I opened up a piece of snail mail yesterday. To say I was a little bit shocked is an understatement. This was the first bill I’ve received after a fairly intense medical procedure five weeks ago. I’m fine now, things could not have gone better. But the bill was, let’s say, a little on the high side of my expectations.
At the very top it had one eye catching line labeled “Total Charges”. Great, no wading through pages to get to the crux of the matter. So how much were the total charges? That three hour surgery and the eight hours I was a guest in their stage one post-op ward resulted in total charges of $249,320.50. I didn’t mistype that, it was just a few dollars short of two hundred fifty thousand US dollars. Or stated another way that’s nearly twenty-three thousand dollars per hour! Man, I’m glad I did not stay overnight.
That’s a lot of money. And while I feel its a heck of a bargain in exchange for keeping me alive and kicking, that’s still very nearly a quarter of a million dollars. And I’m not even sure there won’t be more bills trickling in over time (although I think this is the grand total).
This is also my first real test of how Medicare and my Medi-Pak supplemental insurance work when facing a major medical expense. I haven’t had many health scares in my life and the times I did run up a sizable bill I was under my company medical insurance plan. Obviously I won’t be facing the entire $250K out of my pocket. But just how much of that is going to have to come out of my retirement nest egg?
The answer was just as surprising as opening the bill, but in a much happier way. Total out of pocket expense for yours truly was zero. Zero, nada, zilch. Not even a single penny. How wild is that? No co-pay, no deductible? Not a single penny for this extremely expensive medical care? The other five pages of the invoice offered an “explanation”. At this point I was feeling like there had to be a catch and I was afraid I might be facing an unpleasant surprise hidden somewhere in the fine print, so I kept reading.
The bulk of the “Total Charges” showed up on page 3. That was the portion that was from the hospital surgical center and post-op ward. Those added up to over $225K. And of that Medicare applied a “Member Discount” of $215K. In other words Medicare told the hospital, “Sorry, doesn’t matter what you think it cost, we are only paying you ten thousand. You can eat the rest, the other two hundred thousand plus dollars. And by the way, you cannot go after Steveark for any of that, he’s golden.” Of that $10K that was paid to the hospital, that was split 80-20 between Medicare and the supplemental policy I purchased. It could not have worked out better for me if Don Corleone had handled the “negotiations” with my provider and made them an offer they couldn’t refuse.
As far as the rest of the costs which included anesthesia, oxygen, robots and my rocket scientist surgeon, they were not as bizarre. Medicare only disallowed a small part of their fees and they and my supplemental policy paid that with zero out of pocket from me.
What a great deal for me, I got a little health issue fixed forever and paid nothing. I know everyone says our system is totally broken compared to the rest of the world, and maybe they are right. But I got first class care where I wanted, when I wanted and with no cost to me. That doesn’t feel broken.
I said no cost to me, but that is not entirely correct. Medicare charges me and my wife premiums, our supplemental policies do also and so does the prescription plan we use. Those six premiums total up to about $8,000 a year for the two of us. That isn’t free but it is affordable and only about half of what I paid for private insurance before we hit age 65.
But something is broken. I don’t think my procedure cost anywhere near a quarter million dollars. Pretty sure the hospital made that number up, that it is pure fiction. But it certainly cost a lot more than Medicare agreed to pay. So I got a pretty big free ride. Except, there are no free rides in life. And that medical center is a for profit business, it is not a charity. So they have to make a profit or they will shut down, right? If I didn’t pay for my surgery, who did?
That’s the question that points to the where the brokenness lies. It is you, kind reader, you who are on private insurance, employer provided insurance or health share plans. They do not have the power of the federal government and while they certainly would have negotiated the total charges down to maybe half of what the hospital asked for, it still would have been a six figure surgery instead of the small fraction they got from Medicare for fixing me.
