The Medical Costs Labyrinth

medical costs

Would you buy a car without knowing the price? Would you buy a house without knowing the price? Would you even buy a pair of pants at the mall without knowing the price? Most of us want to know the cost of anything before we buy it. However, for medical services, most people find out the cost of the services when the bill arrives. Sometimes there are additional services billed including facilities charges and anesthesiologist services.

The medical costs in the US comprise 17% of our GDP (Gross Domestic Product).  That’s one out of every six dollars in our economy.  In 2013, 60% of all bankruptcies were due to medical bills, 78% of them had health insurance. I believe there is a correlation between unknown medical costs and medical bills bankruptcy. This is a systemic problem in the U.S. as a result of the collusion of insurance companies, health care owners, and politicians.

My Story

In 2013, my dentist referred me to a local ear, nose, and throat doctor due to a sore throat.  After the ENT identified that I had a malignant tumor, he referred me to an oncologist. I was diagnosed with head and neck cancer which was compounded by no health insurance. This initiated my journey to understand my health costs.

Diagnostic Services

My oncologist requested diagnostic testing in order to survey the quantity, location, size, and activity level of the tumor(s). She recommended a PET scan and an MRI. This combination of tests would have cost over $10,000 locally. I asked if the MRI was needed since I did not have any insurance. The doctor said that a CT instead of an MRI would be sufficient. The cost of a PET scan and a CT scan would be over $5500. This was still a lot of money out of my wallet.

I then started searching the internet to compare pricing of these services. I found a diagnostic facility close to Orlando, Florida that would perform the same services for $1200, about 20% of the local cost.  I made an appointment, booked a flight, reserved a rental car, and embarked on a 15-hour day trip to Orlando. The total cost was $1600. I saved almost $3000 by taking a day trip out of state. This illuminated my understanding of the profit margins of different health care businesses.

Choosing a Cancer facility

The next step was to choose a facility for radiation and chemotherapy treatments.  I inquired about the total costs of treatments and the hospital took over a month to provide me a cost estimate. This required multiple calls, reminders, and escalations. Meanwhile, my stage 3 tumors continued to rapidly grow.

In the interim, I checked with an independent cancer center, located a block away from the hospital. It was a fantastic facility with a great staff and doctors. They provided me a cost estimate within a week. The hospital was going to charge $65,000 and the independent center would cost $40,000. Unfortunately, the hospital was unsure if the $65,000 was the only costs that I would be billed. I opted for the independent cancer center and had a great experience.  Note: In 2014, the independent center was absorbed by two hospitals. Now the facility is only used for chemotherapy.

Ear Tubes

In 2014, I lost 50% of my hearing due to post-radiation trauma. The doctors told me that my hearing loss was permanent and to make an appointment to be fitted for a hearing aid. I visited an ENT who said that I had fluid in my ears. He recommended tubing my ears in his office. I enquired about the cost without insurance. I was told $400. The procedure took about 15 minutes, which entailed: drill a small hole in the eardrum, vacuuming the fluid through the hole, and then insert a small tube with a grommet into the hole. I paid the $400 for the procedure, but then weeks later I received another $400 bill for a facilities charge from the hospital. My $400 estimate doubled. Yikes! My experience is that the doctors and care providers are far removed from costs. Even billing departments are not aware of the additional auxiliary costs from other facilities, e.g. radiologist, anesthesiologist, labs, etc.

Ear Tubes part 2

My hearing was perfect for months after the ear tubes were inserted. At the end of 2014 the tubes fell out as planned, the holes in my ear drums healed, and the fluid returned to my ears. My hearing was back to the pre-tubed state. In 2015, I landed stable employment as a full-time faculty member at a local community college, which included benefits. I then began exploring options to improve my hearing.

I went back to my ENT for his advice (he did not inform me in 2014 that I could be back in a year with the same problem). He recommended a more permanent tube, but ithe procedure would require anesthesia because, during the insertion of the new tubes, he would need to temporarily touch my inner ear, which he described as excruciating pain.

Even though I had insurance, good stewardship required me to know my out-of-pocket costs for the procedure.  The ENT office provided me their charges, but the hospital and anesthesiologist could not provide pricing in time, so the procedure was postponed.

I called Blue Cross with the procedure code, insurance id, and hospital name, but they would not provide their allowed cost for the procedure. They will provide their allowed costs after the procedure but not before. Blue Cross said to ask the provider.  The hospital let me know that they bill $8000 for the half-hour procedure, but Blue Cross will only pay $4000. Since I am on an 80/20 plan then my cost would be $800. The American Anesthesiologist (a national conglomerate of Anesthesiologists) said they could not tell me how much their services would cost me.

I then decided to try a non-conglomerate hospital. I called Sanford, NC and immediately was notified that my cost would be $625 for the hospital charge.  Next I contacted a hospital at Rocky Mount, NC, one hour away, and received an out the door cost of $265 for the hospital charges.

Here are my hospital facilities estimates for a 15-minute outpatient procedure to have my ears tubed at three different locations.

  • Raleigh $800
  • Sanford $625
  • Rocky Mount $265

This is assuming that the procedure goes as planned. This does not include the anesthesiologist charges or the ENT bill. I did receive an estimate of my costs, from my ENT, for $108.

The same insurance policy and the same procedure produce vastly different allowed costs by the same insurance company.  Even the allowed cost in Raleigh of $800 is the same charge at their ambulatory surgery center as their full-service hospital.

Why would an insurance company allow $4000 at an ambulatory surgical center and only $1300 at a full-service hospital that is 60 miles away? Remember, this is for the same insurance policy and the same procedure code.

One billing agent told me that most insurance companies have an across the board discount of 6-10% of their billed costs, but Blue Cross has a complicated algorithm that is difficult to unravel.

Patient Cost Transparency

I believe that this is an area of oversight that the government can add value. This year, congress enacted that all mortgage loans require the lender to receive a copy of their HUD statement at least 3 days before their closing date. This is a fix for people receiving their closing costs the night before or even the day of a closing.

In our free enterprise society, the medical community is shielded from competition by the lack of cost transparency. I think that the cost of any non-emergency medical procedure or operation should be available to all patients, with or without insurance, prior to contracting for services. This requires a caveat in the case of emergency procedures, undetected problems during surgery, etc.

Too many people press their “I believe” buttons when they go to the doctor. Most people find out their costs after medical services are rendered because the culture does not demand the information ahead of time.

I called my NC state legislature representative’s office yesterday.  The office has referred my concerns to the Dept. of Insurance liaisons.

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