Uninsured Shoppers May Lose their Drug Discounts Unless they Find a New Card
Walmart is known as the retailer that began the $4 generic prescription program. It became the go-to store for cheap generics if you didn’t have prescription drug coverage. Other major retailers soon followed. It was a game changer in the pharmacy business. Generic drugs that were once a lucrative business for pharmacies were suddenly low-margin products. Of course, not every generic is $4, but the $4 list is pretty robust. For those prescriptions that are not on the $4 list, patrons often turn to a discount pharmacy card program, such as PS Card or GoodRx. A pharmacy discount card is a service where uninsured individuals (and anyone who wants one) join a network that has partnered with a pharmacy benefit manager (PBM). PBMs administer drug plans for insurers, health plans and government programs such as Medicare and Medicaid. Because PBMs are volume purchasers of drugs, they’ve negotiated a better price than is typical for walk-in customers. For example, let’s assume you join a discount drug plan whose PBM partner also administers the drug plan for General Motors. GM pays lower prices for drugs than one consumer paying cash. Yet, card-holding cash-paying customers benefit from the volume discounts that huge purchasers receive.
Discount drug cards contain information on the specific PBM allowing the pharmacist to look up the negotiated price, the payer and the account of the card provider. Once entered into the computer with their customer records, this information can be stored in the pharmacy computer system for years allowing the pharmacist on duty to always apply the correct discount. The process works similar to the way it works when you have health coverage and your pharmacist enters information on your drug plan into the pharmacy computer system.
In mid-August 2015, Walmart took the unusual step of identifying its pharmacy business as a drag on profits. Apparently, more Walmart pharmacy shoppers were enrolled in drug plans, which it claimed reimbursed prescriptions at lower rates than prices paid by cash-paying shoppers. The volume of high-margin cash transactions was also down as fewer shoppers paid with cash. Customers with health coverage obviously expect the negotiated discounts their plans offer – especially if they have not met their deductibles. But what about discount card holders? What if the records of their cards were accidentally lost? The other day I got a call from the owner of a discount pharmacy card service saying Walmart had apparently done just that — purged its pharmacy files of all discount cards. Customers are still welcome to use a discount pharmacy card as long as they present a new one to the Walmart pharmacist.
Because the information is stored electronically, most people probably don’t remember where their cards are. They may not even remember that they’re using one. I could not find an official disclosure but I did find independent confirmation from other discount card firms that customers need to present the Walmart or Sams Club pharmacist with a new card upon their next visit. The discount pharmacy card executive I spoke to was worried that periodically purging discount card records may become standard practice at all chain pharmacies as a way to boost margins. Who knows? Maybe drugstores will begin to require their customers to present a discount card at every encounter.
Discount card providers don’t generally charge consumers for their services. Most cards are free, while purveyors make a small commission off each prescription filled. In theory, the pharmacy earns less on discount card program members, but has more customers. A new venture called Blink Health is a departure from the standard way of doing business. Blink’s business model may give it a competitive advantage over the other discount cards if more pharmacies demand a card during each encounter. Blink is a service where patrons have to sign up in advance. Once registered, customers look up their prescriptions and pay for them online. The customer then prints out a paid-in-full voucher (containing discount card information) and presents it to the pharmacist. Some discount cards run afoul of Medicare’s anti-kickback regulations but this method is apparently legal for Medicare as well. Although the specific price varies from one pharmacy to the next with some card programs, Blink has uniform pricing across all pharmacies. Whichever card program shoppers use, one significant benefit of programs such as PS Card, GoodRx and Blink Health is the ability to look up the drug’s price ahead of time.
A funded discount card is even better for one many times get a deeper discount with cash on the spot
File with your insurer to get the higher negotiated price applied to your deductible
I’ve heard experts advise to check your drug plans negotiated discount against Walmart’s $4 list or the price using a discount card. You may find the $4 is cheaper than a co-pay, or possibly find a price lower than your insurer’s negotiated rate depending on its formulary.
The downside of paying cash is that it doesn’t count toward your deductible. In the case of Medicare, it also doesn’t count toward your total drug spending in the context of the donut hole. If the cash price is significantly lower than the coinsurance liability, however, it could still make sense to pay cash.
Barry
The insurer does not know cash for a lesser price has been paid
Simply file the claim as if you paid the higher price
There is no magic to this
Just common sense
Don — Doesn’t the insurer require a receipt as proof of what was paid? Why would the pharmacy give you a receipt showing a price higher than it received? It looks fraudulent to me.
