Blog > What Happened to Medical Discounts for the Poor?
What happened to medical discounts for the poor?
March 19, 2019 | Theresa Matthews
Are you old enough to remember Doc Adams of Gunsmoke? Do you recall how he often gave his services for free or gratefully accepted a chicken from struggling folks? What ever happened to those kind, humanitarian healthcare providers and specifically to discounts for the poor? How can so many people be forced to declare bankruptcy because of unexpectedly high medical expenses?
In the “old days”, and by that I mean before the 1980’s, many hospitals and doctors charged a sliding scale. Those able to pay including those with medical insurance were charged the full cost of care. Patients of limited means were given a discount or lower price depending upon their ability to pay. But in the late 1970’s and early 1980’s, managed care came into being. Medical costs had been rising and like now, everyone was looking for answers and approaches to bringing costs down. Managed care came onto the scene and seemed to offer a solution. Kaiser was the first and continues as one of the most well-known managed care organizations. But there was resistance to systems that required use of particular physicians so managed care was extended and now includes open systems that contract with most physicians making it possible to choose one’s own doctor.
The managed care concept is based on bulk pricing. For example, anyone who has gone to Costco knows that the larger the package, the more the product is discounted on a per ounce basis. This approach was applied to health expenses by managed care organizations. These companies demanded discounts from hospitals, doctors and pharmaceutical companies based on the number of “lives” they represented. In other words, they argued for discounts based on bulk volume.
It wasn’t long before the federal government noticed this and decided to capitalize on this trend. Then, as now, Medicare and Medicaid costs were rising quickly and were becoming costly items in the federal budget. So the government decided that since they represented as many people as all of managed care combined, they should have even better discounts. Legislation was passed requiring a 15% discount for federally paid health expenses from the very lowest price charged to managed care.
How did this affect the poor and uninsured? By definition, a sliding scale is a discount, so if a hospital or physician offered a lower price based on ability to pay, the government could legally demand a price 15% lower. So sliding scales and discounted pricing for those of limited means had to be eliminated. Pricing was changed to the “list price” only.
How serious is the impact? When one adds up all the different elements, a hospital can choose to charge $20,000 to take out an appendix, but in fact charge only $2500 for patients covered by managed care and even less for those on Medicare or Medicaid. This disparity allows these payers to claim they are achieving big discounts but in fact pricing has been inflated to allow for this. Unfortunately though, anyone without health insurance is charged the full list price for a service, a price that is often grossly higher than that paid by those more financially able to pay.
I doubt lawmakers intended such a dire outcome for uninsured people when it enacted its legislation. I would like to believe that their intention was to make a wise choice for taxpayers who ultimately pay for Medicare and Medicaid. But as often happens, there are often unintended consequences of even the best-intentioned actions. And in this case, individuals who have limited means and lack insurance are often financially crippled or ruined by unexpected medical expenses. In addition, the managed care pressure for discounts has driven prices up so that medical providers can “afford” deep discounting. And of course, the new middle men also seek profit so that is priced into health care.
Recently, uninsured individuals have begun to negotiate pricing for non-emergency surgeries. This often requires a cash payment in advance of the procedure but can make otherwise unaffordable surgeries possible. But healthcare pricing at full price for the uninsured remains a serious issue and for those who have been financially crippled or ruined by this, my heart goes out to them.
What can we do about this? I believe that we cannot count on the system to change anytime soon, so the best defense is, as they say, a good offense. And that means that each of us should take responsibility for his or her own health. Whether it is making better food choices, giving up smoking, starting to exercise more routinely, eliminating anger or negative thinking, or seeking out a deeper relationship with one’s spiritual path, making a change today to live healthier will help us turn back the tide of ever-increasing healthcare costs. You can make a difference!