Can Consumers Save on Health Care Bills By Paying Cash?

Health care consumers are catching on to the recent trend in medical care where paying in cash for treatment rather than using insurance saves money, a huge change from the previous system where hospitals once charged uninsured patients the highest rates.

Part of the reason for this change is new state and federal rules aimed at protecting uninsured patients from overcharging. These rules protect the uninsured but hospitals then seek higher rates from commercial insurers to make up the difference on insured patients. The plan members pay those higher negotiated rates, partially because of the increase in high-deductible health plans. 

Traditional relationships between payers, providers, and patients are compromised by the cost transparency, though some providers prefer to keep cash rates quiet.

James Lazarus, vice president, Advisory Board Co., who advises hospitals on self-pay prices, said offering cash rates that are lower than insurance-negotiated rates could violate contract provisions. “If insurers find out that plan members are able to access a cheaper cash rate, they’ll call up the hospital and say, ‘That’s our new contracted rate,’ ” he said.

Boulder Community Hospital hasn’t had complaints from insurers, says Chief Financial Officer Bill Munson. “Patients have the right under federal law to request that we not bill their insurance,” he says, “and when they do, they have the right to participate in our self-pay program.”

Amy Oldenburg, Aetna’s vice president of network and product strategy, says Aetna members who find they can save money by paying cash “should make the best choice based on their needs.” But, she cautions, they could be paying for unnecessary procedures and are missing out on the opportunity to have Aetna coordinate their care.

According to Tom Nickels, an executive from the American Hospital Association, members are concerned that high-deductible plans will increase their bad debt and leave even insured patients unable to afford care. Cash discounts can help both problems.

Cash discounts can present patients with a dilemma when it comes to meeting deductibles. Most insurers do not allow cash payments to count toward deductibles, so health care consumers must predict whether they are likely to have a major medical expense during the year that would warrant using insurance, or if they believe they will stay healthy and therefore pay cash.

One patient, Nancy Surdoval, a retired lawyer, required a knee x-ray that cost $600, out of pocket, when using her high-deductible insurance plan, or $70 if paid in cash. When she was then faced with paying for an MRI for her knee, she had to decide whether to pay $1100 out of pocket through insurance, or $600 in cash.

Ms Surdoval assumed she needed knee surgery, so rather than pay $600 for an MRI at one medical center, she went to a doctor at New York’s Hospital where the MRI was $2800. Paying through insurance met her $3500 deductible for the year, so the $30,000 knee surgery in June was covered in full. She spent the rest of 2015 getting all the medical care she needed before her deductible increased the following year.—Amanda Harvey 

Reference: Beck M. How to Cut Your Health-Care Bill: Pay Cash. The Wall Street Journal.February 15, 2016.