Patients are Becoming Price Sensitive; But Only Because Obamacare Destroyed their Insurance

A recent post for the Los Angeles Times blog, Economy Hub, discussed a government report that found the number of Americans having trouble paying medical bills fell since Obamacare was passed. LA Times business writer, Michael Hiltzik, reported how 44.5 million Americans had trouble paying bills in early 2015, compared to 56.5 million in 2011.

How do we know 44.5 million Americans had trouble paying bills in 2015 — or that 56.5 million had trouble in 2011? A sample of Americans were surveyed (basically interviewed) and the results extrapolated to the entire country.  Is this really accurate? And what does it even mean? Economists don’t generally put much faith in polls and surveys where people tell their opinions. The poll is referred to as a survey instrument (that’s a fancy name for a carefully-worded questionnaire). The way a poll is worded can easily bias the responses — sometimes intentionally. Economist prefer ex post facto data where subjects reveal their preferences through data that tracks their actions.

As an aside, I especially don’t trust polls that ask people if they’ve had trouble paying for something they don’t necessarily want to pay for in the first place. For example, there are people out there who would probably say they have trouble paying for cigarettes. Yet, these same people will continue to buy them. Their revealed preference is to buy cigarettes despite the cost. They may say they have trouble affording cigarettes because they can remember a time when a carton cost $17 and now that only buys two or three packs depending on where you live.  Smokers undoubtedly resent that fact that cigarettes are expensive due to taxes and would likely report the financial strain if surveyed.  By contrast, there are also people who will spend an exorbitant amount of their income on alcohol, but may never say they have trouble affording beer. Rather they may have trouble paying for beer, cigarettes and unexpected medical bills on the same budget.  If you ask them, they would probably report having trouble paying for the least popular items in their budgets rather than the luxuries they choose to afford.

Hiltzik assumes the ACA is working because 12 million fewer people indicate they have trouble paying medical bills. Yet medical bills can be a problem not just for the uninsured; and not just because medical care is expensive. Paying for health care when uninsured (and costs below the deductible) is a problem because our convoluted health care system does not compete on price. Because it doesn’t compete on price, it also doesn’t post prices or try to earn the patronage of price-sensitive shoppers.

There is one trend that is likely to cause many more people to have problems paying medical bills in the future; the growing prevalence of high-deductible plans. Health insurance deductibles are rising both under Obamacare and in the workplace. As premiums and deductibles rise, enrollees become increasingly apt to drop coverage if they can. Who wouldn’t question the value of paying, say, $6,000 per year for a plan with a $6,750 deductible you will never exceed. As healthy enrollees drop their insurance, enrollees who stay are likely to be sicker and more costly — resulting in premium hikes the following year. This will prompt yet another cycle of healthy enrollees dropping out.

If there is one silver lining in the dark cloud that is the Affordable Care Act, it is that the costly — and largely worthless — Obamacare exchange plans will encourage millions more people to ask about prices when receiving medical care. Millions of enrollees are essentially paying for all of their health care out of pocket because their deductibles are far higher than their annual medical needs. Hopefully that will boost the number of patients comparison shopping for medical services. People who pay all their medical bills out of pocket have an incentive to ask questions like “doc, do I really need an MRI right now?” “Can’t we wait to see if my knee gets better on its own?” “What’s that going to cost?” “Is there somewhere I can get it done cheaper?” You get the picture; when asking about prices become more common, maybe we can move beyond Omamacare and establish a consumer-directed health care system that serves more peoples’ needs.


Comments (77)

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  1. The big ham says:

    This artical is a perfect example of how the majority of the population is clueless about insurance. The general definition of insurance is spreading the risk over a large group of people that can not be personally financed . Family insurance plans are now running $17,000 a year with out of pocket costs over $6,000. Families are already financing almost $2000 per month. Whether it’s through employer based health insurance , personal insurance , tax credits or out of pocket. People are worried about co-pays and small deductibles when the could go to a bank and take out a $100,000 loan cheaper than there monthly insurance costs. Higher deductankes area good thing. Pay if and when you get sick. Not every month in the hopes that you will,get sick. Educating the public and the POLITICIANS on what insurance is for is the place to start. Anyone that understands insurance knows that the minimum essential benifits are nothing more than a pre financed claim and is driving the cost of insurance to unsustainable levels.

    • Devon Herrick says:

      I agree. If Americans realized how much they are paying; and all they are getting is a few doctor’s visits each year, most would demand a change.

  2. What is also interesting is that the proportion of uninsured who experienced problems paying medical bills also dropped! So, there is some exogenous factor here.

  3. Michael Gorback says:

    ObamaCare has ironically exposed the problem at the heart of the system: no price discovery efforts by the consumer of the goods and services. You don’t care about “needing” an MRI if it doesn’t cost you anything.

    Of the four questions cited the first two questions are clinical decision making issues, not price issues. The latter two are about price and those are two major factors that have been masked by insurance until recently.

    Whether you “need” a test or whether a condition can be treated by observation is a matter of clinical decision-making. What it will cost and where the least expensive point of service is are usually beyond a physician’s purview. They are subject to the same lack of transparency as the patient when it comes to facility and ancillary service costs. They have no idea what the contracted rate is with your insurance and usually the best they can do is recommend that you ask the facility.

    Even if you get an estimate it will probably exclude anesthesia, pathology, and other services that are provided by independent contractors. I give patients an estimate of what I will cost them out of pocket. The facility that I usually use gives patients an estimate in advance of the facility cost. Yet despite these efforts I have been astonished when patients bring me the anesthesia bill for a procedure done at an in-network hospital with an out-of-network anesthesia group.

    I’m an insider and I’m still getting hit with new gotchas. Do you know the cost differential between IV sedation and “TIVA” (total intravenous anesthesia)? Do you know whether you need TIVA or just IV sedation or if you need anything at all?

    Who knows how to shop this mess?

    The only time you can usually get an accurate upfront estimate of total cost from a doctor is when they have total control. That often means an ophthalmologist with their own Lasik setup, a plastic surgeon with his own facility or where they have worked out a package deal somewhere, etc. The Surgery Center of Oklahoma offers package deals on major surgeries. Common denominator? Cash in advance. The other scenario is in-office procedures e.g, vasectomy where once again the doctor controls all the parameters.