I have one additional data point that gives me confidence that I’m right about how this works. I was on a hospital board for a locally owned hospital back in the day. I remember the CEO explaining how the thing that determined if the hospital made money or lost money was the patient mix. He used this example. He said a standard heart surgery at our hospital actually cost about $20,000, that was the amount the hospital needed to recover to break even. He said if a patient had insurance through their employer or any other kind of private insurance they would get paid $40,000 for the procedure and net a $20,000 profit. However the same surgery for a Medicare or Medicaid patient would only result in a $10,000 payment resulting in a loss of $10,000 for the hospital. Therefore you needed one private insurance patient for every two Medicare patients just to break even. That’s a broken system and that’s a big reason private and employer provided insurance is so expensive. You are paying a big share of Medicare and Medicaid patient costs.
It is broken on many levels. But a main one is it sends a perverse signal to the provider. If they know they are losing money on me as a patient, they have a huge incentive to underserve me, to rush me in and out, to provide the least post operative care possible. I’m not a opportunity for them to make money, I’m a drag on their profitability. I’m more like a tax than an income stream. That’s a terrible business model in a capitalistic economy. Plus how can the government tell you to operate your business at a loss, how is that moral? It is like telling a car dealership that they have to give away one third of their new cars for free each month. What does that do to the price of the cars they don’t give away? Exactly.
What is the answer, socialized medicine like our neighbors to the north? Or just keep things like they are? I mean it worked great for me, I can’t complain. I got an incredible bargain even though I could have paid the full quarter million and not seriously impacted my net worth. I do think any kind of “Medicare for all” is asking for disaster the way things are now because hospitals generally cannot make a profit just with Medicare reimbursements. They have to be able to overcharge private insurance companies to offset the low Medicare payments. At the same time giving wealthy boomers free medical care paid for by the insurance premiums of Gen X, Y and millennial patients feels unsustainable and unfair. I have no suggestions at all. How about you?
OK, maybe you stayed at a Holiday Inn Express last night, how would you fix this mess?
Have you experienced something bizarre in terms of medical bills and insurance?
Did you consider to take care of your own healthcare? Eat a healthy diet, exercise etc and you can avoid all health care insurance?
Steve, what I had was most likely the result of a genetic flaw or past injuries from my active lifestyle. I’m a marathoner, a tennis player and very very fit for a guy my age but I’m 66, OK? Assuming people can avoid needing health care insurance by living healthy is, in my humble opinion, borderline crazy. You can improve your odds for sure but you cannot prevent cancer, injuries or accidents. I had a 53 year old friend die this week from Covid, he racked up a million dollar medical bill from spending his last weeks in ICU. Eating right didn’t save him, and it won’t save you from needing medical care some day. Be smart, and have insurance.
Wait, I’m only 65.
>> I had a 53 year old friend die this week from Covid, he racked up a million dollar medical bill from spending his last weeks in ICU. Eating right didn’t save him, and it won’t save you from needing medical care some day. Be smart, and have insurance.
Sorry for the loss of your friend, Steve. May I ask if he was vaccinated? I’m not looking for a long reply… just a yes or no. I’m not looking to start any debates with other commenters. It’s more of a data/informational question for me. Thanks.
Yes, he was fully vaccinated. He was a very high earner making right at a million a year as well. As far as I know he had zero underlying conditions and was in perfect health until Covid.
Steve, i beg to differ. I dont go to a doctor for health advice because thats MY responsibility. Just take a look at the people with health problems around the world, and it aint nothing to do with a genetic flaw or something. Your bad health decisions cant be compensated by taking pils. All the best and a good recovery man.
I don’t disagree at all with that, you have a lot of impact on your health by how you live, eat and move. But there are many genetic issues as well. I was born with a hernia, my brother has Fuchs Dystrophy both genetic. But most chronic conditions like diabetes and heart disease are heavily influenced by behavior, while other conditions are predetermined by your DNA. Like women born with a genetic propensity to breast cancer, eating right doesn’t fix that.
I understand your position, but mine is that, hospitals and school medicine doctors aren’t the places to go,to get treatment if you are sick. Feel free to stay in the bosom of Big Pharma and you will end up like your pal who died from COVID, despite its 99,3% recovery rate.
Ok, we will agree to disagree. As a chemical engineer I’m all about better living through chemistry, and you are definitely not. But that’s what makes it an interesting world, good fortune to you.
Three comments. First, those of us on private insurance also get the same crazy “discount.” I had a surgery once that didn’t go quite the way I wanted it to go, and instead of being outpatient I was in the hospital for about 2 weeks – including a few days in the ICU. One of the bills was for $100K, of which the insurance and I combined paid around $5K. So not quite the 0% cost-to-you as your medical issue, but still had >95% of the the cost just disappear.
