Can anyone explain Medicare to me?

A few weeks ago I had to have my gallbladder removed during a trip to the ER.

The hospital charges were over $50,000, all of which were “approved.” Yet, Medicare says it actually paid less than $4,000.

I don’t understand how this works at all. Can anyone explain? Do providers actually settle for less than 10 percent of the “approved” charges for Part A?

Actually only the person without insurance is going to get the $50,000 bill–anyone with insurance is going to pay massively less.

All medical providers have these nonsense “list prices” for services that are inflated by 500% or more above the price at which the providers are actually willing to provide the services. When the bill is paid by Medicare or an insurance company, the prices are dramatically lower pre-agreed contracted rates.

This can totally fuck people who fall outside this regime of pre-negotiated contract prices, i.e. people who are uninsured, or anyone who goes out-of-network either inadvertently or through necessity. Even if you can afford and are willing to pay the $4,000 that Medicare or an insurance company would pay for your treatment, the hospital will present you with a bill for $50,000. And your legal situation when you have been treated without having pre-negotiated (or been told) the price is often unclear, protections vary from state to state and with the specific circumstances of treatment. If you have any assets or income above poverty level you may be in serious trouble. Basically the providers use these bullshit prices to gouge people for outrageous amounts of money whenever they can get away with it, arguing that it offsets the patients that they are obliged to treat who can’t pay.

It’s just one of the many ways in which the U.S. healthcare system is utterly dysfunctional.

I realize that. My point is that Medicare did get the $50,000 bill, and approved it. Then paid less than 10 percent of it.

Right – this isn’t specific to Medicare. In the U.S., health providers have a basic rate (sort of like the “rack rate” that hotels have for rooms, which few people ever actually wind up paying) for procedures and services, but they then have lower, “negotiated” rates with various health insurance providers (and Medicare is one of those providers, as are Blue Cross / Blue Shield, Aetna, UnitedHealthcare, etc.)

As PastTense notes, if you have insurance (including Medicare), the amount that is eventually charged by the hospital or doctor will be the amount that your insurance provider had previously negotiated with the hospital or doctor for that service. From that negotiated price, your insurance may pay some of it (depending on the specifics of your insurance policy – copay, deductible, etc.), and you’re responsible for paying the remainder. If you don’t have insurance, the provider will charge the full “basic rate” amount, and you’re responsible for all of it.

Thus, even if you have an insurance policy which doesn’t cover a lot (such as a high-deductible plan), it still may be preferable to having no insurance at all, because you at least get access to your insurer’s negotiated rates.

Edit: ninja’d by Riemann.

It’s really quite complex and straightforward at the same time. The hospital writes a bill based on what it provided to the patient, and medicare pays the hospital based on what it believes the care should have cost. The two numbers rarely align.

I suspect that what’s happened here is that Medicare approved coverage for the procedures in question, not paying the standard rate for them.

Exactly. Medicare never approved the $50,000, it approved the treatment. And the provider understands that if it treats you as a Medicare patient, it will get paid Medicare rates, not the nonsense inflated prices that it might like to get paid. The same applies with private insurance - if the provider accepts that insurance, then when it treats you it gets approval from the insurer for the treatment, with the prices that the insurer will pay for various treatments all pre-negotiated in the extensive contract between the insurer and the provider.

So it seems that the outrageous charges are like the fictitious “regular” prices in store sale papers. See what a good deal you got.

Pretty much, yes, save for the fact that they aren’t fictitious for the uninsured, who would face those charges for the same treatment.

I would think in a case like that, the uninsured person would just file for bankruptcy and then the provider would get squat. It all just seems like a ridiculous game without much upside for anyone involved, patient or provider. If the patient had 50k lying around, they would be able to afford insurance.

This is, in fact, what often winds up happening.

This won’t hurt a bit.

There are also circumstances in which people with decent private insurance can get totally fucked by this, notably if you need emergency treatment and you are taken to an out-of-network hospital. That could mean many hospitals in your own state; or any hospital if you are traveling in a state where your insurer has no presence.

