Lessons in Healthcare 101
OK. So over the past year or so I have been reading all kinds of things on this forum regarding healthcare and it has come to my attention that there is a large misperception/misconception made by people who are not in the healthcare profession about how things "work". I have been wanting for some time now to begin this thread. So here it is.
I will, from time to time, post some information about what I think is a common misperception among the general population (those that are not involved in providing healthcare). Having said that, this will be the first Lesson in Healthcare.
It is a common misconception that doctors and hospitals charge different fees to uninsured patients, Medicaid/Medicare patients, and private health insurance patients---that they bill one amount for a service to the patient and a different amount to the insurance provider and that they bill different amounts to uninsureds, 'Care/'caid patients and private insurance patients.
This is simply not true. In fact, it is illegal for any doctor or health care facility to have more than one Fee Schedule. This means that you must charge the same price for any given service to everyone. I will use a simple example:
Let's say that a doctor provides a service to a patient (a hernia operation, for example). What is not understood by many people is the concept of Reimbursement. Years ago the doctor would send a bill to his/her patient for the hernia operation. It would generally take a lonnnng time for the doctor to get paid because the patients had to contact their insurance company; the insurance co. would then send the money to the patient and the patient would turn around and send it to his doctor. Then the insurance companies (who were generally lead by Medicare) said, "Hey doctors! Tell you what---you'll love this! We will do you all a favor and help you get reimbursed for the service you provided (the hernia operation) by taking the inefficiency in the system out of the equation. Instead of you billing the patient and then they will have to contact us and then we will send the $$ to them and then they will send it to you (whew!), How about if you just send the bill directly to us, and then We will send the Reimbursement directly back to you! What a great Idea!" On paper and in theory it was...but what it really was was a way for insurance companies and Medicare/'caid to control the amount of the Reimbursements. Over time the Reimbusements have gotten smaller and smaller---I bet you didn't know that there is legislation currently pending that will decrease physician reimbursements by 21.5% (that's right TWENTY-ONE percent. How many of you could take a cut in pay by 21%? Me either. But that's a discussion for another thread...)
Back to the example.
So theway it works is that the doctor signs a contract with each and every insurance provider (including Medicare and Medicaid) to become a Provider of that type of insurance---meaning he can accept patients covered by that type of insurance. In technical jargon, he "Accepts Assignment", or agrees to accept whatever amount of money that that particular insurance company will pay for any given service. Is everyone following?
In our example, let's say that Frank Jones needs a hernia operation and he has Insurance XXX. Insurance XXX will pay $65 (I'm using low numbers to make it easy) and ONLY $65.
However, Insurance YYY will pay $80. Yes, different insurance companies pay different amounts within the same state and ACROSS states. Insurance YYY may pay $80 in Pennsylvania, but they will pay only $70 in South Dakota. (Do you begin to understand WHERE healthcare reform needs to change these types of things---not the crap they are handing us?)
Medicare may pay only $78
(To put things in real perspective, Medicare pays $651.92 for a hernia repair in Philadelphia but it pays only $583.85 in the rest of PA at the time of this post)
Does everyone see the problem here?
A doctor (or other health care facility can have ONLY one Fee Schedule (how much he bills for any given service provided). As a doctor you MUST bill the uninsured, the privately insured, and the Medicare/'caid patients THE SAME AMOUNT. It is ILLEGAL to bill different people different amounts.
Now, here is where it gets a little confusing:
Insurance XXX pays only $65
Insurance YYY pays $75
Insurance ZZZ may pay $90
Medicare (in this example) pays $78
What happens if the doctor sets his Fee for hernia repair at $65, but the patient has Insurance ZZZ? He gets paid $65, because THAT IS WHAT HE BILLED. Insurance ZZZ is willing to pay $90. But the doctor billed less, so he gets paid less.
What happens if the doctor sets his fee at $110. The patient has Insurance ZZZ and they will pay (reimburse) ONLY $90. The doctor gets paid $90.
Can the doctor then turn around and say, "Well, my fee is $110 and Ins. ZZZ paid me $90, so I will bill the patient the difference of $20".
NO. HE CANNOT. Remember, he signed a contract with Insurance ZZZ to "Accept Assignment". The Reimbursement Assigned to the service of Hernia Repair is $90. The doctor cannot, per the contract, turn around and bill the patient for the differnce.
In order for a doctor to collect as much payment as possible, he sets his Fee Schedule slightly above what the majority of insurance companies pay (in reality, it turns out to be about 150% of the Medicare Reimbursement Schedule).
So, for this example, the doctor sets his Fee Schedule for Hernia Repair at $85
Frank Jones has Insurance XXX----the doctor will get paid $65
Tom Smith has Ins. YYY---the doc will get paid $75
a patient with Ins. ZZZ ---the doc will get the full $85 (and, in fact, he could have gotten as much as $90, if his Fee Schedule was higher---but he Cannot change it. He must have a set Fee Schedule which is subject to audit).
Now, a patient who is uninsured will get a bill directly from the doc.---$85 in this case. We'll get back to that...another time.
So,looking at a patient with Insurance XXX---it appears as if the doctor billed the Ins. co. only $65 because the patient receives a paper that tells them that the doc was paid $65. But it may also say somewhere on the bill that the fee was $85. It gets confusing and appears that there were two different fees billed. There were not. The Fee was $85. The Insurance company agreed to pay $65. The doctor was obligated to accept the $65, or he would get NOTHING.
Insurance companies TELL doctors and hospitals how much they will pay. The doc/hosp. either accepts that much or gets nothing. Period.
HERE ENDETH THE LESSON
... I firmly believe that any man's finest hour...is that moment when he has to work his heart out in a good cause and he's exhausted on the field of battle - victorious.