Patients fronting cash for medical bills are getting big discounts: 7 things to know

As more patients with high deductible health plans are strapped with costly out-of-pocket bills, some consumers are saving money by paying cash for medical services upfront, reports The Wall Street Journal.

Here are seven things to know about the trend of lower cash rates on medical charges.

1. Before the Affordable Care Act, hospitals and healthcare providers routinely charged uninsured patients the highest rates possible. Under new state and federal rules to protect uninsured patients from price gouging practices, however, hospitals are prevented from charging uninsured patients more than Medicare rates.

2. Since the ACA was enacted, hospitals have sought higher negotiated rates from commercial insurers to make up for financial losses on Medicare and Medicaid services, which traditionally return lower government reimbursement rates. When insurers pass those negotiated rates on to members, policy holders with high deductible health plans will in turn pay higher out-of-pocket costs.

3. Hospitals will often offer discounts to patients for cash payments on the day of service, as cash saves administrative work and collections hassles, according to the article. Many hospitals, fearing the effects of high deductible health plans on reimbursement rates, will offer lower cash rates to mitigate bad debt and ensure uninsured patients can still afford care.

4. Growing consumer price transparency is changing how patients, payers and providers pay for and collect on medical services. ClearHealthCosts, a startup that publishes healthcare prices for consumers, aggregated self-pay and negotiated insurance rates for medical services in New York, California and Pennsylvania. In many cases, a patient's Explanation of Benefits statements revealed the same services would have cost less money in cash at the same place, or a care setting nearby.

"My favorite was the $5,400 MRI at an academic medical center in California," Jeanne Pinder, founder of ClearHealthCosts, told The Wall Street Journal. "Insurance paid about $2,900 and the patient paid about $2,500. It looked like he got a great deal — but he could have paid $725 cash down the street."

5. By offering cash rates lower than insurance-negotiated rates, healthcare providers run the risk of violating payer contract provisions. "If insurers find out that plan members are able to access a cheaper cash rate, they'll call up the hospital and say, 'That's our new contracted rate,'" Jim Lazarus, vice president of The Advisory Board, told Wall Street Journal.

6. While some healthcare providers keep their cash rates quiet, other providers see low cash rates as an opportunity to drive business to patients who otherwise would have been unable to afford services. Regional Medical Imaging of Flint, Mich., said some insurers even encourage plan members to take advantage of cash rates. "They're collecting premiums, and they aren't having to pay out when patients pay cash instead," Amy Davis, Regional Medical COO, told The Wall Street Journal.

7. Low cash rates present savvy healthcare consumers with a dilemma. Most insurers won't count self-pay toward member deductibles, therefore policy holders must determine whether they will incur major medical expenses this year before deciding to save short term with cash.

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