Here’s what happened to me.

I live in NM, and my insurer doesn’t have a presence in any other state. In 2017, I required major emergency treatment for an accident while in Arizona. The nominal total bill (the bullshit massively inflated “list price”) was $200,000. Obviously since the accident and treatment were out of state, this was out-of-network - i.e. my insurer had no pre-agreed contracted rates with this hospital.

I knew I needed an attorney. And I spoke to literally dozens of attorneys, both in Arizona and NM, and I picked up a few bits and pieces but bizarrely I could not find any attorney with a full understanding of the law in these circumstances. After several weeks of uncertainty and stress I just started doing my own research, and I eventually worked out the following. It turned out that the insurance ombudsman in my state was the most helpful resource.

Federal legislation (the ACA) dictates that if you need emergency treatment at an out-of-network facility, your insurer must pay something. The wording is “usual and customary rates” or UCR. There’s always considerable dispute about how much the UCR is, but the insurer obviously tries to get away with a low number, perhaps in the vicinity of Medicare rates. In my case they paid around $25,000.

However, federal legislation does not prohibit what’s called balance billing by the provider. In other words, my insurer paid $25,000 (roughly equivalent to the Medicare rates for my treatment), but then the hospital just deducted that from their fantasy outrageously inflated $200,000 bill and sent me a bill for the remaining balance of $175,000. And furthermore, when the hospital discovered that I have enough assets (I have paid off my mortgage) to be able to pay that, they flatly refused to negotiate any discount whatsoever - even though paying it would have meant losing my home.

When the Obama administration was trying to pass the ACA, they knew that balance billing for emergency treatment was a huge problem, but politics dictated that they decided not to resolve it at the federal level in the ACA, but rather leave it to the individual states. It turns out that there are two ways that some states may protect you: either by prohibiting provider balance billing explicitly; or by “hold harmless” provisions against your insurer, which puts the onus on your insurer to negotiate a full settlement with the provider without any balance bill to the patient. Here’s an article describing the situation in all the states:

That may not be completely up to date, but in many states you have neither of these protections.

Fortunately for me, it turns out that New Mexico is a “hold harmless” state. This is the best protection, because you’re not exposed to problems if two states with different laws are involved. For NM residents, it’s all down the NM insurer to sort out a full settlement with any provider of bona fide emergency care without any balance bill to the patient. The most astonishing thing, however, is that my insurer had deliberately misled me throughout the process, with customer service reps clearly reading from prepared scripts that made technically accurate but incomplete statements like “the provider is legally allowed to balance bill you” - while failing to inform me that under NM law I don’t have to actually pay any such bill, they do!

In the end, when I was secure on my legal position, I drafted a letter referencing all the relevant statutes, took it to a prominent law firm and paid them $200 to check my research and then put it on their letterhead and send it to the insurance company. My insurance companied folded immediately, and within two weeks had negotiated full settlement with the hospital. After several months of extreme stress, it turned out that I paid nothing more than my usual deductible & copay.

Bear in mind that many states, you would not have this protection. And that even in NM where it turns out I do have this protection, I had months of stress trying to figure it out. I had to do the legal research myself, with my insurance company deliberately trying to deceive me. What chance would (say) a busy working single parent have, or someone whose first language isn’t English? And we’re talking about amounts of money that would certainly bankrupt most people, or that (without exaggeration) might lead to suicide.

The U.S. healthcare system is beyond fucked.

Check your state’s protections if you need out-of-network emergency services. Of course this doesn’t apply if you’e already on Medicare.

When I saw ‘Medicare’ in the thread title, I thought it was gonna be about our health care system in Canada. After reading the posts so far, I still want to note some things about health care up here in igloo country.

Basically, ALL your medical costs are covered by the government. That includes virtually ALL blood/tissue tests, ALL investigative procedures, and ALL surgery.

If you have a catastrophic illness or any accident requiring medical attention, you will receive care immediately upon seeking it. You will pay exactly nothing.

If you need elective surgery, you will wait for it. Sometimes for weeks, more often for months, but not too many (usually). The operation is gratis.