    Some people probably think doctors should do the shopping but we don’t have access to the necessary information nor do we have the time and resources to gather and collate the information even if we could get it.

    • Barry Carol says:


      That’s an excellent summary of the problem which, at its core, boils down to the confidentiality agreements between insurers and providers that preclude the disclosure of actual contract reimbursement rates. Moreover, there are four types of doctors that patients generally don’t know and have no role in choosing which are: radiologists, anesthesiologists, pathologists and ER doctors. Knowing that patients have no role in choosing them, many deliberately refuse to join any insurance networks so they can bill on an out-of-network basis and then send patients huge bills beyond what the insurer chooses to pay them. This accounts for why some wags call these specialists the RAPE doctors. I personally have gotten EOB’s that showed that the out-of-network rate for the anesthesiologist exceeded the in network rate for the surgeon.

      I think contract rates need to be ascertainable by both patients and doctors. I also think that there needs to be special rules governing how much can be charged for care that must be delivered under emergency conditions. If it were up to me, I would limit such charges to 125% of Medicare. Finally, I think either hospitals should require doctors in these four specialties to join the same networks that the hospital participates in or employ them on a salaried basis and negotiate a reimbursement rate for their services with each insurance company that they do business with.

      • Devon Herrick says:

        I have discussed this issue with free-market policy wonks but no one can agree on a solution. Nobody wants price controls (rightfully so). Nor should government dictate fees or working conditions.

        But there needs to be a safe harbor provision where the providers of care need to contact and come to an agreement with their patients before hand. Otherwise, they are assumed to be willing to accept the hospital networks negotiated rates.

        My example is just a quick and dirty stab at a transparency measure. It would need refinement. Some would argue that’s not practical. But, my wife is a consultant who sometimes contracts with clients and sometimes contracts with other consultants. She always signs an agreement with the entity paying her bill.

        Similar, if a doctor doesn’t contract directly, they are assumed to be working off another (non-secret) arrangement. That some doctors (or hospitals) can take advantage of this lack of transparency is not in the best interest of a competitive market.

        • Al says:

          Devon, I agree with you. Hospitals handle the administration of hospital care and that includes making sure the patient knows what the fee will be beforehand. They are in the position to do just and even to include some of this in their advertising.

    • Ron Greiner says:

      Michael, I think a lot of us just trust our doctors to give us the best advice that is at their disposal. My little brother had inner-cranial surgery last week for his Trigeminal neuralgia (TN). All we know for sure is he will be paying for 2015 and 2016 Out-Of-Pocket (OOP) expenses with this surgery. I guess his good news is that the rest of 2016 medical expense will be paid 100% so I don’t think he is going to be worrying about future 2016 medical expenses. Sometimes when you are really sick all you can do is trust your Doctor.

      People like my little brother could care less how much the cost is because he is going to hit maximum out of pocket regardless of the price. If the surgery works I’m sure he would pay the entire cost with cash if he had to because it would be worth it to him. If the surgery helps him that surgeon will be worth his weight in gold.

  4. Bob Hertz says:

    Excellent points by Devon on the flimsy generalizations that surround the ‘problems paying bills’ concept.

    However, regarding the last paragraph of the post:

    I think the jury is out on whether consumer choice and transparency on discretionary, ambulatory care can overcome the high costs of life-saving inpatient care.

    In other words, to use an oversimplified analogy,
    if 1000 patients refuse an extra lab test or office visit next yaar but 10 patients take Sovaldi for hepatitis at $84,000 per case, will insurance premiums go down?

    • Devon Herrick says:

      If more people were having to pay for Sovaldi out of pocket, the price would not be $1,000 per tablet. But, of course, Sovaldi might not exist.

      A sustainable health care system also means a level of technology Americans can afford while maintaining their preferred standard of living. That gets to the question: how much is an extra year of life worth? If the extra year is at age 89 and has poor quality of life, is it worth spending, say, 30% of our GDP instead of 10%? The answer is Yes, if it’s someone else’s money; but No if I have to pay it and live in a much smaller house, take fewer vacations, eat out less often and pay taxes that are double the current rate.

  5. Bob Hertz says:

    Notes to Devon:

    I believe that Sovaldi has up to 3 million potential customers who suffer from hepatitis. And that is just in North America. Sovaldi could charge $5,000 per cure and still make billions in profit.

    I continue to believe that American legislative cowardice on setting maximum drug prices has impacts all the way through our health care system.

    2nd note:

    No legislators in America have the guts or the backing to refuse to pay for a life saving treatment. The issue is too painful.

    for this reason I favor price ceilings on all monopoly drugs, whether they extend life or relieve pain.

    • Barry Carol says:


      While I think the price of Sovaldi and Harvoni are too high given the large potential patient population both in the U.S. and elsewhere, we also won’t refuse to pay for overpriced cancer drugs that are only marginally better than less expensive alternative treatments.

      The governments of other developed countries will refuse to pay for those if they deem the asking price too high but they will invite the drug manufacturer to come back with a lower, more acceptable price which it sometimes does.

      The pharmacy benefit managers (PBM’s) are starting to assume that role in the U.S. by keeping certain drugs off their formulary. Even oncologists are starting to refuse to use some cancer drugs that they think are too expensive relative to the marginal value that they provide. Good for them.

  6. Bob Hertz says:

    Devon’s notion of a safe harbor provision for out of network docs is surely on the right track.

    However it will take some hard nosed legislation to happen, in my opinion.

    About 4 states have health care consumer protection laws that are worth a nickel. These are the usual progressive states-
    New York, Colorado, Illinois, Minnesota.

    The other states have next to nothing. I do read legal cases on occasion, and in most states judges will side with the medical provider no matter how outrageous the bill. This does not mean that judges are vicious, rather that I suspect they are constrained by existing laws or the lack of them.

    I for one would love to see a President who went on TV and held up an abusive balance bill, and named the doctor on TV and ripped the bill to shreds. Short of that, I think we do need national legislation that makes some bills legally uncollectible.

    • John Fembup says:

      “Short of that, I think we do need national legislation that makes some bills legally uncollectible”

      Wouldn’t a judge in some court eventually ask the attorneys, “what makes some bills, you know, different? Specifcally what exactly makes these bills not collectible but the other kind are?”