Barry
When the pharmacy shows the lower cash price being paid to the insurer is it proper business practice to not credit the lower payment toward the deductible?
Our health care system is rather strange. The Wall Street Journal had a front page article last Wednesday or Thursday discussing how cash-paying customers could often get a better price for a hospital procedure than using their health plan’s negotiated discount. The article said that the cash payment often does not count towards the patients’ deductible. So, if a patient does not expect to meet their deductible, it is often better to pay cash rather than using the health plan.
That doesn’t make sense to me. Health plans should provide an incentive to not only shop for the best price, but also pay using the cheapest method. I once ask a Humana executive at a conference where I was speaking why insurers don’t steer enrollees to cheaper providers for services like MRIs. He said “patient preference.” What??? My preference is to have premiums that don’t rise at double digit rates. That can only be accomplished when my plan gives me incentives to be prudent with my purchases.
When I used to ask self-funded large employers about this issue, the answer I usually got boiled down to we want to keep our employees happy. Employees want their coverage to be comprehensive and easy to understand. They prefer to just go wherever their doctor sends them if they need imaging or the services of a specialist. They don’t make the connection between rapidly rising health insurance costs and smaller wage increases. In the old days, low deductibles only compounded the problem. Maybe that’s changing somewhat as deductibles rise but not nearly enough as far as I can tell, HSA’s notwithstanding.
If there is one silver lining in Obamacare, it’s that the high deductibles will encourage more people to ask about prices. The problem is: research shows people don’t compare prices, they just decide if they can afford the price and just don’t get the service done if they can’t. Patients need to learn that they can shop around and find prices they can afford.
I think it would be helpful if doctors or someone on their staff became more equipped to help patients compare prices or steer them to the most cost-effective high quality providers in the first place. We would need to eliminate confidentiality agreements between insurers and providers to facilitate that effort.
While developing such expertise is not free, as insurers consolidate, the administrative burden of having to deal with multiple insurers each with different rules should lessen.
“I think it would be helpful if doctors or someone on their staff became more equipped to help patients compare prices or steer them to the most cost-effective high quality providers in the first place.”
Over the years my overhead climbed from about ⅓ to ⅔. This was due to managed care and all the bureaucratic management from Medicare. Income has been curtailed. How do you expect the physician to spend even more time training staff to know the most cost effective providers? Who do you think is going to pay for this care? If a doctor improved such transparency and gave better care he can’t raise his rates. You don’t want balanced billing, but you wish the physician to assume more responsibility.
You have supported the ACA which comes with ACO’s. The idea behind the ACO is to save money. In this desire of yours you have taken away part of the ability of a doctor to refer to the higher quality physician because that physician may be outside the ACO.
Everything you seem to support seems to conflict with what you say you want. You are a very bright buy, but that makes things confusing.
Allan — I’ve heard numerous primary care doctors suggest that their overhead is about half of revenue these days. I’ve never heard any claim it was two-thirds.
As for ACO’s, FFS Medicare beneficiaries still have the right to go to any provider they want whether he’s in the ACO or not. How that factors into the cost control equation, I don’t know.
Regarding raising rates, some doctors have been practicing a long time and have amassed a lot of experience while others are just out of residency training. I’m more than willing to pay a premium for the seasoned practitioner especially if his experience base is a good fit with my medical issues.
Barry, I think this is actually already happening. But it helps to be proactive.
I have had my dermatologist look at my file and ask about my coverage. When he discovered everything he ordered was going to be out of my pocket he gave me lower cost options. My primary care physician also was fine with me doing things like using my own lab (since I knew the price there).
My wife has experienced the same reactions when she informed her physicians about her coverage. One doctor helped her find a radiology clinic for a $430 MRI (and didn’t want to order it until it was absolutely necessary).
In order to get prescriptions renewed, my wife has researched lab tests online and found a comprehensive panel that would satisfy more than one purpose for a lower price. When she explained the strategy to her doctor, the doctor was fine with it.
My wife and I have had similar conversations with our dentists. They have always been received well.
Barry, that is what *my* overhead went up to. I was a solo practitioner and it makes a difference when you have a few others sharing the bills. I have heard others complain that their overhead went up into the 60’s% range. I never changed the way I practiced so I never cut patient services. But back to the question, with rising overheads and fees being cut how do you expect the physician to spend even more time training staff to know the most cost effective providers? Who do you think is going to pay for this care?
You don’t even want to permit balanced billing so that individual physicians can shine and be reimbursed for these things. That is what I consider being unreasonable.