Second, I suspect that the concern about receiving substandard service as a “money losing” patient is probably not a big issue. My experience is that the customer-facing service providers in the healthcare field often have no idea what their costs even are. I have been in situations where I wanted to know up-front what the costs are for specific medical tests, and when I ask the office they literally have no idea. Just crazy to me -after working in manufacturing for decades, I can’t even imagine not knowing (or even caring!) what my costs were. Just was stunned at how inefficient the service delivery process is in a hospital…
Finally – one thing I was really surprised about is how little money my surgeon made in all of this. When people think of healthcare inflation they seem to immediately focus on the doctors themselves, but in actuality the bulk of the costs seem to be going to the healthcare facilities (ie the hospitals themselves). Can you imagine running your chemical facility like they run the hospital?? It’s just so completely insane that I don’t even know where to start….
You do get a big discount but my hospital board experience says it is not the same or usually as big although in your case it seemed to be. Our hospital did make a profit on private insurance patients but lost money on Medicare patients but that was several years ago, might not still be that way? My surgeon also only made around $10K, he was not responsible for the big bill at all. Thanks, Greg, great information.
Healthcare and examples like this, which remind me that we live in a country where you can have medical procedures and tests done (even when non-emergency) without having a clue what you’ll be on the hook for when it’s done. It’s insane. No other product or service is sold without the buyer knowing the price they are paying. This is the biggest unknown and thing that scares me the most about early retirement. Glad yours was a favorable surprise, and hope you are still healing well!
Thanks Mrs. RFL, I’m back to 100% again. I paid my own insurance from 60 to age 65 when Medicare took over. It cost $16K per year for me and my wife. It is age based so it is less for younger people although more if they have kids on the plan too, which we don’t. It is a mess, but it does appear to work pretty well for seniors like us, but shifting costs to younger people is not fair at all.
Great post @Steveark!
And I agree here with @Mrs. RichFrugalLife – The biggest problem with healthcare IMO is the lack of cost transparency. I like hearing of the many practices that are going to a subscription model where you pay the physician or group of them monthly for a set level of services. This is where I hope we are headed. More transparency, more options. Then, and perhaps only then supply and demand can take a hold and help to create a better system for all.
That is probably a good development, but if you get something weird like my brother’s eye condition or my situation you do not want to be limited in where you seek treatment. My GI doctor told me my surgery was impossible. The guy in Denver had done it dozens of times and didn’t even consider it particularly major, sometimes you have to do some research to find the right rocket scientist doc.
Madness. Just complete madness, this American healthcare system. I dunno what the solution is, but what we’ve got is clearly and grotesquely broken.
Agreed. But I did have advantages over, say, Canada. What I had done wasn’t experimental but it is very new and I had to drive 1,000 miles to find a surgeon with the experience to do it. And I got in right away in spite of Covid. I think I would have had trouble getting nonconventional treatment approved and scheduled in a system under total government control. I still had the ability to pick and choose both the procedure I wanted and the provider. I don’t think that is an option under most socialized medical systems. But ours is a big dumpster fire, agreed.
Oh my. You got me going this morning Steveark! I have a master’s degree in health care admin and spent many years negotiating managed care contracts and working for Medicare contractors on quality of care issues. So here you go…
1. I’m glad you had a good experience, but many do not have the best experience and healthcare bills are the biggest reason for personal bankruptcy in the country.
In fact, although our healthcare system is the most expensive in the world, our quality of care figures compared to other countries is in the middle of the pack. There are many many countries that do better in terms of care quality, and cost less.
2. Hard to believe, right? How can we pay more and get less?!!!!
3. Because we think of healthcare as a “business.” More money means a better product, right? Not necessarily, and not in healthcare.
Healthcare wasn’t delivered as a business product with business management principles until the 1980s. And that began the awful situation we have now. I’m a capitalist for sure and a true believer in the American way. Except in the case of healthcare.
a. A competitive business model has many principles that define it — consumer choice, full price transparency, etc. Those don’t exist in many of the most expensive healthcare situations.
