Marc Cuniberti: Hospital bill hopscotch
On a recent visit to the local hospital near my home to get a rather involved medical test, I compared the cost of paying cash to paying by insurance. I told them due to my type of insurance I would pay cash and get a receipt to submit to the company. This is regarded by the hospital as what it is: a cash payment collected at time of visit. The cost was $1,780.00. If I had paid by insurance, the cost that would have been billed to the insurance company would have been $2,620.00.
That works out to a difference of $840.00 or an almost one third higher price. One then asks the question: what is it about getting paid by an insurance company versus cash that requires the hospital to charge a third more.
Having to wait for payment might be one reason, but even a extremely high usury rate assumptions, the opportunity cost (the use of the money I paid up front versus waiting for the insurance company to pay) certainly amounts to but a few dollars. Assuming an unheard rate of return based on current interest rates of 10 percent (which the hospital likely gets nowhere close to that return) and assuming a liberal 90 day pay period for an insurance company, the loss incurred by waiting for the insurance company to pay costs the hospital less than $100.00.
What other costs does the hospital incur when dealing with an insurance company which could amount to $740.00?
The question does boggle the mind, at least mine. Since shipping and handling (actually processing and handling — pun intended) is the only major cost I can imagine that is incurred in dealing with an insurance company, just how involved and costly is that entire process. Apparently very.
The required paperwork is detailed. The submittal process exacting and the kickback rate significant. Since the old adage is an insurance companies secret mission is to “keep the money as long as they can,” you can imagine there are many landmines in the paper trail awaiting an inexperience clerical worker in crossing all the “T’s and dotting all the “I”s.
Even experienced clerical managers can make mistakes on the pile of forms required during a claim submittal. Re-submissions can be required and every box left unchecked or checked incorrectly means a longer wait until the reimbursement check arrives.
Of course, should legal issues arise that requires the services of a lawyer to recoup a denied claim or loss, the hospital will pay that out of its pocket as well. That cost is therefore assumed by the hospital as a reoccurrence at a presumed rate and is then built into the insurance rate as well.
Sit over a cup of coffee for a spell and the possibilities of what problems could arise when transmitting and transacting complicated medical procedures can occupy one’s mind for hours. I know, I did it, and I basically gave up after compiling quite a list of things that could go wrong when dealing with a profit driven insurance conglomerate and trying to get them to cut the hospital a check. Never mind the government requirements heaped on the poor processing souls when dealing with a Obamacare, Medicare, Medi-Cal or other government entity.
After an hour or two of listing all the pitfalls and requirements that could befall a processing hospital or doctor, I’m actually surprised that a 30 percent surcharge covers it. And that’s one reason your medical costs are skyrocketing.
This article expresses the opinions of Marc Cuniberti and are opinions only and should not be construed or acted upon as individual investment advice. Mr. Cuniberti is an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Marc can be contacted at MKB Financial Services 164 Maple St #1, Auburn, CA 95603 (530) 823-2792. MKB Financial Services and Cambridge are not affiliated. His website is http://www.moneymanagement radio.com. California Insurance License # OL34249
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