Why Medicare Rates Don’t Work for Non-Medicare Patients
Medicare is a broken system. Any insurance company that tries to benchmark its medical payments to Medicare is deliberately underpaying hospitals and doctors. And sticking you with the unpaid balance bill.
Here is an example of how the out-of-network debate has been shaped in recent years.
This article, as with others like it, assumes that Medicare is a fair and accepted standard for reimbursing medical care. Consequently, any provider who charges more than Medicare is engaged in “markups” or “price-gouging.”
In reality, Medicare reimbursements are appallingly low.
Medicare typically pays hospitals only 93% of what it costs the hospital to provide that care. Hospitals must make up the difference through other insurance payers, or go out of business.
For specialists, such as neurosurgeons, the situation is worse – Medicare pays as little as 5-10% of charges. Relying on Medicare payments, a typical neurosurgeon would have to operate for half the year to earn enough to pay malpractice premiums. The remaining six months of work would not come close to covering other overhead expenses, such as payroll and rent.
That is why over 50% of orthopedic specialists in New York refuse to accept Medicare. In Texas, 42% of all physicians no longer treat Medicare patients.
Most people do not realize this. They do not understand that Medicare is a broken system. Any insurance company that tries to benchmark its medical payments to Medicare is deliberately underpaying hospitals and doctors. And sticking you with the unpaid balance bill.
So, the next time you read an article about outrageous doctor charges that are several times Medicare, ask yourself: What is more shocking, that the doctor charges more than Medicare, or that Medicare pays your doctor less for saving a human life than your monthly wireless phone bill.
Out-Of-Network Benefits Are Important -
Don’t Let The Insurance Companies Take Them Away
If you have OON benefits, you have the choice to seek the best medical care. You can go ahead and see the specialist with the most expertise to treat your diagnosis. That doctor will bill your insurance company, and you will pay some out-of-pocket expense as determined by your insurance policy.
You may not think much, if at all, about the out-of-network (OON) benefit on your health insurance policy until life delivers a dose of bad news.
Consider this scenario: you have a diagnosis that requires the attention of a specialist. Your doctor or family friend highly recommends this specialist – the best in the medical profession, the one they would see if they received the same diagnosis.
After checking with your insurance company, you discover the highly-recommended specialist is not in your network.
Well, if you have OON benefits, no worries, you have the choice to seek the best medical care. You can go ahead and see that specialist with the most expertise to treat your diagnosis. That doctor will bill your insurance company, and you will pay some out-of-pocket expense as determined in your insurance policy.
But what if you don’t have OON benefits? That means you won’t be able to be treated by that recommended specialist. Instead, your insurance company will hand you a book of in-network doctors, and you will find yourself flipping through the book in search of a different specialist that may not even treat your condition.
In this scenario, as in many others, the in-network doctor may also be far away from home and only have appointments several weeks or months from when you call.
We know that’s no way to find a doctor, especially at such a stressful moment in your life.
That’s why doctors and patients have joined together to call attention to this latest effort by New Jersey to reduce your benefits and restrict your medical care.
What Are Surprise Out-Of-Network Bills?
Surprise out-of-network balance bills occur when a patient receives care from a doctor who:
- Is not in the patient’s health plan.
- Was not chosen by the patient to render care.
Typically, this happens in the emergency room. The patient presents to an in-network hospital, but the specialists on call are out-of-network. It can also occur during elective surgeries (by in-network surgeons) when the anesthesiologist or pathologist is out-of-network.
You have probably seen the news stories. Typically, the narrative is that these patients are exploited by predatory OON physicians who take advantage of the patient’s lack of choice. Patients get “exorbitant” bills that can bankrupt them. Or the insurance company has to pay, and premiums go up for everyone.THE TRUTH IS THIS Almost all doctors charge based on a published guide that lists usual and customary fees. This published guide takes into account the high cost of providing medical services in States such as New Jersey.