      I don’t know how that question could be answered. Do you?

  7. Bob Hertz says:

    I would be delighted to answer that question.

    A bill that is incurred by a debtor who has full knowledge of their cost and the right to say ‘no, thanks’ is absolutely collectible.

    But a medical bill whose cost is not disclosed to the patient beforehand, and in a situation where a rational patient would never decline the service, that kind of bill can be challenged.

    • Al says:

      Except in emergency situations for a contract to exist my understanding has always been that there had to be a meeting of the minds. If no discussion of money took place between the doctor and the patient then I don’t see how a meeting of the minds could exist. It is at that point that the bill in question should be determined by the courts based upon some type of evidence such as Medicare, private insurance, median or average cost to self pay patients, etc.

      There is a lot of myth in medical care so I don’t know if that happens today or not. Generally medical professionals send the bills to collection agencies and then I surmise it would be up to the patient to state the amount owed was not contracted and that the matter be taken to court or otherwise arbitrated.

  8. Devon Herrick says:

    One could argue that markets where one party has no discretion are prone to market failure to the extent the government has the obligation to address it. This market failure creates negative externalities that effects the public as well as government — since half of medical bills are paid for by government.

    Nobel laureate economist Ronald Coase argued the only intervention required to come to a desirable outcome was to reduce transaction costs and to assign property rights.

    So basically, an interpretation of that could mean 1) doctors have a right to set their own fees they believe the market will bear; 2) patients have the right to advance knowledge of those fees — giving them the opportunity to decline or bargain (especially for big ticket items like anesthesia and surgery). 3) each party has the responsibility to perform due diligence to ensure their property right is enforceable. By that I mean the doctor has to make an effort to inform the patient and the patient cannot avoid talking to the doctor and later claim their propert right (i.e. their own money) was violated.

  9. Devon Herrick says:

    The legal argument is a good one. Signing a blanket financial responsibility form at the hospital — agreeing to pay any and all fees for both affiliated and non-affiliated providers — hardly constitutes a meeting of the minds. For industries where fees are incidental and trivial it might be acceptable. But a patient is not in a position to know the magitude of what they are agreeing to when prices are both high and opaque, and list prices are often multiples of the market price.

    • Al says:

      The hospital is the only entity that has the data necessary to understand what happens within its walls. It should be up to the hospital administrator to see to it that there is transparency sufficient for any contracts having to do with patient care and services. The hospital even writes the contracts so the burden of proof that a contract even along with the verbiage should be made into a burden of the hospital (that is true with other contracts where the contract is written by one party and there is an ambiguity).

      As an example one of the most grievous things done at a hospital that costs patients money is when the patient has work done in a hospital that accepts his insurance. Later the patient discovers that not every physician involved was covered by the patient’s insurance even though the patient was told by the hospital he was covered.

      If I were the judge I would leave the problem at the hospital’s doorstep since they were paid for the patient’s care within the walls of the hospital. The hospital is ultimately in charge of who is and who is not on the hospital staff. That would quickly force the hospital into divulging all costs and get signed contracts in advance.

      I had this problem with a bunch of patients. As an example a patient had X-rays done at the hospital and both he and my staff checked to make sure the patient was completely covered. He then got a separate bill from the radiologist. I called the administrator the hospital and told him to solve the problem with the radiologist and make sure the patient didn’t have to concern himself with this problem. The administrator refused and I told him I would testify against the hospital and radiologist and that it would be a cold day in hell for me to refer patients for outpatient radiology testing ever again. That problem never recurred.

      Part of our problems stem from everyone involved in healthcare. We leave it to others to handle the problems causing laws to be passed that we later object to. If we want patients to take responsibility we have to do the same and sometimes act to protect patients from abuse.

      • Barry Carol says:

        Patients generally don’t know and have no role in choosing radiologists, anesthesiologists, pathologists, and ER doctors. For this reason, many of these specialists deliberately refuse to join any insurance networks so they can charge outrageous fees and balance bill patients for the amount that the patient’s insurance doesn’t cover. I think hospitals should either employ these specialists directly or require them to participate in all the same networks that the hospital contracts with if they want to practice in that hospital.

        Two months ago, I had a cardiac procedure at a leading NYC academic medical center. It included a one day stay in the hospital. The hospital charged $222,343 for its care! Medicare paid $15,351 or 6.9% of charges. Put another way, the hospital’s list price was 14.5 times Medicare. The surgeon and anesthesiologist billed a combined $19,074 and were paid $3,723 or 19.5% of list price. Aside from a few billionaires and Arab sheiks, the vast majority of people would not be able to remotely afford the list price for this episode. Yet, if the hospital found out that the patient had a good income and significant savings, it would come after him aggressively for as much of the list price as it could possibly collect. I would suggest that anything beyond 125% of Medicare is too much and the list price is outrageous on its face.

        Signing the hospital’s form agreeing to be financially responsible for all charges should be unenforceable if the patient was not given a legally binding estimate of the expected out-of-pocket costs. Hospital based care, including physicians practicing one of the four specialties alluded to in the first paragraph, is where the bulk of the problem is with respect to likely costs and surprise bills. I’ll bet that if a few hospital executives and politicians had to face these bills and aggressive collection tactics, the problem would be solved virtually overnight.

        • Ron Greiner says:

          Barry, your one day procedure cost taxpayers $19,000 yet you think $1,000 age-based tax credit per child for an entire year of health insurance is too much. We all know that this $19,000 for one day’s expense for you is just the tip of the iceberg and taxpayers will spend much more for you for the rest of the year.

          You always say that low cost insurance is “cherry picking” and that these poor employees in America must pay for their insurance with “After Tax Dollars” even though you never paid taxes on your health insurance. So the poor can’t deduct their health insurance yet pay taxes so you can have yours for free. This post of yours is revealing on just how unfair America has become.

          It is advantageous to help these young taxpayers who will contribute to America in the future. Spending unlimited amounts on you Barry just keeps you alive to drain the system even more and keep you alive to keep voting for more government handouts.

          • Barry Carol says:


            I can assure you that my wife and I have paid much more in federal income and payroll taxes than the vast majority of people over the course of our adult lives and, for what it’s worth, my Medicare claims during my first three years in the program (2012-2015) were modest and my wife’s were close to zero. For 2016, between our standard Part B premium, our Medigap premium, our Part D premium, and the IRMAA surcharge, we’re paying over $15,000 per year for health insurance for both of us. I would hardly view that as getting our healthcare “for free.”