Example: When you are being rushed to the emergency room, do you sit up on the gurney and shout, “wait! Let me check the pricing on that ER and it’s doctors. I might want to go a little further down the street….”
b. A competitive business model is designed to benefit the consumers, (which isn’t working in healthcare) but its number one priority is to the stockholders/owners. The incentives in healthcare are to charge more and pay less for the care delivery. Kinda’ scary if you are on the other end of the knife, — you could be getting cut with the cheapest knife kit they could reasonably provide. (that would be good business!). And cutting you open more often is better. More surgeries equals more money. We don’t pay for true “health” care, we pay for sickness care..
4. So why don’t we change our system to be more like all those other countries where quality delivered is better?
The screaming from lobbyists and legislators and pharma companies and medical device manufacturers keep us in the same loop. The pharma companies are nice for our stock portfolios, but not for our consumers many times. (seen what happened with insulin prices?)
FYI, Medicare is the only insurer that is LEGALLY PROHIBITED from negotiating pharmaceutical prices. They may down charge the hospitals, but they are at the mercy of the Mercks and Pfizers of the world. And the US is the ONLY COUNTRY that allows Pharma to charge whatever they want.
Seen the CEO compensation packages for those companies? Even worse — how about the pharma company with the exclusive Tricare (veterans care) pharamceuticals contract — that also moved it’s corporate offices out of the US, to avoid US corporate taxes? (hmmm)
5. Plus, how many people have $8K per year in retirement to pay for a full Medicare plus supplement package per person? You’ve obviously earned it Steveark, but the median income in retirement isn’t as pretty. So these hardworking Americans who paid into the Medicare system their whole lives end up on a Medicare Advantage plans (HMO), that won’t let them go to Denver for a surgery, trust me on this. Well, not without a significant battle. And if they stick with just Medicare Part A, B & D instead of an advantage plan? The coinsurance and co-pays on their hospital bills are NOT covered (look at your bill again and see how high your out of pocket would have been).
6. Finally, you should know, that the highest dollars that will be spent on you and anyone else reading this, will probably be spent during your last 6 months of life. Last ditch surgeries, last ditch chemo treatments (so brave! — and so expensive while being only about 5% effective, unfortunately).
Palliative care is one of the best bets we have coming to healthcare, and people in the industry are fighting it because — well — it just doesn’t bill all that well.
/rantover
…
*
Lisa, I’m so glad you commented because it will let me verify some of my assumptions (wild guesses). You are a qualified expert, so tell me, 1)is what I said about complex procedures like mine (or heart surgery), that they are money losers for hospitals when they are treating a Medicare patient but money makers when they are treating a private insurance patient? It was true at one time at the hospital I was a director for but that’s just one data point. 2) Why would the low income retiree have to pay co-pays and I didn’t? I have Medicare and a Blue Cross Blue Shield supplement and a prescription plan. Are you saying they can’t afford the supplement and would have picked up the 20% my supplement paid to keep me at zero?
Oh, and I didn’t make it clear but the cost for all the plans I have now totals $8,000 a year for both of us, not $8,000 each. Still a lot of money for someone living off of Social Security. And because my income has been pretty high I’m sure I’m paying the max on my Medicare premiums, I think they would be much less if I had lower income, but still a burden for someone without a ton of money. Thanks for the insightful comment, I’m sorry if I raised your blood pressure!
Hey Steve…thanks, I’m only an expert in what I’ve learned at the negotiation table, so I’m happy to share that.
1. Yes, there are certain procedures that are money makers for hospitals. At least depending on the payer contract. Sometimes there is a per capita rate or even a bundled rate with the physician’s group is hammered out at the negotiating table — Aetna is good about doing that for the heart surgery billing codes for their insured lives. At one time it was also hip replacements, but bundled payments (including doctor, hospital and rehab facility) have cut into that. Usually cancer care is the biggest money maker because of the pharmas and infusions. Radiology and Lab departments are considered the biggest profit centers of the hospital. But heart surgery certainly can be a money maker.
2) Low income people can’t always afford (or choose not to buy) a Medicare supplement plan. If they are low enough income they can be “duals” or medicaid/medicare. And at least the hospital can recoup from Medicaid as well. If they aren’t Medicaid eligible, then the hospital goes after the individual for the 20% that the supplemental covers for you.
