ACA wasn't supposed to have this happen

[growing_older]

insurers did not contract with a major children's hospital because the hospital refused to accept the rates.

Interesting that what I heard was only partly a rate dispute, but also an attempt to eliminate exposure to high cost care, as this is the regional hospital that treats the sickest of the sick. A friend had a $600,000 bill for a child that no other hospital would even attempt to treat.

 

[pb4uski]

Oh insurers are making billions. But I did a quick search and 2011 spending was 2.7 trillion. Insurance company CEOs are well-compensated too

I think providers (doctors and hospitals) get more than insurers, as industries.

Pharmaceuticals probably make more than insurers too.

When looking at whether profits are excessive (or not) you really need to look at returns rather than absolute numbers. Laymen and politicians often seem outraged that a company or industry makes billions but totally fail to consider the investments that need to be made to generate those earnings.

Let's say a company makes $10 billion. That's a lot of money. If their investment is $20 billion then it is a 50% return and an outrageous profit in relation to the required investment. But if their investment is $150 billion then it is only a 6.7% return and certainly not very good even though $10 billion is a lot of money in absolute terms.

According to Yahoo Finance, Health Care Plans average ROE is ~13% - good but not outrageous and certainly not excessive enough to cause indignation. Major drug manufacturers average ROE is 20% - again, solid but not outrageous. Also see Sector List - Yahoo! Finance Industry Browser

 

[explanade]

I'm saying the health insurance industry as a whole doesn't take up a big percentage of the money the US spends on health care every year.

Not saying this or that industry has outrageous margins.

 

[clifp]

I'm saying the health insurance industry as a whole doesn't take up a big percentage of the money the US spends on health care every year.

Not saying this or that industry has outrageous margins.

One of the questions that this whole healthcare debate has raised in my mind is how do we really know how much we spend on health care.

An uninsured guy has an accident. They hospital treats and save his life.
They then present him with a bill for $250,000 Now if he had been insured, the insurance company might only owe $50K to the hospital. But since the guy is uninsured and probably poor, the hospital might ultimately decide to settle for say 25K spread out over 5 years.

So how much did we spend on healthcare for this guy $25,000 that he really paid or the $250,000 that hospital billed? What organization keeps track of these expenditures?.

 

[killingme]

You have to pass it to see what's in it...

Some health insurance gets pricier as Obamacare rolls out - latimes.com

 

[MichaelB]

You have to pass it to see what's in it...

Some health insurance gets pricier as Obamacare rolls out - latimes.com

Please, an explanation or snippet so members know what the link leads to.

 

[Texas Proud]

One of the things that is missed when people talk about the margins earned by the various firms is the amount of healthcare that is not needed but done...

I have had a sister and my mom go into the hospital the last couple of years... my sister had a good number of doctors come by and do tests on her... some were never needed and never requested... but the spending was done anyhow.... so they made a profit of 13% or so.... but 100% of the costs were not needed...


My mom was recently in for fainting and falling... they have done a good number of tests on her as they do not know why... the costs have piled up and I am still dealing with them.... they think there is some 'growth' on her heart.... when I asked my sister (a nurse) what could be done she said nothing.... nobody is going to do open heart surgery on a 94 YO.... so they continued to do tests anyhow... they did a blood flow test on her legs.... why It costs hundreds of dollars to do with no change in her diagnosis....


Sometimes the doctors that we trust are doing things to us that should not be done.... for a profit... even a 13% profit....

 

[W2R]

[...]when I asked my sister (a nurse) what could be done she said nothing.... nobody is going to do open heart surgery on a 94 YO.... so they continued to do tests anyhow... they did a blood flow test on her legs.... why It costs hundreds of dollars to do with no change in her diagnosis....

It does sound like you and she deserve a good explanation of why these tests were being done.

I can think of one possible reason in particular. When my mother was about that age, she had to have her legs amputated at the knee because of impending gangrene, due to low blood flow, threatening her life. We were told that these circulatory issues were due to her extreme old age causing her blood vessels to break down at that time. It took four more years before most of the rest of her organs failed due to her advanced age, almost simultaneously, and at that time she passed away at age 98 (well, two weeks short of 98).