            As for young people who don’t get their health insurance through an employer, it’s quite probable that the employer tax preference isn’t going anywhere for a number of reasons including strong support from labor unions. So, if you want to give tax credits to people who buy their own insurance you either need to suggest what other taxes you are prepared to raise to cover the cost of that new subsidy or maybe you think we should just further increase the deficit and borrow the money from the Chinese and stick our kids and grandkids with more federal debt to pay down during their working years.

            • Ron Greiner says:

              Barry, you and your wife didn’t pay Federal Income Tax, State Income Tax or Payroll Tax on your health insurance for your working lives which made the country owe $18.5 Trillion in debt so far. You say employees without employer-based benefits cannot have any tax relief, like you have always enjoyed, because your grandkids might have to pay for it.

              You say that low-cost insurance is “cherry picking” so these employees have to pay extra for their insurance, with after tax dollars, so we can all suffer with New York’s guaranteed issue mandates. Then employer-based insurance dumps their sick into the Individual Markets driving up our prices even more.

              I would prefer you to say that employer-based health insurance should only be 50% deductible so some other Americans can have a little piece of the American dream too with some of your tax relief.

              I’m sure you and your wife will live for another 30 years and instead of taxpayers spending $19,000 a day my Grandkids will be spending $190,000 a day for your wife in the year 2045. Next you will be telling me that taxpayers are paying for your pension.

              • Barry Carol says:


                I’ve said countless times that if it were up to me, I would get rid of the employer tax preference altogether and lower marginal income tax rates, increase the standard deduction, etc. to ensure the change was revenue neutral to the federal government. But it’s not up to me and it’s doubtful that any such change could ever get through our political process.

                As for pensions, I had a private pension from one employer that was paid in the form of a lump sum distribution and a 401-K plan from two others. There is no taxpayer involvement.

                • Al says:

                  “if it were up to me, I would get rid of the employer tax preference altogether…”

                  That is a meaningless statement since you know it will not occur. Yet knowing it will not occur you deny other remedies that should be considered.

                  What conclusion do you think the listener will take away?

        • Al says:

          “so they can charge outrageous fees”
          “require them to participate”

          To me the above represents a collectivist mindset. How does Barry know what a ‘not outrageous fee’ looks like? Are the multimillion dollar fees paid to sports individuals outrageous? We pay them and I don’t hear any widespread complaints even though the game isn’t as important as saving a life. Would anyone suggest that payments fall (rather than increase) the more important something is?

          Why shouldn’t the biggest expert in the world charge more for his services than a dummy? What it appears Barry is saying is that force should be used to prevent that expert from practicing medicine unless that expert also acts as an indentured servant. He wishes to force the hospital to control physician fees and won’t even permit that expert to open his own hospital and compete.

          Barry, you seem to have a concept of what is fair in your mind and wish that type of fairness be set loose on society. I disagree with what you consider fair. You are promoting collectivism.

          • Devon Herrick says:

            Al, I personally don’t advocate forcing doctors to do anything. However, to have a legally-enforceable claim against an individual patient I believe it is prudent to require an agreement set out in advance. Indeed, I don’t necessarily want the hospital to write this agreement; I want to hospital out of the way. Neither do I think hospitals employing the physician is the answer. The self-interest that allows some specialties to avoid networks and balance bill more than network fees would also be present if hospitals were to employ the physician.

            A good public policy should promote transparency and allow the parties to negotiate a mutually-desirable agreement.

            • Al says:

              Devon, to me the hospital is a complex shopping mall where it is charging a type of overage and therefore is involved in the individual charges that are created by private concerns. Therefore it behooves the hospital to know what is being sold. That they are the one’s to get signatures for private concerns is their business, but strange non the less since hospitals don’t have the authority to alter a physicians charges.

              I think this relationship was created by an overly paternalistic view of the patient/ doctor-hospital relationship which was promoted by public hospitals, tax policies and a paternalistic government. We need to end the paternalism and have the medical sector function in a way similar to other sectors of our economy.

          • Barry Carol says:


            As Devon noted, the real need is for price transparency before services are rendered. I don’t see how you could possibly ever have a meeting of the minds without that.

            Moreover, as I’ve noted numerous times, different rules are needed for care that must be delivered under emergency conditions when the patient may not even be conscious. There is no opportunity for a meeting of the minds on price in that situation either.

            Whatever the rules are, hospital management should put themselves in the position of a patient without insurance or with very high deductible insurance or with a narrow provider network and ask if they would be willing to live with those rules themselves. If not, they need to rethink their business model.

            • Al says:

              Barry, we all agree with price transparency, but price transparency is meaningless if the one that incurs the bill is not the one paying the bill.

              Emergency care is the tough problem, but very frequently tough problems are easier to manage after one takes care of the less difficult problems like the one above. Therefore this problem should barely be discussed until the above problem is solved. Some, however, prefer to utilize the outlier case to prevent appropriate progress from being made.

              We already have models of action. Why not use those models first before adding more and more laws that become new problems rather than solutions.

              • Barry Carol says:


                You can correct me if I’m wrong but my understanding is that as much as 50% of inpatient hospital admissions come through the emergency room which would meet my definition of care that needs to be delivered under emergency conditions. I would hardly call all those cases outliers.

                Also, if the patient has an out-of-pocket liability due to not having met his deductible, a coinsurance obligation or is receiving care from an out-of-network provider, what difference does it make if a good chunk of the bill is being paid by an insurer and what difference does it make if the patient bought that insurance policy himself or got it as part of an employer plan?

                Whether the patient is responsible for paying the entire bill or just part of the bill, he should be able to learn with as much certainty as possible what his financial obligation will be before services are rendered, at least for non-emergency care that can be scheduled in advance.

                • Al says:

                  You need not hide behind the 50% fact. We are talking about hospital transparency and that includes all charges that hospitals create which includes hospital outpatient services as well. Outpatient services include those services where a person might go in and out on the same day or remain in the ER for more than 24 hours. If our desire is to correct the problem and not just talk about it then we would have to include outpatient surgicenters as well since they replace outpatient hospital care.

