Why can't Docs get reimbursed what they charge?

[sean842]

**Let me preface this by saying that I know this is not reality, but simply hypothetical**

Recently I've wondered why it is that doctors are allowed to be reimbursed less than what they charge. Example, a doc bills an insurance company $1000 for a procedure, but the insurance company only reimburses $400. Okay, so legally, what is to stop the doctor from saying "screw you" the bill was for $1000, and then insisting that the patient pick up the remaining $600 because their insurance is cheap?

I realize this may seem outrageous, but it really isn't. You wouldn't go to the dentist and get a $500 root canal done, write a $200 check to the nice receptionist and leave. They would send you to collections before your back to solid food. Medicine should be no different.

Now before anyone harps on me about the patients, I think this could have a few advantages for the patients. In the most likely scenario, the insurance company gives the doc the shaft and the doc has to pursue the patient for the bill. Well, this gives the patient a huge incentive to either a) insist on his insurance company being worth a sh** or b) actually taking some responsibility for their medical bill. In situation a, if the patient suddenly finds themselves being stuck with a $600 bill (as opposed to the doc) then now the economic burden of this bill gives the patient a huge incentive to switch to a better insurance company. This increases competition in the markets, which is currently lacking since the burden doesn't fall on the consumer, and could lead to increased efficiency. Likewise, in situation b, the patient, now being stuck with a huge bill is less likely to insist on CT/US/MRI,etc for every little thing if they know they will be partially responsible for anything the insurance company doesn't cover. Thus helping to make a dent in healthcare costs.

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[deleted87716]

What you're describing is called "balance billing," and is prohibited by nearly all third-party payers (commercial as well as government) with whom physicians typically contract. Currently, the only way around it is to stop accepting insurance (e.g., operate a cash-only practice).

 

[oldiebutgoodie]

**Let me preface this by saying that I know this is not reality, but simply hypothetical**

Recently I've wondered why it is that doctors are allowed to be reimbursed less than what they charge. Example, a doc bills an insurance company $1000 for a procedure, but the insurance company only reimburses $400. Okay, so legally, what is to stop the doctor from saying "screw you" the bill was for $1000, and then insisting that the patient pick up the remaining $600 because their insurance is cheap?

I realize this may seem outrageous, but it really isn't. You wouldn't go to the dentist and get a $500 root canal done, write a $200 check to the nice receptionist and leave. They would send you to collections before your back to solid food. Medicine should be no different.

Now before anyone harps on me about the patients, I think this could have a few advantages for the patients. In the most likely scenario, the insurance company gives the doc the shaft and the doc has to pursue the patient for the bill. Well, this gives the patient a huge incentive to either a) insist on his insurance company being worth a sh** or b) actually taking some responsibility for their medical bill. In situation a, if the patient suddenly finds themselves being stuck with a $600 bill (as opposed to the doc) then now the economic burden of this bill gives the patient a huge incentive to switch to a better insurance company. This increases competition in the markets, which is currently lacking since the burden doesn't fall on the consumer, and could lead to increased efficiency. Likewise, in situation b, the patient, now being stuck with a huge bill is less likely to insist on CT/US/MRI,etc for every little thing if they know they will be partially responsible for anything the insurance company doesn't cover. Thus helping to make a dent in healthcare costs.

I'm pretty sure that this is what was done back in the olden days (70's). I recall paying the balance on various doctor bills, so, for example, my insurance paid 80%, and I covered the rest.

Oldiebutgoodie

 

[sean842]

What you're describing is called "balance billing," and is prohibited by nearly all third-party payers (commercial as well as government) with whom physicians typically contract. Currently, the only way around it is to stop accepting insurance (e.g., operate a cash-only practice).

I realize it is illegal, it just doesnt seem to make good economic sense to outlaw such a thing. What was the reasoning behind that?

 

[dpmd]

The docs in question agree to accept the lesser amount from the insurance company in exchange for being an authorized provider for that insurance. They can choose not to participate if they want (although might have difficulty finding enough paying patients otherwise).

There is a difference between something being illegal, and being contractually not allowed. Balance billing is against most contracts, because the insurance company tells customers they will only have to pay whatever copays they charge for whatever kind of service. If the doc then changes this it would be false advertising.

And many patients have walked out of a dentist office after an expensive procedure having only paid a fraction of what the dentist bills. Lots of dental insurances have set copays for a variety of procedures (although certain stuff will cost extra like the white stuff to fill cavities instead of the metal), and the amount picked up by the insurance company is discounted to some degree. Again, it is something the provider agrees to in advance.

 

[deleted87716]

I realize it is illegal, it just doesnt seem to make good economic sense to outlaw such a thing. What was the reasoning behind that?

In the case of commercial insurers, it adds value to their product by making costs predictable to beneficiaries and making providers beholden to the insurance companies. In short, it strengthens the hold that insurance companies have over American healthcare costs.

The situation is similar with Medicare. The government wants to "protect" patients from "greedy" doctors.

 

[deleted87716]

There is a difference between something being illegal, and being contractually not allowed. Balance billing is against most contracts, because the insurance company tells customers they will only have to pay whatever copays they charge for whatever kind of service. If the doc then changes this it would be false advertising.

In the case of commercial insurers, balance billing would violate the physician's contract with the insurer, and would likely result in the physician being dropped from the insurance company's panel.

In the case of Medicare, it truly is illegal, and is punishable by fines and even jail time.

I should add that most commercial insurance plans frequently require patients to pay amounts beyond the copayment. These are typically annual deductibles and patient-allowable amounts for certain services (e.g., the insurance company pays 80% of the allowable amount for something, and the other 20% is the patient's responsibility). Doctors who bill patients for these are not engaging in balance billing. They're simply collecting what they are contractually entitled to collect.

Attempting to collect more than the allowable amount is considered balance billing.

 

[sean842]

In the case of commercial insurers, it adds value to their product by making costs predictable to beneficiaries and making providers beholden to the insurance companies. In short, it strengthens the hold that insurance companies have over American healthcare costs.

The situation is similar with Medicare. The government wants to "protect" patients from "greedy" doctors.

Thanks for the clarification Blue Dog, everything your are saying sounds like another way for insurance companies to exert olgopolistic power over the markets. I understand that physicians sign contracts that prevent balance billing, but if the markets were competitive then these contracts would be signed at prices that the market would otherwise have arrived at anyways.

 

[docB]

I realize it is illegal, it just doesnt seem to make good economic sense to outlaw such a thing. What was the reasoning behind that?

Just to clarify, it is only illegal in a few states (e.g. CA). In most states you can legally do it. In those states it's your contract with the patient's insurer that prevents it.

It's an important distinction. The government sticks it to us in many ways but this is the insurance industry screwing us on this one. The fact that we can't unionize which would be one way to fight this type of collusion against us does factor in. Now in the case of states that have outlawed balance billing because the politicians the insurance industry are in bed together, well that's just a good old fashioned ass whooping we took there.