She truly enjoyed her last four years of life, though, even without her legs.

 

[Moemg]

.... they think there is some 'growth' on her heart.... when I asked my sister (a nurse) what could be done she said nothing.... nobody is going to do open heart surgery on a 94 YO.... so they continued to do tests anyhow... they did a blood flow test on her legs.... why It costs hundreds of dollars to do with no change in her diagnosis....


Sometimes the doctors that we trust are doing things to us that should not be done.... for a profit... even a 13% profit....

The blood flow test may have been done in preparation for open heart surgery . The take vessels from the legs to use as grafts .My Mom is 97 and when they recommend tests to her she just nicely refuses .

 

[explanade]

One of the questions that this whole healthcare debate has raised in my mind is how do we really know how much we spend on health care.

An uninsured guy has an accident. They hospital treats and save his life.
They then present him with a bill for $250,000 Now if he had been insured, the insurance company might only owe $50K to the hospital. But since the guy is uninsured and probably poor, the hospital might ultimately decide to settle for say 25K spread out over 5 years.

So how much did we spend on healthcare for this guy $25,000 that he really paid or the $250,000 that hospital billed? What organization keeps track of these expenditures?.

I found this document:

http://www.cms.gov/Research-Statist...onalHealthExpendData/downloads/highlights.pdf

Then of course, during this whole health care debate, there was a lot written about comparative costs and results across different countries.

A key metric is expressed in terms of GDP. I think the US is around 17% of GDP while the next closest nation was around 12% of GDP.

US GDP is $14 to $16 trillion I believe.

 

[explanade]

One of the things that is missed when people talk about the margins earned by the various firms is the amount of healthcare that is not needed but done...

I have had a sister and my mom go into the hospital the last couple of years... my sister had a good number of doctors come by and do tests on her... some were never needed and never requested... but the spending was done anyhow.... so they made a profit of 13% or so.... but 100% of the costs were not needed...


My mom was recently in for fainting and falling... they have done a good number of tests on her as they do not know why... the costs have piled up and I am still dealing with them.... they think there is some 'growth' on her heart.... when I asked my sister (a nurse) what could be done she said nothing.... nobody is going to do open heart surgery on a 94 YO.... so they continued to do tests anyhow... they did a blood flow test on her legs.... why It costs hundreds of dollars to do with no change in her diagnosis....


Sometimes the doctors that we trust are doing things to us that should not be done.... for a profit... even a 13% profit....

Some of the additional procedures are attributed to defensive medicine. Doctors doing tests to document that they tried different diagnostic methods to determine the problem.

Then there have been articles about doctors owning a lot of these testing labs and facilities, which bill for the various tests.

 

[clifp]

I found this document:

http://www.cms.gov/Research-Statist...onalHealthExpendData/downloads/highlights.pdf

Then of course, during this whole health care debate, there was a lot written about comparative costs and results across different countries.

A key metric is expressed in terms of GDP. I think the US is around 17% of GDP while the next closest nation was around 12% of GDP.

US GDP is $14 to $16 trillion I believe.

Interesting document, but I still was unable to find their methodology for how they collected the data. It is relatively easy to figure out in single payer system like Medicare.
Health Care expendentures = Money Uncle Sam paid + Medicare Premiums+ supplemental insurance premiums.

However, I think it is really hard to get accurate data in the confusing system we have.

In the example I gave where the bill was $250,000 but the amount paid was only $25K. Did we spend $250K for health care or $25K?

Say I hired a contractor to build me a McMansion on some leased property and the bill for the initial phase (say architect drawings, permits, pour the foundation, demoing the old hose) was $250K, but I only paid him $25K before going broke. The contractor would have had $250k revenue and bad debt of $225K on his books. In compiling statistics on home builders in city or state, it is perfectly reasonable to count the full $250K ,because massive price discounts/bad debt are uncommon.

