Insurance companies pay less than the government does

Filed Under: Costs, Providers

News flash: Here’s a doctor telling us that insurance companies consistently reimburse him less than the government pays for many procedures

“United Health Care is consistently one of my lowest payers. For example, they pay me $65 and Blue Shield (the insurance provider in the first example) pays me $73 for an office visit. For the same visit, Medicare pays me $79 (that’s right, most private insurers pay me less than Medicare). ”

This quote is from a Web site by Dr. David Belk, who practices medicine in San Francisco, called truecostofhealthcare.org.

The entire site is worth a close look, because it’s a deep dive into medical billing from a side we rarely see: the doctor’s view.

Insurance companies don’t publicly disclose their payment rates. The way insurers figure out their payment rates is by using historical values, then entering a closed-door discussion with a provider in that insurer’s network. The discussion results in a contracted rate for a service or range of services. Disclosure of the contracted rate is penalized; insurance companies claim that the rates are a proprietary secret. That makes a certain amount of sense; if Doctor A realized that Doctor B was being paid twice as much, Doctor A would ask for that much in reimbursement too.

But the truth is that the insurance companies and the providers already have a lot of information on what the rates are, because of historical data and also because of contract analysis practices like this one from the AMA. The only people who don’t know what that rate is are consumers, who are paying insurance companies to take care of the money for them.

It’s also true that doctors and hospitals often claim that Medicare and Medicaid pay less than private insurers do. But that’s increasingly not true, if we listen to Dr. Belk and to a billing supervisor I talked to for this blog post, titled “The view from the billing office, Part 2.” She told me that the cash price for an MRI of the lower back at her clinic is $1,500; Medicaid pays  $542; Medicare pays  $497; and Blue Cross pays $400.

It’s long been an article of faith that Medicare and Medicaid pay less because they’re buying in bulk, and because they’re the government; now, though, it seems, private insurers are paying less than the government. Imagine how that might dislocate the marketplace.

Hm. That’s a lot to think about.

For further food for thought, check out Dr. Belk’s price list here. He’s compiled a list of charges, plus the reimbursement rates by private insurers and by Medicare. It’s instructive.