You support the ACA and ACO’s and in another breath you want physicians that you have tied together to refer outside of their ACO (if a better provider exists there). That is also what I consider being unreasonable.
You say here that you are more than willing to pay more to an established practitioner, but on the other hand you won’t permit the patient to decide that one physician is worth a few extra out of pocket dollars seen with balance billing. What’s up?
“You say here that you are more than willing to pay more to an established practitioner, but on the other hand you won’t permit the patient to decide that one physician is worth a few extra out of pocket dollars seen with balance billing. What’s up?”
Here’s the problem with balance billing which perhaps you can help us resolve. Say my NYC based cardiologist charges $125 for a routine office consult (CPT: 99213) and Medicare pays him $75. I would have no problem with him balance billing me for the other $50.
On the other hand, when I had my recent six hour cardiac procedure at a NYC academic medical center which included an overnight stay in their cardiac observation unit, the hospital billed $222,000!! Medicare paid about $15,700. Are you really telling us that the hospital should be able to balance bill the patient for more than $206,000? How many people do you think could afford that? The surgeon and anesthesiologist also billed a significant multiple of what Medicare paid them. The same issue applies there.
In addition, a few days after my procedure, I had a complication that landed me in my local ER for about five hours. I had a CT scan and some blood work. The hospital billed over $15,000 and Medicare paid about $1,500. Is it reasonable to balance bill me $13,500 for that small amount of work and service? I don’t think so and care that must be delivered under emergency conditions produces a whole separate set of issues as well.
The bottom line is that balance billing may be a workable concept for primary care but it’s not workable, in my opinion, for hospital based care or for surgeons, anesthesiologists and other hospital based physicians who do procedures. I think it’s a much more complicated and less straightforward issue than you make it out to be. If we were to allow balance billing under some circumstances but not others, it would probably be an administrative nightmare to draw that line.
Understand Barry, at no time did I talk about hospital balance billing. We used to balance bill all the time because our fees were our own and then the lefties came in and created a new way of billing. That type of control left you with the crazy fees you talk about.
But let’s get to the heart of the issue. How long would a hospital be billing $222,000 for a $15,700 bill? Everyone would go elsewhere.
I suggest you and your friends try different physicians. For the prices you are talking about you can fly them in or fly the patient out. It was the collectivists that made a difficult problem worse.
You realize of course before we permitted the lefties to monkey around with healthcare, healthcare prices were set by the willing seller and bought by the willing buyer.
Allan – I’m glad you agree that hospitals shouldn’t be allowed to balance bill. Does the same apply to imaging centers, labs, and prescription drugs? I hope so.
As for doctors, there is still the issue of those who do procedures, including surgeons and anesthesiologists, in a hospital based setting. A former colleague of mine had shoulder surgery a couple of years ago at NYC’s Hospital for Special Surgery. The surgeon billed $33,000 for his work. I have no idea what the employer provided Blue Cross plan paid but I’m pretty sure it was nowhere near that amount. EOB’s that I’ve gotten in the past often showed anesthesiologist charges in the range of 50% of what the surgeon billed and those guys are often deliberately not in the network because the patient generally has no role in choosing them. Care provided by doctors in a hospital setting may also include those who are employed by the hospital on a salary plus bonus basis. Others may be independent contractors with practice and admitting privileges providing similar services. Is that a relevant distinction in the context of balance billing?
In the end, it seems that any patients that need much beyond basic primary care could easily face pretty significant bills from doctors if balance billing were allowed and those bills would not even count toward insurance deductibles or out-of-pocket maximum amounts which are themselves rising sharply from what they were not all that long ago. Insurance, then, could become a word without meaning. I don’t think having doctors use a sliding scale and attempt to figure out what each patient can reasonably afford would be a very satisfactory arrangement either.
As I noted previously, balance billing might be OK for most primary care or, more broadly, for E&M codes but not for procedure codes and not for most care that’s delivered in a hospital inpatient or outpatient setting.
Barry, I didn’t say I would or wouldn’t allow hospitals to balance bill. You brought the hospital in all on your own. I would treat hospitals (brick and mortar structures) and all other structures differently than physicians. All physicians should be able to balance bill, but in order to do so there has to be a meeting of the mind as to price. Without a meeting of the mind there is no contract and other mechanisms must be used.
Your anecdotes tell us that the collectivists have so destroyed the marketplace that some of the bills are laughable. The marketplace will bring back sanity though your anecdotes may continue long after. Unless disclosed in a contract some of the fees you mention would be thrown out in a court of law.
