How Much Will That Cost?

Imagine the following scenario in which I am having a conversation with my auto mechanic.

Mechanic: You know, your car is at the age where it really should have this test.

Me: Is this really necessary?

Mechanic: Well, if you don't have it, and there's a problem with your car's engine, by the time you notice a problem it may be too late to fix it. I really recommend that you have us do the test.

Me (reluctantly): Okay...Any idea of what it'll cost?

Mechanic: Hmm...not sure about that. We'll have to check with your credit card company and get back to you.

Me: Wha?

Mechanic: Well, you'll probably use a credit card to pay, right? So we need to check with your credit card company.

Me: Okay...

(Three days later, the mechanic calls me back.)

Me: So, what is this test going to cost me?

Mechanic: I'm sorry, but your credit card company couldn't tell us, either.

Me: But...I'm going to end up paying for this test that you say I should have. No one can tell me before the test what it'll cost?

Mechanic: That's correct. I'm sorry. Would you like to schedule the test now?

Me: Okay...

Now, raise your hand if you think that scenario was ludicrous. How could a service provider not be able to tell the buyer what the service will cost? Nevertheless, substitute the words "doctor's office" for "mechanic," "body" for "car," and "insurance company" for "credit card company," and you have the essence of an experience I had earlier this year.

Without getting too detailed about it, last year my age started to begin with the number 5, and one's reward for that is a recommendation from one's doctor that one get a certain test involving one's posterior. Good times.

I happen to have a high-deductible health insurance plan, coupled with a health savings account. This meant that said HSA would be funding much of the cost of this test. Consequently, the price tag was of more than passing interest to me, and I called the physician's office to ask how bad the sticker shock would be. The person I spoke with said she would have to check with my insurance company, which she did. Unfortunately, even after checking with them, she still didn't know. 

There are some surprises I like and others I do not. Large bills fall into the latter category. I contacted the physician's office so that I wouldn't get that surprise, and they were unable to tell me the cost of the test I was buying.

So what did this little test end up costing? Well, there was good news and bad news. Under both New York State insurance law and the federal health care reform law, insurance companies must cover these sorts of preventative procedures in full. The doctor who performed the test is in my plan's network. According to the Explanation of Benefits form the plan sent me, he charged $790, they allowed $267.40, and they paid that amount. I was not responsible for any of that cost. So far, so good.

However, this is the sort of test for which the patient is placed under anesthesia (and the patient wouldn't have it any other way, believe me.) The anesthesiologist has his own charges, and New York and federal law don't say anything about insurers having to pay for that. The guy who sent me to my happy place charged $450, the insurer allowed $390, and all $390 was applied to my deductible. Therefore, the answer to the question I so naively asked ahead of time (how much will this test run me?) was $390. And, because no one could tell me this in advance, the amount shown on the bill came as a surprise.

This, my friends, is nuts. If you've followed this blog for some time, you know that I have an interest in the economics of health care, particularly as to how the federal health care reform law will change it. I therefore do a lot of reading on the subject, and if I've read it once, I've read it a hundred times: One reason why health care cost so much as that we patients are insulated from the cost. Of course we'll overuse the health care system, what with our $20 co-pays. We'll be more careful health care consumers if we have "skin in the game." We have to shop for health care services to ensure that we're getting value for our dollars, we have to be educated, we have to ask questions, yada yada yada.

Guess what? My family has to ring up $4,000 in allowed charges each year before my coverage kicks in (unless its for preventative measures like this test.) I have skin in the game. I asked the questions. A fundamental part of shopping is finding out the price of a product or service before you buy it. I tried to do that. And no one could tell me until after the service had been delivered.

There are people who over-use the health care system because they have low co-pays. I know a few of them. However, a) I doubt that they make up the majority -- going to the doctor or the emergency room is still quite inconvenient; and b) statistics show that at least 25 percent of annual Medicare spending is on people in the last year of their lives. If we all became Walmart shoppers for health care tomorrow, the very sickest people, those in the last days of their lives, would still consume a lot of health care and put upward pressure on costs. 

Nevertheless, for those of us fortunate enough to not be terminally ill, asking questions about cost makes sense. Or it would if someone could give us answers. Until there is something approaching good pricing information available to patients before there's an emergency, the talk about us becoming good health consumers is just talk. I can think of no other expensive purchase I make where I don't know the cost ahead of time.

It's no way to run an auto repair operation, and it's no way to run a health care system.

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Comments

[Greg Hogan]

I've been in the health insurance industry for over 20 years and I've often said the cost of insurance is not the issue, the issue is cost of care, because the cost of care drives the insurance premiums.

Every doctor's office knows (or should, they have a contract) what they will be reimbursed for each procedure, how about making that public? We, as insurance agents, have to tell anyone who asks what we will make on their policy, let's do that with doctors and other providers.

[Ali T]

I have to agree it is a big ridiculous. People are kind of loosing their patience as well.

Greg commented by saying that it is based on the cost of care, that is correct!

People are simply unaware.

[Tim Dodge]

Ali,

Unfortunately, the system doesn't help people to become more aware.

[Ali T]

Tim - You're right about that!

Guess that's why one to one consulting in the human level is the best way to approach people and teach them!

Regardless, great blog post!

Keep it up

[Tim Dodge]

Greg,

You'll get no argument from me.

[Nicole]

I just came upon your blog for the first time and was thumbing through your posts. This one happen to catch my eye. I myself am also fortunately enough to not be seriously ill and so I don't visit the doctor's office very often. However, I completely agree with you...I'd definitely want to know the price of a procedure BEFORE it happened. Surprise costs are never fun. Like you mentioned, every other industry tells you the price first. Health care should too. Thanks for sharing this experience. I enjoyed reading it.

[Allan B.]

I am afraid, that in few years when my kids will need to go to doctor, they will get cheapest care possible. Why just not regulate Pharmaceutical companies?

[Bobbie King]

The conversation above your article could trigger somebody to be mad and furious at the mechanic. They are obvious that they just want your money. You should have stopped the test.