3) Glad to hear you are only paying $4K per person! That gives me hope for my expenses in future.
Lisa, Thanks, that’s fascinating information. Most of my expertise is in thermodynamics and heat transfer. Truly useless stuff once I retired!
Hey Steve, would you mind telling me which supplemental insurance plan you use? I’m a year away from shopping for my own and yours sounds pretty good! Thanks.
Blue Cross Blue Shield Medipak.
What a cluster dude. Glad you’re okay, but as others have commented it just goes to show how effed up things are here. I don’t have the answers, but as others have said the lack of transparency is astonishing, even criminal. No one is gonna convince me that the actual cost of your procedure was $250K, and I bet they couldn’t line-item that number with a straight face if they had a gun to their heads. Ridiculous.
You said it Dave. I was through mentioning medical stuff I thought, but that ginormous bill was way too ridiculous to not post about!
The health industry certainly seems broken from my point of view and maybe – just maybe – medicare for all wouldn’t be the worst thing in the world. Thanks for sharing your experience.
Maybe Janet, but they would have to up the payments to hospitals enough for them to make money. Right now they lose on many Medicare patients, or at least I believe that is the case.
Thank you for sharing him with us!
https://www.newshowercurtain.com
Sure, my pleasure curtain.
Thanks, its very fun to get noticed!
Wow, I’m glad you got that taken care of so that you pay nothing. That is a miracle in the United States.
I have a similar story of my coworker’s boyfriend. He had physical discomfort and he refused to go to the hospital because he was afraid of the bill. Well it turns out, he needed to take out his appendix and needed to go to the emergency room. If he didn’t he would’ve passed away. He would literally choose to pass away than be faced with the bill.
His bill came and how much was it? That’s right. It was $100,000. He was a student and couldn’t pay any of that. It took a month of phone calls before that finally got resolved and he ended up paying nothing.
I still would’ve been scared out of my mind. I am keeping medical tourism in my mind because I just cannot deal with the healthcare system of the United States. I hope to never need to use it, either.
David,that is a scary story. I think medical tourism might work but there are some technologies and procedures that are hard to find outside of the US. However most things requiring surgery are generally pretty routine and don’t require a specific surgeon.
A few years ago we had a health scare with my dad. He also got a large ‘bill’ or list of charges. I thought they were trying to give him a heart attack or ulcers with the sticker shock. While you and he had the presence of mind to read the statement & in his case check with insurance, many people see huge numbers and panic.
I don’t have easy answers to the healthcare issue. While I get that hospitals are functioning for profit perhaps that is part of the issue. How much profit vs how much is ‘enough’? Same with health insurance companies. I’m hoping people with degrees more applicable to economics can figure this out.
Glad you are on the mend!
That’s a really good question, Liz–is it in the public interest for hospitals to make a profit? If so, how much? Should they strive to maximize profit, the way any other business does?
It seems to me that it’s a difficult matter–and, more importantly, that leaders need to make some VERY difficult choices. I’m not optimistic on that count.
Liz, Having been on a hospital board and seeing the actual numbers it isn’t the most profitable of businesses because of the way the government cuts the reimbursement rate on the bills they pay. I don’t have any answers other than buying good insurance and having a hefty emergency fund.
Having read this I believed it was really enlightening.
https://www.diyshowercurtain.com
Thank you, I appreciate your commenting!
Always cool to be mentioned in a big time blogger’s post! Thanks!
That’s a fairly hefty bill but after adjustments and Medicare at 65 it comes down. But still the same procedure in another country may be a fraction of that.
Hey DP, I’m not sure I could have gotten this done very many other places and of course I did get it done for free here after the dust settled, or at least I think so. I can’t be sure there isn’t another bill out there somewhere with my name on it. There are multiple ways to do the surgery that I had and some create some very undesirable lifetime limitations. Even in my home state, not a medical star for sure, I was given false and dangerous information from my doctor that I was able to disprove and ignore after doing some research. It is scary that a doctor could be that ignorant in their own specialty. Vetting doctors in a foreign country for something rare might pose more of a problem.