                  Suddenly that 50% dwindles down to an outlier status or at least a minority status and we can return to the topic at hand.

                  I too am concerned about transparency, but I don’t believe in making doctors into serfs to satisfy your need for a complete accounting of the bill. The patient needs to learn to use some of his own resources to prevent himself from being billed in a significantly unfair fashion. That number compared to the total number of medical bills is small.

  10. Bob Hertz says:

    Good points by Al and Devon, but I still do not know how anyone gets a case to a judge and forces responsibility onto a hospital. And then has the case become a precedent.

    I still think there is a role for federal legislation here. Without it, we could wait years before courts take the side of patients.

    • Al says:

      Bob, when you have a leak in your toilet you call a plumber. Generally you know how much he will charge for the task at hand or charge by the hour. If you were provided the bill of $100 for time and $2,000 for the flapper that costs less than $20 what would you do? Would you pay the $2,100? If you didn’t pay the plumber would send a collection agency after you threatening to ruin your credit. What would you do? I would hope you would send a certified letter back to the collection agency disputing the bill.

      Once the bill is disputed three things can happen. 1) A negotiated settlement. 2) You are taken to court. 3) The plumber simply forgets about the bill.

      Why do you think things are any different with bills from the hospital?

      • Devon Herrick says:

        I suspect that in your example of the plumber charging $2,000 for a flapper, the media and the attorney general would ultimately get involved. Yet this doesn’t happen often in health care. There is a general acceptance of the dysfunctional system.

        Regardless of the industry, the providers of goods and services will always try to find ways to boost fees. My heating/air conditioning repair company advertises a $90 service call and an hourly labor rate of $125. But that’s misleading. When they came out to fix my AC last August, I told them on the phone I suspected a bad start/run capacitor. (I would have replaced it myself but I needed to be at work and my wife works from home and didn’t want to wait for me to work on it that evening).

        The $20 capacitor took less than 10 minutes to install and came with a cost they disclosed in advance that was $110 on top of the service call. They advised also replacing the contactor (~$30), which they charged $160 to replace. The same company came out for a biannual maintenance tune-up to inspect the equipment. In the process they pulled a couple of working parts off and explained why we should allow them to replace them at markups similar to those above. This time I said no and ordered the spare parts off Amazon for $20 apiece.

        • Barry Carol says:


          While the markups on the a/c system parts were high, at least you were able to learn the price before you agreed to have them installed. If I take my car in for routine service and they tell me I need to replace the fuel filter or the hoses or brakes or whatever, they will tell me the price in advance.

          There is no reason why this can’t be done in healthcare except for the confidentiality agreements that preclude the disclosure of contract rates. That’s what needs to change in my opinion.

          Medicare rates are already publicly available so whatever rate is being quoted should at least be able to be compared to the Medicare rate to judge whether it’s reasonable or not.

          • Al says:

            Barry, what sense does it make not to agree to pay an inflated price for a part when you already have spent a couple of hundred dollars in their time searching to find out what was wrong. Whether the guy charges $5, $50 or $100 you are going to have it fixed because at a minimum you will have to spend another $100 to have someone else put that part in and suffer while waiting for it to be done.

            Transparency is not always timely as you suggest it should be. When one cuts you open one doesn’t know what they will find. You want guarantees of price and the only way to get such a guarantee is to pay a very high price for insurance. I don’t think you would be willing to pay that cost either.

            • Barry Carol says:


              If the transparency approach that I prefer worked 95%-98% of the time, that would be OK with me and a big improvement over what we have now.

              I get that there are cases like your surgery example where complications are discovered, but even then the ultimate charge should be within what I would call a zone of reasonableness which I would peg at about 125% of Medicare for anything Medicare would pay $1,000 or more for.

              • Al says:

                We have loads of different types of medical bills that are submitted and paid. What makes you believe that the transparency of today doesn’t work 95% of the time? What percentage of bills received by patients today have significant over charges where the patient was totally unable to find out his OOP portion that exceeded his insurance contract that he or someone else purchased for him?

                Where there is no insurance physicians make sure to tell the patient costs for at least one reason. They want to be paid.

                However, permit a free market to exist and transparency will be so bright you will have to wear sunglasses.

                • Barry Carol says:

                  If insurance covers a procedure, pays its contract rate less a known in advance copay, and that’s the end of it, the patient is happy and satisfied. Of course, the patient most likely didn’t know what the procedure would cost ahead of time and his doctor didn’t know either because neither cared about the cost.

                  That’s a different issue and a different set of problems. It’s not price transparency; it’s either second or third party payer depending on who chose the insurance policy — individual or employer.

                  • Al says:

                    That is a different issue perhaps, but perhaps not. The reason behind our desire for price transparency is so that prices can be reduced through competition that is seen in the free market something that you seem to have second thoughts about.

                    The insurer and the employer know the amounts they have to pay and so does the patient for the most part.

                    That you want price transparency for its own sake so that a person whose insurance pays 100% can see prices he will never look at isn’t worth very much and isn’t worth nit picking over. It’s mostly a waste of time and effort especially where so many important things are needed.

                    • Ron Greiner says:

                      Al, if we had Free and Open Markets we might have an insurance company that used Return of Premium (ROP) in health insurance. When I started in the insurance industry in 1987 I was selling health insurance with ROP. Trust me, those clients would care how much the bill was because they got back every penny paid in less claims at 65-year-old.

                      I liked it because I would ask, “Do you want all your money back at 65 or would you prefer to let the insurance company keep it?” That worked pretty well.

                    • Al says:

                      Ron, I think Phil Levitt is trying to offer something of that nature and he is sometimes on this list.

                      We need to end the collectivist model and move in a direction where the patient and insurer determine the type of insurance being offered and the cost (willing buyer/willing seller). When that happens prices will plummet and quality will eventually rise.

                    • Barry Carol says:

                      Even when the insurer is paying 100% or close to it, the patient still has an interest in ensuring that as much care as possible is delivered by the most cost-effective high quality provider because the aggregate cost of care affects his premium and his employer’s ability to raise wages if he gets his insurance through an employer plan.

                      What we’re really talking about here is safely moving as much care as possible out of hospitals in favor of independent imaging centers and ASC’s. I don’t know how much care that amounts to at the end of the day but I think the more care we can drive out of hospitals and hospital owned stand-alone facilities, the better.

