Medicare allowable charges

[FinallyRetired]

After receiving several medical bills from doctors and hospitals, I've been shocked not by the high billed charges (which I've grown desensitized to), but by the huge disparity between the billed amount versus the Medicare allowable amount. Actually, I use military Tricare, but by law it's tied to Medicare allowable amounts, so it's the same thing.

For example a $10,000 billed charge for a major surgery might result in a Medicare allowable charge of only $2,000, of which Medicare pays 80%, or $1600, and I pay $400.

I have mixed feelings about this, and several possible explanations, and I have no idea which is correct:

1. If the procedure really costs $10,000, the doctor is being tremendously underpaid by Medicare, and I'm surprised any of them accept Medicare. It's only a matter of time before they drop Medicare patients, since no business can sustain such losses.

2. If the procedure really costs $2,000, the doctor is tremendously overcharging the patient, and Medicare is looking out for the patient by adjusting billing charges (and, yet, Medicare is said to be going bankrupt).

3. The true cost is somewhere between 1 and 2. We have a multiple tier system in this country: (a) those on Medicare, (b) those who are wealthy or have good private insurance, and (c) everyone else. Doctors/hospitals accept payment based on the tier of coverage, making up with tier (b) for losses for tiers (a) and (c).

I suspect the answer is 3. Am I correct, or is there something else going on?

 

[quietman]

I believe the answer is #3 as well, with a generous allowance for profit at the doctor, supplier and insurance levels as well. My own experience with durable medical equipment (think wheelchairs and the like) seems to agree with this. Insurance is billed about 10x actual cost and allowable amount is "bargained" down by factor or 4 or so. Insurance still pays double the real cost of the item, or consumer pays that if they have deductible to satisfy. Woe to the uninsured who do not shop outside the system and pay the billed amount instead of the true "street" price they could have gotten by going direct to a supplier.

Also, I've found that suppliers who participate in Medicare and insurance reimbursements rarely deal with the general public. I suspect that doing some straight sales at true prices would somehow upset their system that supports the crazy high prices for contracted sales and services.

 

[Gotadimple]

FR:

#3.

It's a fee schedule that is negotiated at the national level between the AMA and Medicare. The fee is as close to a wholesale price as possible. The law requires the fee schedule to be reduced each year. So, today, the schedule is so low that there are many providers who will not see Medicare patients. I thought I caught a sentence in one of the many health debate articles about the fee schedule needing to be revamped because of the pricing deceleration.

The Billed Amount is the 'retail' cost of the device or procedure in the local community. Read as: what is generally charged to those without insurance.

QuiteMan:

Allowed Amount is the price for the device/procedure that is in the fee schedule. You are correct that the provider must accept the Medicare fee schedule if she/he intends to serve Medicare patients. At a time when the fee schedule was higher and a provider wanted to assure a reasonably steady stream of patients, being in Medicare was an important business decision for them. Now being out of Medicare is an equally important decision because they can't afford to perform services for what they are being paid.

You are also correct that most DME suppliers don't work with the general public, they work with the physician (who must prescribe the device and prove it is a needed item), but bill Medicare directly.

As I've said in another forum here: the practice of paying providers by a fee schedule is what is driving the cost of medical care. It's piece work and we all know that in order to make more money one has to perform more pieces to earn the pay.

-- Rita

 

[Rich_by_the_Bay]

It's indeed a combination; on the professional fee side (as opposed to hospital-related charges) it started out years ago at a fee schedule that was discounted but allowed you to cover your costs for most procedures though not by much.

Over the years, technology advanced, inflation happened, and oddball arbitrary decisions crept into the picture. The allowables became psychotic and as a doctor you didn't really know what to do since you could literally lose money on MC patients. A few practices engaged in "code creep" where you charge for a comprehensive visit instead of what really happened (a limited visit). Quite illegal and unethical. Others would schedule short visits and make the patient come back for another if they had more than a simple problem or two - probably legal but inconvenient for all parties.

Long story short, multiply the above example by a thousand other quirks, and you have what we have today: $17 for a brief office visit, $70 tylenol pills, weird incentives and discounts and disgruntled patients and doctors.

 

[FinallyRetired]

Long story short, multiply the above example by a thousand other quirks, and you have what we have today: $17 for a brief office visit, $70 tylenol pills, weird incentives and discounts and disgruntled patients and doctors.

Rich, psychotic allowables is right. $17 for an office visit? A plumber charges me a minimum of $80. Granted, he comes to the house, but he didn't have to go $150,000 in debt to get his education. And when he makes a mistake, people don't usually die.

I'm almost embarassed to go back and see my doctor, knowing he's probably losing money every time he sees me.

We all know the system is broken, but it becomes real when you see these kind of numbers.

 

[JOHNNIE36]

I mentioned this about six months ago on another thread. Same subject and I asked how the whole system worked as there was money going or coming in the way of tax benefits, writeoffs or some combination. In 2004 I had open heart surgery. I'm now looking at the hospital bill which indicates charges for the use of the Emergency Room, operating room, various medical equipment, my semi private room, tests, medicines, nurses, medical supplies, etc. Everything except all the doctors and surgeons. The hospital bill (seven days) was $152,628. Medicare approved and paid $34,279 and my secondary insurance was billed $2165 which they paid except for a small copay. I never could figure out how this was possible financially and I still haven't been able to answer it in my own mind. I think I got a hell of a good deal. Why would I want to change my health insurance?

 

[FinallyRetired]

I think I got a hell of a good deal. Why would I want to change my health insurance?

We have a good deal for now, but it's not sustainable. Either doctors will drop Medicare patients, or our premiums will increase. As it stands, Medicare is marching towards bankruptcy, so it may be both.