You worry in your argument that insurance will have no meaning with balance billing. When one advocates that insurance not sell based upon risk which is what you seem to advocate insurance already has no meaning. But no worry with a free marketplace established insurance will again mean something and healthcare costs will plummet down.
As we’ve discussed before. I’d like to see a safe harbor provision making it more difficult to collect under conditions where there was no meeting of the minds, or even a meeting at all (or even a call from the providers’ office manager).
I don’t want price controls, just some sort of communication. I wouldn’t throw out such bills; possibly some type of recourse with mediation or arbitration.
I agree with you whole heartedly Devon. In fact I would make that into a shared responsibility with the hospital since they are employing physicians and decide whether a physician can or cannot practice at that hospital.
This is not rocket science. Not infrequently judges have been known to declare a contract to be not binding because there was no meeting of the minds. Additionally I believe if the contract is vague the one who wrote it has the burden of proof. That would be additional protection for the patient.
Once people know they will not be paid without a valid contract they will make sure that the necessary elements exist in the contract in a fashion a patient can understand.
I like Devon’s idea conceptually. Perhaps there could be a default price of between 100% and 115% of Medicare if there is deemed to be no meeting of the minds. One concern I have as it relates to hospitals is that when you show up at the admitting office for an inpatient or outpatient procedure, they give you a bunch of forms to sign including one that makes you agree to be financially responsible for all charges without giving you any idea of what the charges are likely to be.
I also think we have to get rid of the regulation that requires providers to bill all patients at the same (list) price for a given service, test or procedure. There is no inherent reason why they can’t bill at the insurer’s contract rate if there is one and tell the patient in advance what that rate is and what portion of that, if any, he is likely to be responsible for. If the patient is self-paying, then provide a self-pay rate.
Hospitals and other providers are quick to turn unpaid bills over to collection agencies which then come after the patient using aggressive tactics, damage his credit rating or often even drive him into bankruptcy. Such behavior is obnoxious, in my opinion, when there is no meeting of the minds on price.
Yes, what Devon said is in conformity with law in other sectors of the economy and agrees with what I said in the initial response. But, why do we have to determine the default price based upon a government number, Medicare. Courts have to determine value all the time so why should we suddenly revert to another type of government price fixing? It seems all too many of your solutions require government when such reliance is not required in other sectors of the economy.. …And why suddenly should you feel that the price should fit between that range of 10-15%? Too much top down control that might have no relationship to the needs where this is happening.
“Such behavior is obnoxious, in my opinion, when there is no meeting of the minds on price.” Most of that behavior ends once the price is disputed. Then it has to be resolved by the court system. If a company damaged your credit when there was an unresolved dispute over the bill I think you can sue the company for damages.
Court resolution can be time consuming and expensive and what happens if you can’t afford a lawyer to represent you? Most people probably couldn’t and legal costs could exceed the value of the amount in dispute. I threw out the idea of some percentage of Medicare as a default price that both parties can choose to accept if they want to as a way of expediting a resolution of the dispute. If one party or both don’t want to accept it, they can pursue a court resolution if they can afford the legal representation.
I would not want it to be a civil court. I’d want some kind of binding arbitration or mediation. I would also want a set of criteria, such as: is there evidence of an agreement, was there a firm price quote, was there evidence that the doctor tried to sign an agreement with the patient; and did the patient make a good faith effort of contact the doctor’s office?
The criteria would need to be spelled out and incentives created in such a way that it would not benefit either party to avoid talking to the other party. A hospital form on behalf of all affiliated providers that said “do you agree to pay all fees…” would not constitute an agreement unless the hospital was taking on the responsibility for all affiliated providers.
For arbitration, I prefer the baseball approach where the arbitrator chooses one side’s position or the other as opposed to splitting the difference. The baseball approach, I think, induces both sides to try to make their final position as reasonable as possible.
I’m still concerned about the costs involved in litigation or arbitration and what happens if the patient can’t afford those costs.
Court resolution may take time, but it permits all citizens to have their day in court, prevents intrusion of government and has long lasting effects. Remember it is the provider (expert) that is not being paid during the waiting period. They want to be paid so even that wait will make the provider more diligent in his transparency and more likely to settle at a reasonable price. It is also bad for the reputation of the provider when he loses. Likely many if not most of the cases can be done in small claims court and if the case is big enough will force the hospital to provide privileged information regarding fees charged and actual fees paid. The court protects the consumer, not the provider. Take note that when courts make decisions against providers especially hospital providers they all take notice.
I note that the binding arbitration in California courts has likely led to arbitrators that favored the provider.