                    • Al says:

                      “Even when the insurer is paying 100% or close to it, the patient still has an interest…”

                      So what are you proving Barry? The ACA failed in its mission in part because it destroyed the patient’s desires for price sensitivity. The unintended high deductibles of the ACA is creating a type of marketplace that is bringing back price sensitivity.

        • Al says:

          Take note Devon how you acted as the consumer leader and went to Amazon to solve your problems. I found that too difficult so I bought a contract to handle all the costs of my A/C. In that way I can and have demanded new parts instead of just fixing a problem. (Most people don’t insist on new parts so the insurer has the A/C fixed at lower costs. I am the squeaky wheel so I keep a record so that when the warranty goes past its 10 years and that part fails again I demand it be fixed under the warranty.) Of course I realize that insurance costs more, but it is worth it especially since I live in an environment where A/C’s get destroyed very quickly.

  11. Devon Herrick says:

    Barry Carol said…
    Signing the hospital’s form agreeing to be financially responsible for all charges should be unenforceable…

    Yes, I agree that it is somewhat odd that hospitals present a blanket form to patients requiring them to agree to pay all fees — including undisclosed fees charged by independent contractors whose fees the hospital neither knows or has a say in setting. Moreover, this is true even for independent contractors who are not affiliated with the same network the hospital is affiliated with.

    If you think about it, why would the hospital have a stake in the financial agreements between its non-employee contractors and the hospital’s patients? The only logical argument is that the hospital has a stake in making sure all stakeholders are in agreement. But that is not the case. This illustrates the assumption that hospitals care more about the financial wellbeing of their medical staff and referring physicians than hospital patients. This suggests patients are not the preferred customers.

    Absent the blanket agreement, patients would have more leverage when hit with surprise balance bills. I don’t want to tell physicians what they can charge. But I suspect if patients met with them in advance and compared the price of several different providers, there would be more competition.

    This may sound like a pain to doctors who provide services in hospitals. But as Bob Hertz correctly points out, it will take more than a few forgone MRIs to bring down health care spending. We need more competition across the board.

    • Al says:

      In order for a free system to work all parties have obligations including the patient.

      Patients have to demand to know whether or not anyone will be charging more than their insurance and how much. My own hospital threatened me with what I considered to be an outrageous fee for I carried very high deductible insurance. I knew what they were paid by Medicare and other insurances. My bill was between 10 and 20 fold. They weren’t even nice to me so I told them to sue and that it would make very interesting reading in the local newspapers. They dropped the bill entirely.

      I think patients should have their own blanket statement that they add to any payment form they are forced to sign. It should say something that states it is their understanding that all fees will be based upon the fees permitted by the insurer unless otherwise specified on the form. Even if that is not permitted and removed it could be helpful in court if one has the names of all the employees involved.

      • Devon Herrick says:

        I agree the patient must share responsibility. Comparison shopping by consumers is what makes markets competitive. However, I have a suspicion any addendum a patient adds to hospitals’ blanket financial responsibility form will be removed or refused.

        It will probably require a legal framework. The federal government (or better yet, state governments) have significant leverage to encourage transparency agreements.

        • Al says:

          Whether an addendum is removed or not is hit and miss. I added an addendum to my mortgage contract with the bank and then upon final signing added another addendum changing one of their rules. Everyone tells me that is impossible. It is becoming more impossible because of computers that don’t accept an addendum, but I have placed an addendum right after my signature in some cases.

          An addendum might mean nothing, but it might give a judge an excuse to do what he wants to do in the first place. Merely telling the judge and having one’s own note written in their own log or on their own receipt, dated along with who was present at the time also adds leeway to the judges decision.

          The hospital lawyers know that so an addendum or attempted addendum might make a fair settlement easier. I don’t think that we need so many laws, rather we needed better informed judges to understand that a doctor’s bill (I am a doctor) should hold no more weight than the bill of a used car salesman.

          • Barry Carol says:

            Patients shouldn’t have to hire a lawyer at potentially high cost to adjudicate a medical bill that should have been transparent in the first place.

            • Al says:

              There are lots of times one might have to use a lawyer when one shouldn’t have had to. That is the nature of a free society. One might be arrested for something one didn’t do and yet one might have to pay for an attorney. If one is a doctor one might be charged with fraud by Medicare and require a lawyer to prove that Medicare broke its own rules. Medicare couldn’t even be sued for damages so that is where one’s fears should lie.

              Life isn’t fair. Live with it.

              Most of the times a settlement will occur and a lawyer will not be necessary. We definitely don’t need the collectivist mindset solving this problem.

  12. Bob Hertz says:

    When my wife was hospitalized a few years ago, I refused to let her sign the blanket authorization to accept all fees.
    It did me no good and in fact it did me harm. The nursing staff found out that she had not signed the form, and they were curt toward her during the entire short stay. Took a while for me to be forgiven for my valiant pro-consumer gesture.

    On another occasion, I did fight a hospital and win over an excess bill to my son, but it took many letters and months to resolve, and it did hurt my son’s credit rating.

    The various answers here are all quite valuable, but the conclusion might be that a patient actually needs an attorney to stay at their side during a hospital stay.

    If we would all step back for a moment, it would dawn on us that it is absolutely grotesque to need legal protection against medical providers who take an oath to help us. I think we need a medical Moses, if you will, who stands atop the mountain and says this is crazy. This Moses should come from the medical profession, I would think. Their outrage has a better chance to be listened to.

    • Al says:

      I don’t believe it should have hurt your son’s credit rating if the objection to the bill occurred within 30 days.

      Why would the nurse be curt to you? Was she told to act that way? If so then the hospital was pretty stupid because if an error was made and you sued for malpractice they likely potentially be in deeper trouble. However, assuming you are correct that is part of what we face anytime we question anyone’s bill.

    • Ron Greiner says:

      Bob, when my son had a non-network provider charge $35,000 he didn’t fight the bill his insurance company did that. He did end up paying a penalty but the insurance company paid the lion’s share because they paid for Out-Of-Network charges less the penalty.

      If people have an HMO that pays NOTHING for Out-Of-Network charges then they have a lower premium to begin with.

      People want the HMO premium then expect to never have Out-Of-Network charges and you can’t depend on that. That’s why I tell everybody you should have a PPO because things happen very fast when someone is sick or hurt.

