Healthcare (&Costs) in the United States: a primer for the outsider

I am writing this blog as one of my friends requested it.

[Disclaimer: I am not an expert, but may know more than you]

Context:

Some people wrote on a Facebook post that, to see a specialist, there is 6 months wait. This may be true in some places; but you can also see the same specialist within weeks in certain places.

 It  depends on where you live, how many specialists are in your area and how many specialists are in your insurance's panel.

 Similarly, to see a doctor, you may end paying $50 even with insurance and $200 without insurance at the least.

In order to understand this clearly,there are some baseline assumptions:

1. Do not generalize this based upon data from one area.

2.Insurance industry is dependendent upon the market characteristics, the actuarial analysis; and their rates go up every year. 

3.Premiums  for the subscribers vary based upon the health, age, sex, smoking status and any pre-existing conditions

4. Insurances are somewhat regulated by government to prevent their monopoly, but they can decide individual premiums, coverage and the payments.

In the USA, there are two kinds of health insurances.

Firstly, the government funded, which is provided through two major categories: Medicare (for elders >65 years) & Medicaid (for low income and those on long-term custodial care)

Secondly, through the Private insurance companies (also called Health plans & HMOs).

Some health plans also own hospitals and employ providers, but it is seen in limited regional areas.

Hospitals can be government owned (Federal- VA hospitals, State hospitals, some university hospitals), non-profit private and or for-profit private entities.

Providers belong to individual physicians LLC or PSC, private single specialty or multispecialty groups, or groups owned by hospitals, academic centers or health plans. 

The providers negotiate their charges (secretly) with the insurance companies when they enroll with each insurance company. Even government sponsored plans like Medicare and Medicaid can be sub-contracted (“managed”) by private health plans to save money for the government.

Health insurance is provided by various companies, they call themselves as HMO (Health Maintenance Organizations). 

They have network of participating providers. If you are a member or subscriber, in order to have the health benefit covered, you have to use the providers from the specific network, except in emergency situations.
Mostly out of state care is not going to be covered well. 

There are plans from the same company which are cheaper with a restricted HMO network, usually needing a referral to see a specialist, or PPO plans (preferred provider) where you do not need to see a primary doctor (to get referral)before seeing a specialist. These can be costlier.

Out of network services are not covered, and even if covered, that will incur higher charges(see below coinsurance).

If someone needs an elective procedure/ test/study ordered by a physician(other than from ER), it may require prior-authorization. 

For example a brain MRI can cost $3500 if not pre-approved, and be just $350 if approved.

Billing & Coding:
Providers and entities bill the insurances or submit the claims online.

The fancy term for this in hospital is so called “revenue cycle operations”

Charges are based upon CPT (R) codes (current procedural terminology) established by the American Medical Association, which has codes as below:

Evaluation and Management: 99201 – 99499.

Anesthesia: 00100 – 01999; 99100 – 99140.

Surgery: 10021 – 69990.

Radiology: 70010 – 79999.

Pathology and Laboratory: 80047 – 89398.

Medicine: 90281 – 99199; 99500 – 99607.

Evaluation and management codes are for office visits; and there are mandatory documentary evidence to bill appropriately. The description of this will be omitted here for keeping this blog short.

[For those interested in reading about it see https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/eval-mgmt-serv-guide-ICN006764.pdf ]

For example, a visit to a primary care provider for cough and fever can be billed as level 2.

But Pneumococcal pneumonia with respiratory failure can be level 3

And their charges may vary.

 This will be based upon the documented complexity of the problem, the difficulty in diagnosis and interpretation of testing and the treatments administered.

Hospital billing:

In the hospital setting, the charges will be usually grouped under DRG (diagnosis related groups)

Diagnosis (as per ICD 10) with emphasis on the complications will have some fixed features.

This is mostly for Medicare beneficiaries, and the payment to acute care hospitals is fixed, regardless of the actual costs and tests involved.

Initial day and subsequent stays in the hospital will have different payment. Hospital will bill for their services and physician will bill for his/her services provided.
Insurance can deny payment if length of stay is not approved by them regardless of the diagnosis.

Example for a physician office visit.

You went to see your family doctor for yearly check, you have Hypertension and Diabetes

You paid $30 at the office.

The Doctor then billed (see EOB below) $375  by submitting the claim to insurance.

Insurance then paid $115 to the doctor.

