Are you worried about how much you are spending on medical care? Are you worried what medical bills you might receive in the future? You’re not alone. Medical bills have frequently been cited as the number one reason for personal bankruptcy in the US. What can you do to reduce your healthcare expenses? Although there are many ways to save money, this blog posts focuses on how to avoid overpaying for medication and services, and how to save money on medical equipment.
Americans overpay for prescriptions.
If you want to reduce your healthcare expenses, prescription medication is a good place to start.
Did you know that it might be cheaper for you to pay for your prescription medication without going through your insurance plan? In many cases, Americans are overpaying for prescriptions because they are using their insurance plan. Doesn’t make sense, right?
Prescription drug overpayments (called “claw backs”) happen when your co-payment for a prescription medication is higher than the total cost of the drug for the pharmacy benefit manager or your insurer. So you end up paying more for the medication than it would cost you if you just paid for it yourself.
How exactly do claw backs work?
Here’s an example of how a claw back works: The pharmacist takes your insurance card, tells you that your copay is $10, which you pay. You assume the medication costs more than $10 and your insurance is covering the rest. However, the medication actually costs only $7, and the pharmacy benefit manager claws back the extra $3.
If you had purchased the medication without using your insurance, you would have saved money.
How often is this happening?
A recent study evaluated pharmacy claims data from a large commercial insurer, combined with data on national average drug reimbursements, to identify claims that likely involved overpayments. The research found that in 2013, 23% of prescriptions filled at pharmacies involved a patient copayment that was at least $2.00 more than the average reimbursement paid by the insurer.
It’s hard to say if the percentage of claw back prescriptions has stayed the same, risen, or lowered since 2013.
This is so serious the courts are involved.
A class-action lawsuit was filed on behalf of patients who claim that Cigna Health and Life Insurance, in collaboration with OptumRx, artificially inflated prescription drug costs, and then clawed back to get a larger portion of patients’ payments. A federal judge recently ruled that the suit can move forward.
How much are we overpaying?
The study found some interesting discrepancies:
- The average overpayment is $7.69
- Overpayments are more likely on claims for generic versus brand drugs (28% vs. 6%)
- But the average size of the overpayment on generic medications is smaller ($7.32 vs. $13.46).
- In 2013, those sampled made $135 million in overpayments; which translates to an average of $10.51 per insured person.
With over 200 million Americans commercially insured in 2013, these findings suggest that these overpayments may account for a “non-negligible” portion of overall drug spending and patient out-of-pocket costs.
What can you do?
The simplest cure to this problem is to ask the pharmacy how much your medication would be if they didn’t go through your insurer. If it’s cheaper without insurance, tell the pharmacy that you will pay directly, without using your insurance. Do this every time you pick up a new prescription!
However, it’s important for you to understand that when you do this, the money you spend on the medication will not be applied towards your deductible or out-of-pocket maximum spending limit.
To save money on prescriptions you pay for with or without your insurance, you can shop around to get pricing from area pharmacies, grocery stores and warehouse stores. For detailed information on saving money on prescriptions, read How to Save Money on Prescription Medications.
If you are tempted to comparison shop for prescription (and non-prescription) medications on the internet, watch out. Black market counterfeit medications are sold through many legitimate looking websites. For more information, read Dangers of Black Market Medications – More Common Than you Think.
Lastly, if you cannot afford medications, visit Zaggo’s Resource Center for information on organizations that provide financial assistance for prescription medications.
Medical bills are frequently inaccurate.
Another important way to reduce your healthcare expenses involves careful analysis of your medical bills. Why?
Unfortunately, medical bills, including those from hospitals are notoriously confusing with codes and language that are hard to understand. And they likely contain errors. The rate of errors depends on who you ask.
MHS, a company that helps patients with medical bill errors, estimates that 8-9 out of 10 medical bills in the US contain at least minor mistakes. NerdWallet found that 49% of the Medicare medical claims contain billing errors.
How much money are we talking about?
In 2017, it was estimated that hospital bill errors cost the US $68 billion annually in unnecessary healthcare spending.
Why so many mistakes on medical bills?
People who enter the data for bills make mistakes, just like any other people. As with any other data entry job, the sheer quantity of data entered opens the door for mistakes – whether it be a typo in the patient name or the wrong procedure or wrong quantity of medication.
Additionally, it’s often hard for doctors and their office staff to keep up with the necessary training to stay on top of ever-changing healthcare industry standards.
A lack of training can make it difficult for billing staff to properly assign the medical numeric code used to classify a patient’s diagnosis. These codes are used to receive reimbursement from governments and commercial insurance plans.