  13. Bob Hertz says:

    But Al. don’t you see the social cruelty here? My wife was giving birth and it ain’t easy. That is a time when no one should be curt!!!

    Episodes like this one make me envious at times of a Canadian system where no money changes hands, and the providers get paid the same for all patients. Of course it can be inefficient and the providers can be uncaring. No system is perfect.

    But expecting a patient to watch for non-network bills like a hawk from their bed is just barbaric!

    • Al says:

      Bob, I see lots of social cruelty all the time. I don’t like any of it, but the most cruelty I have seen is the cruelty of the leftist governments that in the 20th century killed around 100 million people outside of war.

      In Canada the Supreme Court of Quebec in Chaoulli v. Quebec found that the delay in treatment was not meeting the stated aims of Quebec’s Constitution that included concerns of humane actions including security for its citizens. It ruled against the state, so things aren’t perfect there either.

      There is no way a free people can have politeness insured by government, Free people have to rely upon other free people for that to occur and it works. Americans are the most generous people in the world. We have to learn to take on responsibility so that when we open up any bill we refuse to pay what we feel is unjust.

      Next time check with your doctor and the hospital and do a bit of leg work. Chances are if you find someone billing out of network you will agree to pay the fee anyhow.

    • Ron Greiner says:

      Bob, these Canadians with money don’t wait in line up North they come across the border and do their surgery in Detroit.

      Just because no money changes hands that is not the way to determine which system is better. I don’t think these Saudi Kings go to Canada for treatment. I know George Harrison didn’t.

  14. Bob Hertz says:

    Al, you make good points but I think that your sentence ending “when we open up any bill we refuse to pay what we feel is unjust” is perhaps a little too utopian.

    Relatively few persons have the education, the boldness, and the financial self-confidence to challenge a medical bill. Many more persons are terrified of such bills, and if they do not pay they can be harassed by bill collectors and sued with increasing frequency.

    I certainly want to see more individual challenges, but I also want to see legal action. For example, Prof Uwe Reinhardt (who contributes to this blog) plsyed a role in establishing better laws on hospitals in New Jersey.
    (see below) I find it perpetually depressing that these laws have to come one state at a time- instead of national enactment……

    Dr Reinhardt relates —

    n the fall of 2007, Gov. Jon Corzine of New Jersey appointed me as chairman of his New Jersey Commission on Rationalizing Health Care Resources. On a ride to the airport at that time I learned that the driver and his family did not have health insurance. The driver’s 3-year-old boy had had pus coming out of a swollen eye the week before, and the bill for one test and the prescription of a cream at the emergency room of the local hospital came to more than $1,000.
    By circuitous routes I managed to get that bill reduced to $80; but I did not leave it at that. As chairman of the commission, I put hospital pricing for the uninsured on the commission’s agenda.
    After some deliberation, the commission recommended initially that the New Jersey government limit the maximum prices that hospitals can charge an uninsured state resident to what private insurers pay for the services in question. But because the price of any given service paid hospitals or doctors by a private insurer in New Jersey can vary by a factor of three or more across the state (see Chapter 6 of the commission’s final report), the commission eventually recommended as a more practical approach to peg the maximum allowable prices charged uninsured state residents to what Medicare pays (see Chapter 11 of the report).
    Five months after the commission filed its final report, Governor Corzine introduced and New Jersey’s State Assembly passed Assembly Bill No. 2609. It limits the maximum allowable price that can be charged to uninsured New Jersey residents with incomes up to 500 percent of the federal poverty level to what Medicare pays plus 15 percent, terms the governor’s office had negotiated with New Jersey’s hospital industry.
    I wouldn’t be surprised if the New Jersey hospital industry was cross at me and the commission for our role in the passage of Assembly Bill 2609. The commission took the view that it helped protect the industry’s image from some of its members’ worst instincts.
    In that spirit, I invite the American Hospital Association to join me in urging federal lawmakers to pass a

    similar law for the nation. Evidently the mere guidelines on hospital pricing that the association published in 2004 have not been enough.
    Indeed, in 2009 I had urged the designers of the Affordable Care Act to include such a provision in their bill — alas, to no avail. Courage to impose it on the industry had long been depleted.

    • Barry Carol says:

      Why stop at 500% of FPL income? If your income is 501% of the FPL, should you really be expected to pay full charges if you don’t have insurance? I don’t think so.

      Also, whatever happened to the ethical concept of treating people the way you would want and expect to be treated if circumstances were reversed? It must be either an unknown or completely ignored notion among hospital executives, especially those with responsibility for pricing and collection tactics.

    • Al says:

      “Relatively few persons have the education, the boldness, and the financial self-confidence to challenge a medical bill. Many more persons are terrified of such bills,”

      Bob, I wonder how those people survive life.

      I think it best that each state do its own thing so that we have 50 states competing with 50 different ideas. I think the patient needs to learn how to be in charge not only in paying bills, but also in obtaining the services they require.

  15. Bob Hertz says:

    Al, I will take the bait of your rhetorical question on ‘how such people survive life.’

    In a recent year I conducted Medicare Supplement interviews at open houses for seniors.

    I met hundreds of people who had worked good jobs, raised families, voted and obeyed laws, etc, and who had absolutely no idea how to deal with medical bills.

    This was especially true of union workers, who granted had never seen a medical bill due to generous health plans.

    Anyways, my point is not everyone in a nation’s labor force is financially savvy and stubborn. If I may generalize from my father’s friends, the men who won World War II did not understand medical bills. But They survived life rather well, and I might not be here without their courage.

  16. Al says:

    “I met hundreds of people… and who had absolutely no idea how to deal with medical bills.”

    Bob, it wasn’t bait. It was a rhetorical question for which no answer was required. Thank you for responding non the less.

    We have a tendency to learn what we need to learn. When I was young I didn’t know how to sweep a floor. Some might say I don’t know how to do that today, but I had to find a job so I became a doctor even though I couldn’t sweep a floor and didn’t know how to manage medical bills. I never had them, so how would I know? “Necessity is the art of invention”, perhaps a bit of an overused phrase, but true none the less.

  17. PJohnson says:

    Wouldn’t be great if you were greeted at the door of health provider with a price list? Works everywhere else.

