Tag Archive: catastrophic care

Health insurance, disrupted: Direct cash payment for services

As consumers get savvier about shopping for health care, some are finding a curious trend: More hospitals, imaging centers, outpatient surgery centers and pharmacy chains will give them deep discounts if they pay cash instead of using insurance.

Source: How to Cut Your Health-Care Bill: Pay Cash – WSJ

This Wall Street Journal article discusses a trend worth watching that has the potential to significantly disrupt the payer and provider relationship, particularly for high cost elective procedures. The WSJ item explains the market forces driving it:

  1. Hospitals and other providers seek higher reimbursements from commercial health plans to make up for lower reimbursements for government programs such as Medicare and Medicaid.
  2. Higher reimbursements drive up commercial plan premiums, pushing more consumers into high deductible plans with lower premiums.
  3. High deductible plans make consumers much more price sensitive since they are responsible for paying a large percentage or all of the cost of sub-catastrophic care.
  4. Price sensitive consumers are highly receptive to deep cash discounts offered by providers — undercutting contracted health plan reimbursement rates that they would otherwise pay out of pocket — and willing to forgo credit toward their calendar year deductibles to obtain the discount.
  5. Online price comparison services spring up, reinforcing and expanding the direct cash pay health care market.

In essence, these market forces are combining to partially disintermediate commercial health plans in the current payer-provider scheme. This is a profound trend that may accelerate a shift back to days of “major medical” coverage, reforming insurance to a true insurance product designed to cover very high cost, unexpected and catastrophic events like serious injuries sustained in traffic accidents and heart attacks rather than routine care and elective procedures.

If the trend of direct cash payment for sub-catastrophic care grows, it will run counter to the Affordable Care Act’s requirement that individual and small group health plans include ambulatory (outpatient) services as an essential health benefit. If people covered by high deductible, consumer directed plans are paying directly out of pocket for this level of care, it will naturally raise questions as to the value of including it as a commercial health plan benefit, further disrupting the traditional payer-provider relationship.

Provider discounts for direct patient cash payment for services falling within health plan deductibles could also set off broad price deflation in medical services.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

High out of pocket costs for major medical care warrant policy scrutiny

The cruel paradox of those with health insurance seeking bankruptcy protection from high medical bills could grow despite the policy intent of the Patient Protection and Affordable Care Act to expand the safety net of individual health insurance.

It’s most likely to occur in the case of hospitalizations where multiple health care practitioners attend to an insured patient and only some of them are in the patient’s health plan provider network. The patient is then placed in the situation where his or her insurance plan isn’t subject to the calendar year out of pocket maximums ($6,350 for individuals; $12,700 for family coverage) that apply only for care rendered by providers in the plan’s provider network, potentially exposing patients to significantly higher bills. Emily Bazar of the California HealthCare Foundation (CHCF) details one such instance involving a plan purchased through California’s health benefit exchange marketplace, Covered California, in her Sacramento Bee column.

This circumstance warrants study by the CHCF and other policy research organizations since it could occur nationwide. If such incidents increase, it could lead to calls for policy changes that make available all inclusive major medical coverage for hospital stays and other types of high cost care. Limited provider networks may be able to work fine for routine care like physician visits and exams, but can potentially leave major gaps for catastrophic care.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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