A common practice among physicians to charge far more than what Medicare actually pays is hitting uninsured people and those with high-deductible plans hard.
“As the health insurance market shifts toward more restrictive physician networks and high-deductible plans, protecting uninsured and out-of-network patients from high medical bills should be a policy priority,” wrote the authors of a study published in JAMA. “For example, a recent law in New York restricts out-of-network physicians from charging patients excessive unexpected amounts.”
The study, led by CPA Ge Bai and Gerard F. Anderson of Johns Hopkins University, Baltimore, looked at data from more than 429,000 physicians. The authors found that doctors on average are charging more than two and a half times what Medicare pays.
“Physician excess charges were defined as total charges divided by total Medicare allowable amount for medical services (i.e., the charge-to-Medicare payment ratio) for each physician,” according to a JAMA news release. “The authors note that the charge-to-Medicare payment ratio represents the upper limit of each physician’s actual excess charge, and may not be what a patient actually pays. The ratio varied across specialties, with anesthesiology having the highest median and general practice having the lowest.”
Almost 11,000 physicians had “high excess charges,” meaning their median charge-to-Medicare ratio was in the top 2.5 percent. Just over half were anesthesiologists and three percent were in general practice, internal medicine or family practice.
A pair of bordering states had the highest and the lowest excess charges. Wisconsin was highest, at almost four times the Medicare rate; Michigan was lowest, at double the rate. Hawaii also had double the ratio.
“About one-third of physicians with high excess charges practiced in only 10 hospital referral regions,” according to the news release. “Although some out-of-network physicians may offer discounts from their full charges, many patients receive unexpected medical bills.”
Medical Billing Advocates of America uses the example of a strep throat test to explain how a doctor’s billing process works. “The insurance company already has a formula for calculating what they will pay for that strep test,” the group explains on its website.
“So no matter what the doctor actually bills, as long as the doctor is participating, the insurance company will pay up to their maximum. So, if the bill is $250, and the insurance company’s maximum payout for the test is $125, the doctor will receive payment in the amount of $125 and will be forced to forgive the rest. If the bill the insurance company receives is $75, they will not pay their maximum payout of $125, they will pay the full $75 that the doctor’s office asked for.”
The group explains that since doctors don’t know how much they actually are going to get out of a visit with a patient until they are reimbursed, it results in “a game of sorts…between insurance companies and doctors.”
According to the site, medical bills push people into bankruptcy more than any other category of financial hardships in America combined.