Study claims that doctors are dramatically raising prices for out-of-network care
The health insurance industry has fired another salvo in the health care reform battle, releasing a study that claims doctors are overcharging patients — sometimes by as much as 4,000 percent.
America’s Health Insurance Plans claims that doctors who choose not to participate in health networks charge fees that are much higher than Medicare reimbursement levels.
“What we found should cause policymakers to closely investigate this issue, including looking carefully at how these charges compare to in-network fees, as well as fees charged for similar services in other countries,” said AHIP president and CEO Karen Ignagni. “For example, in one state, a physician billed a patient $6,791 for ‘cataract surgery with insertion of artificial lens’ — over 1,100 percent of the Medicare fee of $581.”
The issue has not been at the front and center of the health care reform debate, but AHIP officials say it should be.
“No mechanism exists to protect patients who seek care out of network from receiving bills that are unreasonable and unaffordable,” Ignagni said. “As policymakers pursue health care reform, we encourage them to look at how much is being charged for services, particularly since higher charges don’t mean higher quality of care.”
Insurance companies create networks to lower costs. Nationally, about 90 percent of doctors and hospitals participate in insurance networks.
When doctors accept patients insured by companies with whom they are not affiliated, they charge more, the report said.
In Colorado, some doctors are charging what AHIP claims are “exorbitant” rates.
For instance, the report shows that in Colorado, doctors charged $26,100 for out-of-network laparoscopic gallbladder removal — when the Medicare fee is $625.94. While that charge was the highest, minimally invasive knee surgery came in with a price tag of $9,773, 1,702 percent higher than the Medicare fee of $574.13.
But the American Medical Society takes exception to the claims, calling the report “grossly misleading.”
“This … report focuses solely on finding extreme outliers in the billions of health insurance claims filed annually,” said spokeswoman Lisa Lecas. “To call this narrowly focused report representative of the physician community is flat-out wrong and insulting.”
Lecas said AHIP is trying to “divert blame” for inflated out-of-network charges, which she says belong not with physicians, but with insurance companies.
“For nearly a decade, insurers used a flawed database to determine out-of-network payments that cheated patients and physicians, and a new Senate report confirms that insurers shortchange patients to increase their profits,” Lecas said. “The only thing this report proves is that health system reform must include insurance market reforms.”
The study definitely raises suspicions, said Dr. Steve Berkshire, professor and director of the Health Administration Program at Central Michigan University.
“The insurance industry is under attack by this national plan,” he said. “And they are trying to divert attention and send criticism to the doctors.”
A differential between Medicare payments and private insurance is expected, he said. Medicare only pays 40 percent to 60 percent of the costs of most in-patient hospital procedures.
“But I have a hard time believing that the differential will be as big as they are saying,” he said. “They could have picked an uncomplicated, easy procedure to put the Medicare price on, then for the out-of-network doctor charges, chosen an outlier that might have had complications.”
The bitter battle between the two forces in the health care industry isn’t surprising, Berkshire said. It isn’t even new.
“Doctors fought accepting insurance,” he said. “In fact, at one point a doctor could be disciplined by his professional organization for accepting insurance. But when companies had enough employers on board, they had no choice. This fight has gone on for a long, long time — since the early 1900s.”
And insurance companies have the upper hand in negotiations with doctors, particularly those in single practices.
“They can’t get together with other doctors and negotiate a group rate,” he said. “The anti-trust laws won’t allow it. They have to be in the same corporation. So a large insurance company with thousands of members can say this is what we’re willing to pay you.”
Insurance companies normally ask for anywhere between 10 percent and 25 percent discounts for its members. When the low Medicare reimbursement rates are factored in, doctors are left charging out-of-network patients the difference to make up for the loss in revenue.
“That’s why you’d expect a difference, but not this large a difference,” Berkshire said. “It seems they picked strange outliers because they are trying to make a case. It’s one of those studies where you are making the data say what you want it to say. That’s not unusual in an advocacy study.”