The hospital accountants would probably (I am guessing) treat the bill the same way $250K worth of revenue and 225K worth of bad debt. The big difference is that massive price discounts are common in the health care. So when they (whoever they is) compile data on the hundreds of billions the uninsured are costing us, I bet they are treating the full $250K bill as the cost. However I'd argue the real cost of this operation was the $50K that an insurance company would pay, not the $250K the hospital would like to bill some sucker. Since this is a pretty common occurrence, my guess is there is a good chance that amount we spend on Health Care probably has a lot to do with fictitious accounting, and is probably exaggerated.

 

[MichaelB]

Health Care expendentures = Money Uncle Sam paid + Medicare Premiums+ supplemental insurance premiums.

Lots more than just that. Long term care, spending not covered by insurance, over the counter medication, alternative medicine, research and development to name a few.

 

[47]

However, I think it is really hard to get accurate data in the confusing system we have.

In the example I gave where the bill was $250,000 but the amount paid was only $25K. Did we spend $250K for health care or $25K?

As you mentioned padded up bills are the norm in healthcare. So, I really doubt they would be allowed to write off the difference betn. initial bill and actual as bad debt. If that's the case all bills paid by insurance companies would still result in millions of $ is deductions for the hospital.

More likely, they use what Medicare pays as the "imputed value" of the service, and they can only write off up to that amount. Although it all looks like black magic to us, there is an elaborate system of procedure codes, allowed rates, and equipment depreciation tables that go into the belly of the beast. There may be some shenanigans in that too, but that would be just pure garden variety fraud.

There is a possibility that IRS allows them to use a slightly higher number if they can reliably show some average number -- but somewhat less likely.

 

[clifp]

Lots more than just that. Long term care, spending not covered by insurance, over the counter medication, alternative medicine, research and development to name a few.

Fair enough, I was just pointing out that is a lot easier to get handle on cost in a single payer system then in our morass.

BTW I am not sure I'd agree that R&D expense is part of health care cost. In theory the cost of the drug should reflect the past and expected R&D cost o0f the pharmaceutical industry. Which sort of makes my point it isn't easy to get a handle on the numbers.

Of course the reality is that American's subsidies most of the $100 billion R&D expenditures of big pharma, in the form of higher cost for prescription degrees. Countries like Canada with a single payer system negotiated a lower cost.

 

[ERhoosier]

.......Then there have been articles about doctors owning a lot of these testing labs and facilities, which bill for the various tests.

This has been rather tightly regulated by the US Gov't for some years. With certain exceptions, docs (& hospitals) referring to facilities they own (or have significant investments in) is a criminal offense under anti-kickback laws.

Anti-Kickback Law - Stark Laws

But unfortunately there are criminals in every profession, inc medicine

And Moemg makes a great point that (in US at least) folks have rights to refuse medical tests/treatments if they wish. I agree 100% that trend in US is to do too many tests/treatments which do not really change patient outcomes. IMHO- Medical curiosity alone is not reason to justify cost (& sometimes risks) of medical testing.

 

[Gatordoc50]

As you mentioned padded up bills are the norm in healthcare. So, I really doubt they would be allowed to write off the difference betn. initial bill and actual as bad debt. If that's the case all bills paid by insurance companies would still result in millions of $ is deductions for the hospital.

More likely, they use what Medicare pays as the "imputed value" of the service, and they can only write off up to that amount. Although it all looks like black magic to us, there is an elaborate system of procedure codes, allowed rates, and equipment depreciation tables that go into the belly of the beast. There may be some shenanigans in that too, but that would be just pure garden variety fraud.

There is a possibility that IRS allows them to use a slightly higher number if they can reliably show some average number -- but somewhat less likely.

They can't write off bad accounts unless they were first declared as income. Who gave you the idea that healthcare providers use a different tax code than everyone else?

 

[clifp]

They can't write off bad accounts unless they were first declared as income. Who gave you the idea that healthcare providers use a different tax code than everyone else?

For tax purposes it doesn't matter much if you call it $250K worth of revenue and $225K of bad debt, or $50K (the insurance company price) and 25K worth of bad debt. In either case the hospital/clinic would only pay taxes on the $25k less expenses and heck most of health care hospital are non profits like Kaiser and many Blue Cross affiliates .
Cause as you say everybody use the same tax codes.