However, the insurance companies would rather NOT pay according to this guide. They have discovered that by underpaying medical claims, they can pad their profits. Remember, insurance companies make a profit by collecting your premiums but not paying your medical bills. Or severely underpaying them. This is their business model.
Who gets stuck with the unpaid bill? You do. Hence the “surprise.” You thought you were covered.
You pay high premiums for health insurance so that that you are financially protected at the most vulnerable time in your life – when you need medical care. Now, even if you survive that trip to the ER, you may not survive the nasty medical bill that your insurance company sticks you. All in the name of corporate profit.
The Doctor-Patient Alliance has been created to protect New Jersey citizens from predatory insurance companies that charge high premiums but offer only false financial protections when we get sick or injured. Let’s hold the insurance companies accountable to pay their fair share.
The Real CauseSurprise OON bills are not a function of predatory billing practices by physicians. instead, these surprises result from insurance carrier lies about the expensive health care plans they sell.
The misleading nature of the OON narrative is alarming to conscientious providers of emergency services who treat patients without regard to their ability to pay.
In reality, “Surprise” OON bills result from insurance carrier misrepresentations about the financial protections their plans offer, not from unethical OON billing. Currently, New Jersey residents have no consumer protections at the time they purchase a health plan. They can be sold small plans that woefully under-reimburse providers, typically at 5-10% of Usual and Customary (UCR) Charge. These artificially low reimbursements leave the patient with large, unexpected financial liabilities. Consumers will not recognize this fact until they encounter the health care system, at which time it is too late. Hence the "surprise."
The purchase of an expensive 80/20 OON plan, for example, might reasonably assume that the plan will pay 80% of a provider’s charge. This is currently not the case in New Jersey. In reality, that “80%” may refer to a Medicare-indexed fee schedule, which typically pays 5-10 cents on the dollar. Carriers are not obligated to disclose to consumers how they calculate OON reimbursements, or how these reimbursements relate to UCR. The resulting paid OON claim might represent only a small fraction of provider charges. The consumer is unaware of this discrepancy until a provider's bill has arrived.
Below is an example of a Summary of Plan Benefits provided by an insurance carrier for one of its out-of-network plans.
This plan offers OON benefits at an 80% rate. The fourth column states “Your Cost If You Use an Out-of-network provider” is 20%. Any reasonable purchaser of this health insurance product would conclude that the other 80% refers to an OON provider’s charges, or at least Usual and Customary (UCR), and will be paid by the insurer. The expense of this OON plan is thereby justified.
However, small print buried in the same document suggests otherwise.
In the small print, the insurance company has replaced Usual and Customary (or the doctor's actual charge) with "allowed amount," and will pay 80% of that value instead. What does that mean? How does “allowed amount” relate to UCR and billed charges in the community? An investigation will reveal that “allowed amount” is only a small fraction of the actual bill.
Most health care consumers do not read the small print, and if they do, are unlikely to discover its meaning, nor understand the significance of Medicare-based reimbursements.
They certainly would not note the misleading nature of the disclaimer below – in the insurance company's example, there is only a $500 discrepancy between OON “charged” and “allowed” amounts. In reality, this discrepancy can be tens of thousands of dollars. That means that the patient is responsible for that discrepancy. The insurance company will not pay it.In the small print, the insurance company has replaced Usual and Customary (or the doctor's actual charge) with "allowed amount," and will pay 80% of that value instead. What does that mean? How does "allowed amount" relate to UCR and billed charges in the community? An investigation will reveal that "allowed amount" is only a small fraction of the actual bill.
New Jersey health care consumers currently have no protections against the above, misleading insurance company practice. In any other setting, this practice would be considered fraud.
Surprise OON bills are not a function of predatory billing practices by physicians. Instead, these surprises result from insurance carrier misrepresentations about the protections offered when they sell expensive health care plans.
