It wasn’t all that long ago that most medical practices charged patients who paid with cash their highest rates. Insurance was meant to negotiate prices down. But things are changing. Now, it’s not unusual for patients to save hundreds or even thousands of dollars out-of-pocket by paying with cash instead of insurance. But why? And what does it mean for the future of health care?
There are several factors that contribute to insurance/cash pricing discrepancies. For one thing, we’re dealing with new state and federal regulations designed to protect uninsured patients from price gouging. Those regulations drive down prices for people facing tough times. But it also means hospitals are seeking higher payouts from commercial insurers to recoup their losses in other areas.
It’s not just about playing the system trying to even-out finances, though. Working with insurance companies also involves large amounts of paperwork and time spent collecting payments. Many physicians now offer discounts to patients paying cash because it cuts down on the administrative work for their practice.
There’s Quite A Difference
So how much of a difference are we talking? It depends on the procedure and the location, of course, but there’s often a significant discrepancy between the cash price and the price negotiated by insurance companies. For example:
- Boulder Community Hospital in Colorado told one patient a knee X-ray would cost her $600 out of pocket if she used her high-deductible insurance, but only $70 if she paid cash.
- Torrance Memorial Medical Center in California billed Blue Shield Insurance $408 for five blood tests and the patient was responsible for paying $269.42. Cash price for the five tests would have been closer to $75.
- For an MRI of the foot from Regional Medical Imaging of Flint, Michigan, a patient with a high deductible plan from Aetna would pay $510 out of pocket. In contrast, they charge cash payers $265.
As more information about this discrepancy comes out, it’s starting to change how patients approach health care. They wonder why someone who’s paying a health care premium still owes more money for a procedure than someone without insurance. And to further complicate things, there are often large discrepancies in pricing between medical care facilities, even ones in the same city, as well.
If patients aren’t facing an emergency situation, they’re increasingly likely to shop around looking for a better health care deal and pay with cash even if they have insurance. The problem is if you have insurance and pay with cash it doesn’t count toward your deductible. So sometimes it’s more cost-effective for patients with insurance to pay the higher cost and get over their deductible so insurance will cover major medical costs in-full. They can’t always guarantee they will or won’t save money in the long-run, which makes navigating decisions about how to pay for health care even more complicated.
For now, the huge variations that exist between insurance and cash pricing are simply a fact of health care. And with legislation surrounding health care changing so rapidly, there’s really no way to tell exactly how this issue will be resolved. It’s a problem that no one is quite sure how to fix.
The cash-priced procedures movement is one alternative that’s gaining popularity. In this system, physicians stop accepting insurance altogether and present pricing information to patients up-front. Other solutions could involve legislation, such as Massachusetts’ health cost transparency laws. Unfortunately, there’s no way to know for sure exactly what direction a solution will take. This is definitely an aspect of health care to keep a close eye on in the future.