Paying Medical Bills Without Health Insurance

Some advice for patients without health insurance (or for anybody wondering why the following is the case). Learn about some things can be done to reduce the costs of someone being uninsured when going to the hospital.

 

Example of Doctor Visit as Uninsured Patient

When you visit a medical practitioner or hospital, they can bill any amount they want (although some are limited by local laws). For some practitioners, the insurance company negotiates how much they’ll pay them for that service. For example, a doctor may charge $200 for a sick visit. But the insurance company negotiates that they’ll only pay $75 for a sick visit. The $200 bill sent by the doctor to the insurance company is called the pre-negotiated rate. The $75 bill in this instance is called the negotiated rate. An insured patient at an in-network practice will not need to pay more than the negotiated rate.

In short, Medicare sets its rates across the board. Providers (e.g. hospitals) have no choice but to accept them, as they are all-but-required to accept Medicare patients. Because Medicare is not required to ensure that its rates are sustainable, Medicare ends up reimbursing, on average, 7% less than the costs of providing services to its patients. (This is not accounting for salaries, overhead, etc. – just the per-patient, marginal cost of each additional service).

If hospitals didn’t make up the difference somehow, they would go bankrupt. So they have to charge other patients more. Unfortunately, most hospitals cannot, by law, charge patients different amounts depending on what their insurance status is when presenting the initial bill. So, the initial bill that they send to everyone is absurdly high. They don’t expect anyone to pay that amount. But they have to highball the initial bill to insurers (to start negotiations), and they cannot legally ask patients if they are uninsured and then present them with a smaller initial bill.

The private insurers usually look at the high bill and say “No, we’re not going to pay that much. But we will agree to pay you 200% what Medicare does for this service, for all our patients this year, if you stop sending us these bills.” This is the intended result.

 

What happens with uninsured patients?

Uninsured patients usually look at the high bill and freak out, because they think they’re expected to pay it. Hospitals could not care less if you pay it or not, which is why you can almost always negotiate it down. Tell them, “I cannot afford to pay $20,000, but I will be able to pay $1,000, and I will pay you that today if that’s what you charge me.” They will almost always take you up on this, beacuse it’s better to them to have the small bill paid than to have a bill that a patient ends up defaulting on. (Defaults affect their bad debt ratio).

 

Negotiated Rates for Insurance Companies

In the above example, having health insurance was financially an excellent move for Bob. For $11,000, he avoided paying $43,000 worth of medical bills. But most people don’t have medical bills that exceed their out-of-pocket maximum. For those individuals, health insurance provides a secondary benefit called “negotiated rates”.

When you visit a medical practitioner or hospital, they can bill any amount they want (although some are limited by local laws). For some practitioners, the insurance company negotiates how much they’ll pay them for that service. For example, a doctor may charge $200 for a sick visit. But the insurance company negotiates that they’ll only pay $75 for a sick visit. The $200 bill sent by the doctor to the insurance company is called the pre-negotiated rate. The $75 bill in this instance is called the negotiated rate. An insured patient at an in-network practice will not need to pay more than the negotiated rate.

In-network or Out-of-Network

The medical practices that have a negotiated rate with your insurance company are considered to be in-network. The medical practitioners that did not agree to the discounted rates are considered to be out-of-network. An out-of-network medical provider can charge you the pre-negotiated rate. Taking the above example, the insurance company may only pay $75 for a $200 out-of-network sick visit, leaving the patient responsible for the $125 balance.

Additionally, insurance companies also may have different deductibles, co-insurance, and out-of-pocket maximums for in-network vs out-of-network visits. For example, the deductible may be $3,000 for in-network visits and $4,000 for out-of-network visits. It is usually most efficient financially to only use in-network providers.

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