  18. Larry says:

    I actually love the rise of the high deductible plans. That wasn’t the intent of ACA, but unintended consequences are a fact of life with government programs. In this case, the unintended consequences were beneficial. High deductibles mean patients care whether their MRIs cost hundreds or thousands of dollars and prefer the former. It’s a good thing!

  19. Devon Herrick says:

    I agree. High-deductibles are a positive outcome of the ACA. What I object to is the networks are narrow which makes it difficult to use the doctor of my choice. Also the premiums are so high that there are no funds left over for most households to deposit into an HSA or pay out-of-pocket for costs below the high deductible.

  20. Bob Hertz says:

    If I remember correctly, there was a rule in Massachusetts after its 2006 reform that required a person to prove they had $10,000 in a savings account before they could buy a high deductible plan.

    The designers of the ACA made the following assumptions:

    a. persons near poverty cannot afford deductibles, so they should get Medicaid;

    b. persons with lower middle incomes would get subsidies to buy silver or gold plans with modest deductibles;

    c. the magic of Obamacare would drive premiums down so that couples making $63,000 a year could buy cheap low deductible plans without subsidies.

    (a) and (b) above have actually worked, but (c) is a disaster.

    • Ron Greiner says:

      Bob, if we gave the poor a zero deductible on a health security card then they would eat differently and so would their dog.

      People on Medicaid are spending other peoples money so they don’t care about the cost and they over utilize. PLUS, doctors know that it is depressing to be broke so it is easy to put them on anti-depression medication and have them coming to their office quarterly for observation. These Docs know how to manipulate the system too.

      Plus, these Medicaid insurance companies get a ton of cash for a broke person who doesn’t own a car and don’t see a doctor because they are healthy. The whole system is just a scam on the American taxpayer.

      Bob, you forgot to mention that the designers of the ACA wanted to eliminate Individual Medical companies from the face of the earth so that their would be no competition to their over-priced employer-based health insurance plans. Let’s face it, there is Federal Law that employers must purchase their product.

  21. Al says:

    Bob what you have essentially said is that we have given the poor a certificate that entitles them to purchase and eat lobster. We have subsidized the price of lobster to such an extent that it is less expensive than chicken so that the people with lower middle incomes eat lobster. Because there is such a demand on lobster, lobster prices have risen so that couples making above $63,000 per year eat chicken and will never eat lobster again.

    Is that what you call a successful program?

  22. Bob Hertz says:

    My choice would be to extend the subsidies to all incomes.

    For example, the couple making $63,000 a year would pay no more than $6300 themselves for insurance. If a policy at ages 60-65 costs $12,000 for two persons, then they get a $5700 subsidy.

    We give much more than that in subsidies to people who turn 65, whether they are rich or poor. I see nothing wrong in pushing the subsidy age down a little.

    The cost of extending subsidies in the manner I described has been estimated at $20 billion a year. Probably less than the cost of keeping troops in Germany.

  23. Al says:

    Bob, I am not against subsidies, but I am for recognizing that every dollar removed from the private sector removes a dollar of earning capacity. As those removed dollars mount up the ability to pay for the entitlements, so many desire, decreases. I also wonder why we are constraining what the buyer and seller exchange.

    Wouldn’t we be better off in promoting a freer market in healthcare (including subsidies) which by itself would reduce premiums along with the need to spend so much in subsidies?

  24. Bob Hertz says:

    The following argument may be flawed, and I welcome corrections, but let me proceed:

    We have expanded Medicare to cover dialysis, we have expanded Medicare to cover drugs, we have expanded Medicare to allow private Medicare Advantage plans to offer extra benefits.

    The tax rate for workers is still 2.90 per cent total. The tax has been expanded twice to non-wage income, and then to non wage income over $250K a year.

    Has any of this diminished the wealth of non-seniors? I witness large new cars and vans bought all the time, and larger homes than ever before.

    Senior citizens are I think the best market for new cars, precisely because they get health insurance for pennies.


    All I am trying to say is that government spending pumps money into the economy as well as take money out of it.

    • Ron Greiner says:

      Bob, young families are suppose to work part-time jobs and pay for over-priced health insurance with after tax dollars so fat cat millionaires can float on their boats in Tampa Bay and scarf down free drugs on Medicare. Young people have to pay Medicare tax on every dollar earned to redistribute their income to the old, that’s America.

      JFK and LBJ told us this is exactly the plan back in the 1060’s when JFK said that Medicare won’t pay for doctor charges only hospital bills. Ronald Reagan at the time said that if we let these Socialists have Medicare that is just the beginning and they will expand to take over the entire medical profession. So either JFK was right or Ronald Reagan was right. Now young people have stopped having children because they can afford children and taking care of America’s old with part time jobs.

      Watch JFK and Ronald Reagan in the 1961 debate and who was telling the truth and who was lying through their teeth.

      Ronald Reagan – Medicare Will Bring A Socialist Dictatorship

      My videos are awaiting moderation – maybe they will show up. I think Ronald Reagan was right – we live in a Socialist Dictatorship – Now we have a Socialist running for President in 2016 who is ahead in the polls in New Hampshire. “One of these days we are going to tell our Grandchildren what is was like in America when men were free!” — Ronald Reagan 1961

    • Al says:

      This is a minor twist of the broken windows theory. It seems that some still believe broken windows pump money into the economy. Read Bastiat. He will tell you a different story.

  25. Ron Greiner says:

    Bob, young families are suppose to work part-time jobs and pay for over-priced health insurance with after tax dollars so fat cat millionaires can float on their boats in Tampa Bay and scarf down free drugs on Medicare. Young people have to pay Medicare tax on every dollar earned to redistribute their income to the old, that’s America.

    JFK and LBJ told us this is exactly the plan back in the 1060’s when JFK said that Medicare won’t pay for doctor charges only hospital bills. Ronald Reagan at the time said that if we let these Socialists have Medicare that is just the beginning and they will expand to take over the entire medical profession. So either JFK was right or Ronald Reagan was right. Now young people have stopped having children because they can afford children and taking care of America’s old with part time jobs.

    Watch JFK and Ronald Reagan in the 1961 debate and who was telling the truth and who was lying through their teeth.

    Ronald Reagan – Medicare Will Bring A Socialist Dictatorship