Doctor billed you $85 again for your responsible amount

You had 3 prescriptions. Two of them were generic, one was brand name.

You paid $15 each for generic, $35 for brand name and 30% coinsurance which came up to $75.

Total expense incurred by you from the visit is: $220

Why???

How much you paid for this coverage?  Still why??

Let us see in detail below

Prescriptions may be another plan 

Scenario (2016-17):

Private health insurance costs can be up to $1000 per month for a ‘decent’ coverage.

A family of 3 (45 yr. Male, 40 yr. Female non-smokers and child a 15 yrs.) of annual income $50,000

Government sponsored plan varies in monthly premium from $300 (Bronze) which has high deductible to $800(Gold) with lower deductibles. (Bronze: deductible $11,000, out of pocket max $14,500)

If not available through government sponsored healthcare market (Affordable Care a.k.a. Obamacare), the private insurance purchased will be significantly higher. 
Interestingly people are oblivious to this fact when they wanted to repeal ‘Obamacare’

Employer provided group plans will have lesser premium than listed for private insurance if you are buying it on your own.

The following terms are important in understanding the coverage and payments.

Copayments

This is the responsibility of the member of the insurance plan. Per visit per member.

This varies, but is a flat charge-in addition to the charges the provider may bill. Usually $25 for a primary provider visit (Internal Medicine, Pediatrics, Family medicine)

Or $50-75 for specialist visit

Urgent care $75-150

- may be collected at their office usually, or billed directly.
Emergency room visits can be very expensive, regardless of the problem.

Co-Insurance

 (-this is not a flat fee, but a percentage of costs)

Your responsibility of the total costs after you've paid your deductible. For example, your health insurance plan's allowed amount for an office visit is $100 and your coinsurance is 20%. If you've paid your deductible: You pay 20% of $100, or $20.

However if the deductible is NOT met, the insurance will not pay the cost.

If the deductible is $1000, and the member has met only $500, the insurance will not cover it.

This can be also in the prescription cost you end up paying (see below).

Example of coinsurance with high medical costs

[https://www.healthcare.gov/glossary/co-insurance/ ]

Let's say the following amounts apply to your plan and you need a lot of treatment for a serious condition. Allowable costs are $12,000.

Deductible: $3,000

Coinsurance: 20%

Out-of-pocket maximum: $6,850

You'd pay all of the first $3,000 (your deductible).

You'll pay 20% of the remaining $9,000, or $1,800 (your coinsurance).

So your total out-of-pocket costs would be $4,800 — your $3,000 deductible plus your $1,800 coinsurance. 

If your total out-of-pocket costs reach $6,850, you'd pay only that amount, including your deductible and coinsurance. The insurance company would pay for all covered services for the rest of your plan year. 

Generally speaking, plans with low monthly premiums have higher coinsurance, and plans with higher monthly premiums have lower coinsurance.

Prescriptions

Copayments are paid per prescription, fixed charge, which can add up based upon the number of prescriptions. In some situations, 90 day prescription is allowed and can save 2 copayments than 3 monthly prescriptions.

Tier 1 Generic / Older drugs: mostly covered (or 10-20% coinsurance)

Tier 2 older brand names ($35 copay), Tier 3: newer brand names ($60), Tier 4(30% coinsurance) are chemotherapy, injectable and biologics that are NOT in the formulary list.

EOB (explanation of benefits)

When you get health care, the doctor, hospital or dentist asks the insurance company to pay for the service they provided by submitting a claim. After they process the claim, you get an explanation of benefits, or EOB. It’s the statement that says This is Not a Bill.

This will have items like: What was billed, any discounts, what insurance will pay, Total covered

What member’s responsibility etc.

If interested, you can see a sample from BCBS available online (– probably a lowest charge example!)

https://www.bcbsm.com/content/dam/microsites/eob-guide/eob-guide.pdf

Covered services

This is important to note when obtaining service. This can vary with different companies and their plans.

For example dental health, and ophthalmology is usually not covered in medical insurance.

Psychiatry and drug abuse related issues, fertility treatments are usually not covered by most insurances.

[This is just a primer]

This real life story is worth hearing
https://www.npr.org/sections/health-shots/2018/05/14/610072486/sticker-shock-jolts-oklahoma-patient-15-076-for-4-tiny-screws?utm_source=facebook.com&utm_medium=social&utm_campaign=npr&utm_term=nprnews&utm_content=20180514