short-term, impede our interest in being smart about how we pay for healthcare services in the future. Most of us don’t care about cost unless it comes out of our pockets. But if the system is to improve, then we should start being as smart about purchasing healthcare as property.
Do some digging.
Not to sound like an old Seinfeld episode, but it is really hard to navigate a health system because you really don’t know what you don’t know until you know. Understanding the language of healthcare – from drugs to diseases to payment – can be as difficult as deciphering the Di Vinci Code.
Try anyway! Navigate the healthcare system before an episode or illness. If you decide to drop the big bucks for a Mercedes-Benz, you probably understand the benefits of distronic plus technology, active blind spot monitoring and adaptive high beam assist. If you are going to have surgery, you should research treatment options, get recommendations for surgeons, compare costs at different hospitals and explore payment plans. The more you know before receiving care, the better equipped you’ll be for a smooth ride (even if you do hit a pot hole).
Find out costs (even though it won’t be easy).
Not only is the healthcare language confusing, but costs are far from transparent to the average consumer. And in most cases, you don’t know exact costs until after the fact. Imagine the tally if you shopped at Whole Foods and didn’t see price tags on those lovely organic fruits and vegetables (and cheeses and desserts).
As patients, you should demand information about all-in treatment costs from payers and providers (they know even if they don’t tell). Every procedure and test is tracked by a unique code that is entered into a system’s electronic health record (EHR). Like the bar codes grocers use to price milk and bread, providers use them to track the the costs of procedures, tests and conditions. Without them, they wouldn’t know how much to charge patients and insurance companies wouldn’t know how much to reimburse providers.
How can you obtain these codes? Ask your doctor, physician assistant or nurse to give it (or them) to you. Then call around to different hospitals and/or imaging centers, and specifically to the finance departments, to obtain cost estimates. You could ask your insurance company, too. Organizations like Cambia Health Solutions offer HealthSparq to its health plan members for pricing information and more.
This Wall Street Journal article provides even more information about how to do some digging online.
Go low, not high
Several patients I interviewed told me that the costs of the exact same surgery varied by many thousands of dollars at different hospitals, as reimbursed by their insurance company. Another claimed a procedure was thousands less if carried out at the physician’s office, but the insurance company required she use a more expensive hospital location.
Even if you hit your deductible or Out of Pocket threshold, you should consider choosing the more cost-effective facility, as long as you’re not sacrificing quality and safety. It’s the right thing to do, if ultimately we consumers hope to break the vicious cycle of care-reimbursement-treatment costs.
Explore your imaging options.
You don’t have to get x-rays and MRIs at the same facility where your doctor works. In fact, if that doctor works at a hospital, you will definitely save money by visiting a freestanding radiology center.
A 2015 study in the journal Health Affairs studied markups at U.S. hospitals. The average markup among most hospitals in the nation was 340 percent. Radiology departments are particularly vulnerable to enormous markups. MRI costs typically range in cost from $400-$3,100, so why not spend less if given the choice?
And explore options for lab tests, too.
The typical cost of a blood test, with a 20% markup is $11. Yet hospitals typically charge in the neighborhood of $157. The next time your doctor wants you to get your blood drawn, ask them how much it will cost. Check other labs in your area, and then select the most cost effective approach. In some cases, you made need the doctor’s order, too. So don’t leave her office without it.
Find best deals for prescriptions.
At one extreme, newly approved cancer treatments can cost $30,000/month – and most are not be approved by insurance. At the other, an ADHD medicine like Vyvanse costs ~$250/month because a generic formulation isn’t yet available. No matter how wonderful the app, you’ll be challenged to find less expensive options for medications like these.
Consider paying cash for healthcare.
Your insurance deductible can drive a lot of healthcare decisions. And if you pay a fortune for a high deductible health plan (like I do!), you may wish to ask a facility, physical therapist or imaging center about the cash price of the services they offer. Inevitably, it is considerably lower than the price they’ll charge if the insurance company pays. (One patient told me an orthopedic office charged hundreds less for her son’s cast if she paid in cash).
If you (and/or your family) tend to be healthy, it may be less cash out of your pocket to keep insurance out of the picture. The downside of this scenario is cash paid for healthcare expenses won’t apply toward your deductible.
Like insurance itself, the decision is a gamble. If you consider factors such as the health of your family, likelihood of illness/injury and deductible timing (how deep into a deductible window you are), then you can make a more informed decision about a cash/insurance strategy.
Open a Health Savings Account (HSA). And contribute each month to it.
The main advantage of an HSA is that contributions are not subject to tax. The maximum amount you can contribute each year without penalty varies by family size. In 2017, the maximum I could contribute was $3,500, but check with you accountant if you are not sure.
Other benefits of an HSA is that you can roll over any money you don’t spend by Dec. 31. And after age 65, you can withdraw money for nonmedical expenses without owing a tax penalty. Forbes provides more information on HSA accounts if you are interested.
Ask about financing options.
Some health systems offer finance plans with reduced interest rates. In fact, several I researched charge no interest if expenses are paid off within one year. Rates then increase as the term grows. But they often cap at around 8%, which is far less than an average credit card rate, which currently stands at 16.99%, according to CreditCards.com.
Don’t be afraid to ask about payment plans if a hospital isn’t forthcoming with the information. Most folks I interviewed said hospitals are reluctant to share ways patients can save money. Go figure.
Don’t give up!
While all of this information can be overwhelming, don’t lose hope. Amazon dominates online shopping because they understand consumer behavior and are transparent about product costs, reviews and shipment. By demanding a bit more Amazon from your healthcare providers and payers, you’ll be a smarter shopper and more satisfied patient.