Additionally, some providers practice “cost shifting”. They inflate the costs for their products and services for insured patients and/or paying patients, in an effort to make up for those patients who cannot pay.
What are some common billing errors?
According to the consumer group, Nerd Wallet, there are eight common billing errors to watch out for. If you think your bill contains one or more of these errors, contact the billing department of your doctor or hospital. The common errors:
Bills can contain duplicate charges for a particular service or procedure.
Canceled tests or procedures.
Sometimes patients are charged for a test or procedure that was scheduled, but later canceled. If you think you were wrongfully billed for a test or procedure you did not have, try to get documents that prove that you did not receive the service before disputing the charge.
Incorrect patient information.
Small errors, such as incorrect name spellings or the wrong policy number, are common and can result in claim denials, leaving you with the full bill. Name and policy number mistakes can also lead to getting bills for procedures and services for other patients.
A hospital may fraudulently change a patient’s diagnosis to one that represents a more serious, more costly procedure. This is illegal.
Unbundling of charges.
Unbundling is when providers separate charges that should have been filed together (bundled) under one procedure code, resulting in a higher bill. Unfortunately, this type of mistake can be almost impossible for the average person to notice.
Inappropriate balance billing.
Doctors and hospitals should not bill you for charges other than your co-payments, co-insurance, or the amount you owe as calculated by your insurance company. If the bill is greater than these amounts, it is called balance billing. Compare the bill with your EOB to make sure you received an accurate, appropriate bill.
Operating room and anesthesia time.
Bills can contain over-inflated prices.
In addition to bills with errors, some hospitals and doctors charge ridiculously high prices. MHS, a company that helps patients with medical bill errors, released this list of charges found on their clients’ medical bills:
- One alcohol swab: $23
- Medicine cup (the small, paper cup; not the actual medicine): $18
- One pair non-sterile gloves: $53
- A small piece of gauze: $20.
You can possibly reduce your healthcare expenses if you contact the billing department any time you find examples of price-gouging on your bills.
What can you do to avoid overpaying for medical services?
Firstly, don’t assume every bill is accurate. After any medical appointment or hospital stay, be sure you get an itemized bill. If you don’t, call and ask for one.
Carefully examine each bill to make sure you received each service on your bill. If you notice a discrepancy, call your doctor or hospital’s billing department. Certainly, don’t pay the bill without making sure it is error-free.
Importantly, if you have health insurance, review your EOB (explanation of benefits) statement from your insurer. EOBs provide details on the type and date of service, the amount billed to your insurance company, the amount not covered, and the amount owed by the patient.
Most certainly, don’t pay more than the amount stated amount on your EOB without double checking with both the provider and your insurer.
And be careful you don’t pay the same bill twice since sometimes a provider sends a second bill even though you have already sent in payment. Therefore, if you’re not keeping track, you might unknowingly pay a bill twice. You can get the money back, but not without a bit of a hassle.
Get professional help with bills.
If you have a problem with a bill, you can get help from a medical billing advocate. However, before hiring one on your own, check with your employer – many offer free or discounted access to a billing advocate. For more information on billing advocates, visit this Healthgrades webpage.
Save money on medical equipment.
One way to reduce your healthcare expenses is to cut costs when buying or renting medical equipment, such as wheelchairs, hospital beds, walkers, lifts, canes, oxygen or bedside commodes. Some ways to save money:
- Firstly, ask your doctor to provide prescriptions for any needed equipment. Then call your insurer (Medicare or private insurance) and ask if they will cover the cost of the equipment if you have a prescription from your doctor.
- If using hospice, ask them if they can help you receive needed equipment at no charge.
- Some “gently used” equipment, such as wheelchairs, walkers and bedside commodes, can be perfectly adequate. (If you are concerned about the safety of used items, talk to your doctor.) To find used equipment, consider:
- Ask the Council on Aging in your town or county.
- Search for local organizations, such as Lions and Masons.
- Post a request on social media.
- Look at Facebook marketplace (use caution when dealing with strangers!).
- Shop at thrift stores.
- If you must pay for the equipment yourself, or if you have a co-pay, search online for the best pricing.
More information on how to reduce your healthcare expenses.
Read these blog posts to learn more about money related matters:
- Can You Comparison Shop for Healthcare Prices? Yes, and You Should!
- How to Shop Around for Healthcare Pricing
- The Impact of the High Cost of Healthcare
- Tips for Handling Medical Bills
NOTE: I updated this post on 1-11-23.