It only matters when you are trying to collect data on the industry as whole. Then it does matter when calculating things like how much we spend in ER visits for the uninsured.

 

[47]

They can't write off bad accounts unless they were first declared as income. Who gave you the idea that healthcare providers use a different tax code than everyone else?

As soon as a company bills you (legitimately) it becomes accounts receivable (AR) for them. Accounts receivable are same as revenue in corporate accounting.

They do not do cash basis accounting unlike individuals. That's why all the software companies madly try to sign deals towards the last day of the quarter.

If they habitually have problems collecting on AR , of course that also is considered a problem - but in a different way. It reflects on the company as an ongoing concern, and indicates a problem in pricing, target market etc. In any case they would have cash flow issues soon enough.

So when a company officially give up on an AR as uncollectable, the treatment is no different from a bad debt which you can write off on taxes. In fact, they are giving you credit when they perform services first and bill you for payment at a later time.

 

[Texas Proud]

It does sound like you and she deserve a good explanation of why these tests were being done.

I can think of one possible reason in particular. When my mother was about that age, she had to have her legs amputated at the knee because of impending gangrene, due to low blood flow, threatening her life. We were told that these circulatory issues were due to her extreme old age causing her blood vessels to break down at that time. It took four more years before most of the rest of her organs failed due to her advanced age, almost simultaneously, and at that time she passed away at age 98 (well, two weeks short of 98).

She truly enjoyed her last four years of life, though, even without her legs.

Thanks for the response... I guess I can see that as a possibility.... I had not talked to my sister about this test...

I usually do not take her.... it is my oldest sister who is retired, so she knows what is happening more than me....

 

[Texas Proud]

The blood flow test may have been done in preparation for open heart surgery . The take vessels from the legs to use as grafts .My Mom is 97 and when they recommend tests to her she just nicely refuses .

My sister who works in a top hospital in the OR talked to heart surgeons... all said they would not do an operation on a 94 YO...

I think it was the blood flow that W2R mentioned....

 

[Texas Proud]

Just my 2 cents....

When they talk about health care spending... it is real spending... the accounting is not taken into account...

 

[clifp]

Just my 2 cents....

When they talk about health care spending... it is real spending... the accounting is not taken into account...

Not arguing and I know you have a banking/finance background but I am curious in the example I gave.

Hospital list price is $250,000
Insurance company customary reimbursement payments would $50,000
the poor uninsured person ultimately agreed to pay $25,000 over 5 year.

How much did the country spend on health care in this hypothetical?

 

[MichaelB]

GAAP usually require that, for revenue to be recognized it must also be expected to be collected within the customary payment period. That means that, collectible or not, a hospital can't book as revenue more than it would customarily collect for similar services. If a service is known to be uncollectable when billed it does not meet GAAP criteria for revenue (in most cases)

Hospitals are free to adjust their prices across the board to reflect unpaid services, and clearly they do. In addition, however, to compensate for charity and other unreimbursed services, they receive higher rates from Medicare for doctor's services than the doctors receive when in private practice. For profit hospitals also receive tax credits.

 

[Gatordoc50]

As soon as a company bills you (legitimately) it becomes accounts receivable (AR) for them. Accounts receivable are same as revenue in corporate accounting.

They do not do cash basis accounting unlike individuals. That's why all the software companies madly try to sign deals towards the last day of the quarter.

If they habitually have problems collecting on AR , of course that also is considered a problem - but in a different way. It reflects on the company as an ongoing concern, and indicates a problem in pricing, target market etc. In any case they would have cash flow issues soon enough.

So when a company officially give up on an AR as uncollectable, the treatment is no different from a bad debt which you can write off on taxes. In fact, they are giving you credit when they perform services first and bill you for payment at a later time.

As Michael states , only cash that is expected to be received would be declared as income. You had suggested that providers arbitrarily jacked up fees in order to increase write offs. That is incorrect as that would only hurt them financially. There is no advantage to them to overestimate income and in fact, a large disadvantage.