You probably pay a lot of money each month for health insurance, so it is important to know what you are TRULY getting from this huge personal expense. The New Jersey Doctor-Patient Alliance wants to help you, our members, make the most educated choices when it comes to purchasing health insurance plans.
In terms of health insurance, one size does not fit all. Please know that there are no health insurance plans available that will cover 100 percent of services for any doctor, let alone a quality doctor. Some plans may restrict your access and choice of physicians more than others. Likewise, some plans will shift significantly more out-of-pocket costs onto patients in the form of high deductibles and co-insurance.
Below is a brief overview of common plans offered in today’s health
1Point-of-Service Plan/Preferred Provider OrganizationPPO stands for "Preferred Provider Organization” plan. These plans provide much more flexibility and coverage when choosing a doctor or hospital. They also offer in-network AND out-of-network benefits. Please note that recently some PPO plans don’t offer out-of-network benefits, so please be diligent about verifying these details before choosing your plan.
PPO plans are generally more expensive than POS (Point-of-Service) plans because they have more extensive options for care. But you have to verify that you are getting what you pay. Health insurance carriers have drastically “gutted” out-of-network benefits, often unbeknownst to consumers and even seasoned insurance brokers. Insurance carriers do this by capping the amount they will pay for out-of-network services, regardless of the charged amount, at a low multiple of the federal Medicare reimbursement rate (e.g., 110% of Medicare). A Medicare rate usually only covers a small portion of an out-of-network medical bill.
Unfortunately, many PPOs have adopted this subtle but significant change to their out-of-network benefit plans amounting to a bait-and-switch for consumers. This could leave you (the consumer AND the patient) with a meaningless out-of-network benefit, and unknowingly responsible for the majority of a large medical bill.
2Exclusive Provider Organization (Extremely Limited Physician Access)EPO stands for "Exclusive Provider Organization" plan. These plans are true “narrow network” plans, which means the available doctor network is small, and your choices to a physician of your choice are limited.
As a member of an EPO, you can ONLY use the doctors and hospitals within the EPO network; you cannot go outside of this network for elective care, and there are no out-of-network benefits. It is considered to be more of a catastrophic plan that will restrict your options for elective healthcare.
3Health Maintenance Organization (Extremely Limited Physician Access)HMO stands for “Health Maintenance Organization.” This type of health insurance plan usually limits coverage to care from doctors who work for or contract with the HMO.
HMOs generally do not cover out-of-network healthcare expenses except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage (i.e., you might not be able to go to NYC/PA/CT to receive non-emergent care from specialists such as an oncologist, heart surgeon, or spine surgeon).
4OMNIA (Extremely Limited Physician Access)Like the traditional HMO, OMNIA Health Plan members are restricted to using physicians and other health care professionals who participate in the Horizon Managed Care Network and hospitals in the Horizon Hospital Network. These plans do not include out-of-network benefits.
OMNIA Health Plans do not include out-of-network benefits. Additionally, OMNIA divides their doctors and hospitals into Tier 1 and Tier 2. Recently released insider documents have shown that quality alone only played a small part in dictating the tier status of a doctor or hospital, often overshadowed by considerations, not in the best interests of patient care. That said, if you see the best in-network Tier 2 doctor, your deductible could be as much as $5000, and you may have to pay up to 50% of the remainder of billed charges for that service.
OMNIA Health Plans
We used Horizon insurance plans as examples of common plans since Horizon is one of the largest health insurers in the state of New Jersey. Please check with your plan regarding medical insurance coverage.
Things to consider about tiered-network plans:
- How likely are you to use providers in the lowest cost tier?
- Are there enough specialists in the lowest cost tier?
- While there are great cost savings associated with the use of Tier 1 providers, these benefits are only realized IF you actually use only Tier 1 providers.
- Recently it was learned that Horizon chose the tiers of their network doctors and hospitals based on criteria that had little to do with quality, and nothing to do with cost, so a Tier 1 doctor is not necessarily the best doctor for your needs.
