One of the complaints I hear all the time is: Those people [referring to doctors and hospitals] must be making a fortune. Just look at my bills. Just last week, I got that from my mother! As a doctor, I wish it were true, but the complaint is way off base.
My professional bill for doing a heart catheterization in a critically ill newborn baby can often be over $5000. What do you think I actually get paid? The allowable reimbursement for that procedure is…(drumroll)… $387. No joke. Should I chant “Show me the [real] money!” before agreeing to do the heart cath? Ridiculous! That is against every ethical principle held dear by doctors and nurses. So we take what they say they will pay.
The same principle applies to the hospital: the printed bill or charge is virtually meaningless because Medicare, Medicaid, or the insurance company tells the hospital what it will get paid regardless of what it says on your bill. That is why it looks like your hospital is making out like a bandit with your $15,000 bill for a hernia repair, for which they actually got paid around $800.
And why is the printed bill so high? Because there are rare insurance plans that pay a specific percentage of the bill. In these rare instances, the hospital tries to make profit to cover losses that are required-by-law such as unfunded care and regulatory compliance. The majority of payers have a pre-determined schedule of payments (”allowable reimbursements”) and that, regardless of the printed bill, is what gets paid.
The “price” on the printed bill for a specific service or item is the same for everyone. That is the law. As a result, everyone gets the same – exorbitant – bill even though no provider ever gets paid that amount. Those astronomical bills are a way to play this rigged game called healthcare money madness with limited (fixed) supply of money and unlimited demand for services.
Most hospitals and many doctors are in financial crisis.
They are required by law to give care but get paid a small fraction of what is charged on the printed bill.
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