December 4, 2023
December 4, 2023

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Managing Out-Of-Pocket Medical Costs

One of the more frustrating aspects of being a consumer under the American system of third party medical insurance is not knowing in advance what your financial obligation will be for a given healthcare service.

And regardless of how many people you speak to at the doctor’s office, hospital or insurance company, the bills you end up with can bear little to no resemblance to what you were told in advance. As a mentor of mine likes to say, their verbal promises are worth the paper they are printed on.

To be fair, unlike most consumer services (such as those rendered at a tailor or an auto body shop), no one really knows in advance what services will be rendered. As an example, if someone goes to the dermatologist because of a rash, the office staff cannot be expected to know quite how much time the doctor will need (after all, it could be a tiny allergic reaction, or it could be a sign of an autoimmune disorder), how complex the medical decision-making of the visit will be, whether there will be a procedure (such as an injection or biopsy), or the diagnosis the doctor will assign to the condition. Those variables, and others, will determine what codes are used on the medical claim, whether the insurance carrier will consider them covered conditions, and what the patient’s financial responsibility will be.

If you take your car to the body shop, you can get an estimate for the work, and before you decide to undertake the work you will know approximately what it will cost you. True, there may be unexpected issues that arise while the work is being done—work that you will be financially responsible for —but you can have a general idea of what your costs are. In medicine, until the claim is adjudicated by the insurance company, no one is really sure what the costs will be.

If that was the limit of the complexity, you could theoretically ask the office for a range of codes they would expect to use (different types of office visit codes, a couple of biopsy codes, etc.) and look up the prices of those codes on a standardized table, and that way you could make an educated guess on the maximum amount you would be responsible, at least for most doctors’ offices. But things are not that simple.

Each office—and sometimes each provider within an office—is paid a different amount for identical codes. These rates differ not only between insurance carriers, but sometimes between different plans offered by the same insurance carrier. For carriers with a large geographic reach, the rates can vary by locale as well. That means that if you had an office visit with Dr. A, and then went next door to Dr. B for a second opinion, despite the two doctors using the same exact codes, you (or your insurance carrier) may end up paying a significantly different amount for the two encounters. And with the exception of Medicare services, those payment rates are not public information—each provider’s contract is separate and not generally accessible.

The reasons for these payment rate differences vary, and are wholly legitimate, but they serve to further complicate the financial picture. If you add in the complexity of in-network vs. out-of-network services, or providers in different tiers of your insurance plan’s network, it gets murkier still.

So if you are puzzled as to why your bills for similar services from different doctors vary significantly, you are certainly within your rights to inquire about the bills, but don’t be surprised if you find the answers elusive or unsatisfying.

If you have an issue you would like addressed in an upcoming Your Clean Bill of Health column, or if you would like to share an anecdote or unusual case you experienced, write to [email protected].

Yossi Faber earned his MBA in healthcare magna cum laude from the joint Mount Sinai School of Medicine – Zicklin School of Business program at CUNY Baruch. He is a member of two healthcare industry-focused networks of expert professionals, and is an invited lecturer at major medical centers and state medical societies. He founded and manages Clean Bill of Health (, which provides both medical billing services to physicians as well as advocacy services for patients to review and help reduce the burden of their medical bills. Yossi lives in NJ with his wife and children.

By Yossi Faber

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