OMNIA Plan Details
- No out-of-network benefits
- Lowest monthly premium and highest out-of-pocket costs compared to other OMNIA Health Plans. Members must use physicians, and other health care professionals who participate in the Horizon Managed Care Network and hospitals in the Horizon Hospital Network, except in cases of medical emergencies.
- Bronze plans, on average, pay for 60 percent of the covered medical expenses in Tier 2; members pay 40 percent.
- No out-of network benefits
- Mid-level-monthly premium and out-of-pocket costs compared to other OMNIA Health Plans. Members must use physicians, and other health care professionals who participate in the Horizon Managed Care Network and hospitals in the Horizon Hospital Network, except in cases of medical emergencies.
- Silver plans, on average, pay for 70 percent of the covered medical expenses in Tier 2; members pay 30 percent.
- No out-of-network benefits
- Mid-level monthly premium and out-of-pocket costs compared to other OMNIA Health Plans.
- Members must use physicians, and other health care professionals who participate in the Horizon Managed Care Network and hospitals in the Horizon Hospital Network except in cases of medical emergencies.
- Silver plans, on average, pay for 70 percent of the covered medical expenses in Tier 2; members pay 30 percent.
- No out-of-network benefits
- Higher monthly premium and lower out-of-pocket costs compared to other OMNIA Health Plans. Members must use physicians, and other health care professionals who participate in the Horizon Managed Care Network and hospitals in the Horizon Hospital Network except in cases of medical emergencies.
- Gold plans, on average, pay for 80 percent of the covered medical expenses in Tier 2; members pay 20 percent.
Use the quick reference chart below, to compare plans.
PPO HMO EPO Omnia Bronze Omnia Silver Omnia Silver HSA Omnia Gold Access to a network of doctors, hospitals and other healthcare providers Ability to see the doctor you want without a Primary Care Physician (PCP) to authorize treatment Referral from a PCP not needed to see a specialist Low or no deductible and generally lower premiums Coverage for medical expenses outside the plan’s network
PremiumAn insurance premium is the amount of money that an individual or business must pay for an insurance policy. The insurance premium is considered income by the insurance company once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy.
Cost SharingIn addition to your premium costs, the term “cost sharing” refers to the amount that your health plan expects you to pay out of your own pocket for medical services. Most plans do this by setting rates for deductible, and coinsurance for any given covered medical service.
DeductibleIn an insurance policy, the deductible is the number of expenses that must be paid out of pocket before an insurer will pay any cost. In general usage, the term deductible may be used to describe one of several types of clauses that are used by insurance companies as a threshold for policy payments.
Co-insuranceCo-insurance is the amount, generally expressed as a fixed percentage, an insured must pay against a claim after the deductible is satisfied. In health insurance, a co-insurance provision is similar to a co-payment provision, except co-pays require the insured to pay a set dollar amount at the time of the service.
Questions To Ask Before Choosing A Plan
1How many times a year do you and your family go to your primary care provider (PCP) for sick visits?
Now, check out the cost-sharing for PCP visits under the plan you are considering. Wellness or preventive visits typically have no cost-sharing. Next, look at the cost-sharing for non‐preventive services (i.e., certain bloodwork and labs, imaging and other diagnostic (testing). Are copayments required for each visit? Do deductibles and/or coinsurances apply?
2Do you visit specialists? If yes, how many visits per year?
Does a given plan require co-payments for each visit to an in-network specialist? How much are the deductibles and/or coinsurances for each visit or procedure? For example, if you have a medical condition that may require you to see different specialists several times a year, take a look at how co-pays, deductibles, and co-insurances apply to those specialist services. For example, if a covered family member has the misfortune of breaking her wrist and getting a concussion after a fall, she may need to see more than one specialist multiple times, such as orthopedists, neurologists, physical therapists, chiropractors and/or acupuncturists.
3How much will prescription drugs cost?