And the financial problem creates pressure on doctors to decrease the time spent per patient and I suspect, in some cases, to reduce the quality of the care.

I had a prostate biopsy several months ago. I've heard that in some cases this can be fairly painful. My urologist was very good, and gave me a local anesthetic before the procedure, so I felt almost nothing. When I saw the charges, there was a code for the biopsy and a code for the anesthetic. Medicare allowed their usual 20-30% of the billed amount for the biopsy, and a fat zero -- nada -- for the anesthetic. How many more Medicare patients can he afford to do while paying out of his own pocket for the anesthetic?

 

[whatsup]

We need FAIR Healthcare Pricing

My wife went to Mayo Clinic. For the examination (visit) and simple tests they billed $800. There were no estimated charges. They did not accept our insurance, which reimbursed us $100. Hospital stays without insurance or Medicare can wipe most people out financially.

Like the health care industry comprising one-sixth of the economy, Medicare provides coverage for about one-sixth of those insured. Yet, Medicare has agreements for hospital charges and sets approved payments for physician services and testing, while uninsureds are charged amounts that are outrageously higher.

There are no other consumer services that Americans use that operate like health care. For someone uninsured, charges for a cataract procedure in an outpatient surgery center could be $12,000 while Medicare approves $750.

When "blues" around the country provided most health insurance, before Medicare, hospital rates were $100 to $200 dollars per day. Inflation does not account for that going up by a factor of ten to fifteen, even in fifty years. Health care reform without a system of FAIR charges will not work.

Medicare approved payments may be closer to what is fair, but there is no business that would ever arrive at costs or pricing like the government.

Medicare should also publish its approved charges for the most common services and procedures, so that uninsured persons have a guide from which to negotiate or choose their care. Estimated health care charges, not covered, should be provided, in advance, in writing, except in real emergencies, just like auto repair laws.

 

[Rustic23]

Ok, I have absolutely no proof of what I am about to say, besides it is past 5:00 here. There seems to be three tiers of medical payments. Medicare on the bottom, insurance companies next, and private payer at the top. If we published Medicare payments, which the insurance companies should know already, then it may bring pressure to reduce the third category. However, as the third category subsidizes the first two, undoubtedly many hospitals and medical professionals would go out of business!

 

[Gotadimple]

Ok, I have absolutely no proof of what I am about to say, besides it is past 5:00 here. There seems to be three tiers of medical payments. Medicare on the bottom, insurance companies next, and private payer at the top. If we published Medicare payments, which the insurance companies should know already, then it may bring pressure to reduce the third category. However, as the third category subsidizes the first two, undoubtedly many hospitals and medical professionals would go out of business!

You've got it right Rustic.

It's a cost shift, and actually private insurance and private payer subsidize Medicare.

-- Rita

 

[ERD50]

You've got it right Rustic.

It's a cost shift, and actually private insurance and private payer subsidize Medicare.

-- Rita

Thanks for stating that so clearly.

It's why I get a bit worked up when I hear the claim that the govt can run HC so much cheaper than private ins because the govt eliminates that demon "profit", and their admin costs are supposedly lower. It's a shell game played on the backs of private insurance and private payers.

-ERD50

 

[toofrugalformycat]

And yet government run, or supervised, healthcare works - with better results and a lower percentage of GNP - in every other industrialized country on the planet. What is wrong with this picture?

 

[Texas Proud]

Rich, psychotic allowables is right. $17 for an office visit? A plumber charges me a minimum of $80. Granted, he comes to the house, but he didn't have to go $150,000 in debt to get his education. And when he makes a mistake, people don't usually die.

I'm almost embarassed to go back and see my doctor, knowing he's probably losing money every time he sees me.

We all know the system is broken, but it becomes real when you see these kind of numbers.

According to my sister.. it is more like $300,000 in debt... her son just started this year... she said it is the 'cheap' year and is $60,000... kind of came as a surprise to me...

 

[ERD50]

And yet government run, or supervised, healthcare works - with better results and a lower percentage of GNP - in every other industrialized country on the planet. What is wrong with this picture?

(paraphrasing) - And yet government run, or supervised, PUBLIC EDUCATION works - with better results and a lower percentage of GNP - in every other industrialized country on the planet. What is wrong with this picture?

I've posted this several times. Only Switzerland spends as much as us, and we rank way down the list in performance. I think the only answer I may have received was "oh, but we have a different group of students". OK, I suspect we have a different group of patients, too. And a different govt, that may not be as responsive.

-ERD50

 

[DblDoc]

And yet government run, or supervised, healthcare works - with better results and a lower percentage of GNP - in every other industrialized country on the planet. What is wrong with this picture?

Because they take a population and evidence based medicine approach to health care which will NEVER fly here in the US.

For example GB budgets how much they spend for healthcare each year and then decide how to spend it to get the most benefit from a population perspective. Here thats called rationing (a swear word!). In GB they will spend the money on say childhood vaccinations before they will spend it on dialysis for a 90 year old severely demented diabetic. They won't cover experimental chemotherapy - and you will see headlines about it here (as well as there). You will have to take your blood pressure medication, aspirin and cholesterol medication rather then get cardiac stents placed for stable angina - which the medical evidence clearly shows is equivalent but MUCH less expensive.

Health care will change but until society comes to grips with the fact that health care must be rationed and the dollars spent wisely rather then demanding on an individual basis the latest, greatest medication/procedure/treatment a solution will evade us.

my 2 cents...

DD

P.S. my Infectious Disease instructor put modern medicine into perspective for me. Our garbage collectors and those who provide potable water save WAY more lives a year then all of us MD's combined.

 

[Rustic23]

For all those singing the 'preventive care' of a government runs system should take a look at Medicare.... it does not even cover an annual physical!