If you have a chronic illness and are being followed by a specialist in the relevant area, you’ll experience regular, appropriate care (and possibly too much care, IMO). The first time you need to a specialist, though, your family physician must refer you to him/her and people will often wait months for that first appointment.

A major problem is that many people (at least in Ontario) don’t have family physicians. Not only is it tough for them to see a specialist (since they have no one to refer them), they are pretty much dependent on the Emergency Departments for much of their medical care. This isn’t too horrible for the patient but it sure screws up the workings of many hospital EDs (and also the hospital to which the patient gets admitted if that was required).

Is it a good system? It’s a lot, lot better for a lot, lot more people than the system in the US.

(NB - drugs are not covered except for while you are being treated in a hospital)

BTW, not too many years ago, about 35 percent of the provincial budget was going to health care. That used to very roughly equate to about 17 percent of all income tax I’d pay. In other words, roughly one-sixth of my income tax was going to health care. ETA: Keep in mind that I also paid federal income tax.

Not entirely true. When my wife had to stay in hospital for several days, it could cost me up to $12/day to park at their parkade. Plus, if she wanted to watch TV we had to pay about $14 a day for the TV service. Highway robbery, I tell ya!

Yes, GP’s and specialists typically can be booked up months in advance. Funny thing is, if you have medical care available like this, people use it.


But to get back to the OP - I recall reading something once about US medicine. Many insurance companies have contracts with health providers stating terms and rates - and one of the more insidious is that they are “guaranteed the lowest rate the doctor offers”. Apparently this means that if someone come along who obviously can’t pay very much, a doctor may not be able to give them a discounted service or forgive the fee. If they do, then the insurance company can demand that all their billing also be at that same rate. Hence, insurance and Medicare’s ability to extract a much better rate than a paying customer.

I believe that this can happen on Medicare.

If you have Medicare Advantage, it is run by an insurance company or HMO that usually restricts you to their network.

If you have Medicare Supplemental (aka MediGap) you are covered anywhere in the US. (N.B. You have to choose MediGap when you first sign up for Medicare if you want to avoid being denied coverage)

That’s a terrible story. This can also happen in a situation where you have specialists within a hospital who are technically independent contractors with their own practices. This has bitten my family on two occasions when it turned out that the anesthesiologists brought in (for relatively minor nonemergency procedures) were not only not on my insurance plan but in fact were not on any insurance plan despite our attempts to preclear everything, especially after the first time this happened. Imagine my surprise to receive bills in the several thousand dollar range with no reduction of any kind.

Fortunately, Texas also has a consumer protection law which applies under these circumstances and it got worked out eventually, but this practice is really infuriating.

My wife had chest pains one evening and we went to the hospital. She wasn’t having a heart attack but they wanted to keep her overnight. I had insurance so I said OK. Found out later that, for some stupid reason, this overnight stay wasn’t covered even though the doctor said it was necessary. A few weeks later we got a bill for over $20,000. We didn’t have it, nowhere near. Made a few payments of a couple hundred or so (had called and made a payment arrangement), then stopped that after about 6 months. Got a few letters about it, then the letters stopped coming and we heard nothing else about it. I guess they just wrote it off. The money they did get from my insurance, plus what I paid was, I am sure, more than enough to pay for an EKG and a bed for the night. How many people in this country have gone bankrupt or lost all their savings because they just paid whatever the hospital said they owed.

^^^Youll eventually get turned over to collections. I still wouldn’t pay. That’s outrageous. Mr.Wrekker had his hernia fixed a few years ago. He did due diligence and made sure he was in his network with the surgeon and the hospital and the aftercare clinic the doctor required. Lo and behold his insurance balked on the aftercare clinic in the end. The bill was nearly $8000.00 for basically changing his bandaid everyday for 4 days. We appealed to the insurance company. And they decided to turn their attention to the surgeon and his little money making scam, the aftercare clinic. It went out of business after that lawsuit went down. Mr.Wrekker signed an affidavit as to what care he recieved. And was glad to do it.