This one is harder to estimate because many plans have different cost-sharing depending on whether the drug is considered to be "preferred" (formulary) or "non‐preferred" (non-formulary). You can call the company or visit the company's website to find out whether your drugs are in the lowest cost tier or not. Some plans include a limit on how much you have to pay for each prescription.
4How do I know if I have a "real" out-of-network benefit?
Make sure you ask your insurance salesperson or representative this question: "At what rate does the out-of-network doctor get reimbursed for this plan?” A good out-of-network policy will reimburse at something called "usual, customary, and reasonable” or UCR for short. A poor out-of-network policy will reimburse at a multiple of Medicare, such as 150% of Medicare. If an out-of-network benefit only reimburse a doctor at this low amount, you are potentially going to be liable for the rest of the bill, hence the term “surprise bill," particularly if it turns out OON benefit isn't much of a benefit after all.
In-Network Vs Out-Of-Network Plans
Insurance companies DO NOT want you to use your Out-of-Network Benefits even though you are paying top dollar for them. They often do this by using a few different scare tactics.
- Calling the patient before services to tell them they will incur extremely high costs
- Sending patients letters that insurance will not cover medical services
- Reimbursing doctors at Medicare rates, which causes the patient to incur the difference in the amount billed and the low amount that the insurance company paid.
Please note that in accordance with federal safe harbor laws, doctors are permitted, on a case-by-case basis, to discount enormous cost-sharing burdens, when you, as a patient, has a claim of financial hardship. Providers of the NJDPA will always work with our patients so that we can continue to provide high-quality care at fair health costs. We care about our patients first and foremost.
Your medical care should be a decision between you and your physician.
The New Jersey Doctor-Patient Alliance strongly opposes efforts by insurance companies to act as your doctor by denying care, often against the judgement and expertise of your own doctor, the trained medical professional, and the only one who has actually seen you person, examined you, and made recommendations for what is in the best interest of your health.
We are here to empower you to ask questions so that you can have a full understanding of your benefits and make the best decisions in you and your loved ones’ health care.
If you have questions about your insurance policy or are having trouble with your insurance carrier, please fill out this form, and one of our representatives will answer your questions.
Welcome to the New Jersey Doctor Patient Alliance!
Our organization represents a partnership between patients and healthcare providers, focused on protecting the sanctity of the doctor-patient relationship as the foundation of healthcare.
Today's healthcare system has become too confusing and stressful for both patients and doctors. Sadly, the anxiety of having a medical problem these days is often not the illness, but navigating through the “big business” insurance system. Instead of focusing on finding the best doctors to get better and be healthy, we struggle with phone calls and stare at the computer screen trying to understand our narrowed network insurance benefit and pharmaceutical plans.
The prior authorizations for procedures and surgeries you need are harder to obtain, keeping your medical records and referrals in order for each doctor is challenging, and the constant changing healthcare laws are confusing. We are all lost in the insurance and hospital industry jargon and the myriad of obstacles which are designed to deter us and to maximize profits, instead of focusing on our patients' health.
The New Jersey Doctor-Patient Alliance is now putting the patients and doctors back in the driver's seat by providing useful resources and information to help guide you through this complex and ever-changing environment.
To that end, these are some of the resources that the NJPDA membership provide for our patients:
- Help you navigate through your insurance plan, whether that’s helping you choose the right plan for you and your family and/or guiding you through your explanation of benefits after a bill has been processed (Click here to read the NJDPA Insurance Guide)
- Access to our NJDPA doctors' directory which will allow you to build a successful team of doctors in your area who share our same priorities of "patients before profits”
- A members-only forum so you can send us questions regarding your health insurance
- Email alerts on news that affect you as a patient and healthcare consumer
- Patient educational seminars on a variety of different topics, keeping you updated on the latest health care advances, patient-oriented topics, and information to help you get more out of every visit to your doctor.
The NJDPA will collaborate with patient members to develop new and empowering membership resources as we grow together.
Membership is free!Sign up