Does anyone understand medical charges & Medicare payments?

[Kirk W]

Pam & I have recently had medical procedures that not overnight. As I look at the resulting Medicare records I have to wonder what actually should cost and who determines what is billed? As I understand it, even those who are not on Medicare but have a health insurance policy do not pay the large numbers as billed, but we have both been on Medicare long enough that we have no insurance bills or payments to be able to compare them. As an example of what I am wondering, the below numbers actual prices from Pam's CMS reports.

1) Amount Charged $2806.00  ~ Medicare Approved $148.44 

2) Amount Charged $585.00 ~ Medicare Approved $15.08

3) Amount Charged $3391.00 ~ Medicare Approved $163.52

This seems to be pretty typical numbers for any medical procedure nowadays. From what I read the numbers for private insurance payments are not all that different. I can't believe that the medical community is losing money on what they do for Medicare or they would not accept it. Is there a way to compare what Medicare pays to what a typical private insurance policy pays for the same procedure? And do insurance companies play that same game with bills and what is paid? 

I have yet to see any doctors out panhandling from lack of income.....

 

Edited May 12, 2022 by Kirk W

[Randyretired]

I don't understand a lot of the billing but the amount our private insurance paid seemed to be higher than Medicare but they still did the billed/paid nonsense.  What seemed like a major rip-off was the out of network costs.  We used in network doctors and an in network hospital but they assigned an out of network anesthesiologist  So we had some large bills.  With Medicare they don't do that. 

[Barbaraok]

They bill, expecting to be told that no, the procedure/item is worth x,y,z and then take the difference between what they bill and what is paid AS A LOSS on their corporate returns.   This is especially true when things are billed onto Part B.  Usually Part A billing is close to what Medicare approves.   But part B (office visits, lab work, outpatient surgery) have the huge gaps.   Another reason why more and more procedures are now "day surgery" not overnight, so considered part B.   

[sandsys]

5 hours ago, Barbaraok said:

They bill, expecting to be told that no, the procedure/item is worth x,y,z and then take the difference between what they bill and what is paid AS A LOSS on their corporate returns. 

That sounds to me like fraud! They should not be allowed to make up the billing numbers just to save tax money. I wonder how they get away with this?

Linda

[Barbaraok]

23 minutes ago, sandsys said:

That sounds to me like fraud! They should not be allowed to make up the billing numbers just to save tax money. I wonder how they get away with this?

Linda

Because it is standard practice.  That's why people without health insurance, or very poor health insurance, end up going bankrupt.   

[Randyretired]

Any business I have been in you can only take a loss if you actually lose money. Of course there is depreciation and other numbers involved. You can't take a loss on receiving less than you wanted unless costs are higher than income.  The only thing this means is they received less than they wanted.  It is still income minus expense.

I liken this to a car dealer putting a large number on a car and giving you a "deal".

Edited May 12, 2022 by Randyretired

[Kirk W]

1 hour ago, Randyretired said:

Any business I have been in you can only take a loss if you actually lose money.

My experience is the same. If you suffer a loss you must document the actual expenses incurred and you can never deduct any more than the actual cost of the claimed loss. There is no deduction for a presumed income not received. 

Excess business losses  IRS publication

Edited May 12, 2022 by Kirk W

[TXiceman]

I doubt that the hospitals are losing any money with the Medicare payments.  Look at the big new hospitals being built everywhere. 

I get similar bills/statement. 

They charge $13,000, Medicare pays $500 and the supplement picks up $100.

It does sound like tax fraud if they are writing off the $12,400 as a loss.

Ken

[Chalkie]

1 hour ago, Kirk W said:

My experience is the same. If you suffer a loss you must document the actual expenses incurred and you can never deduct any more than the actual cost of the claimed loss. There is no deduction for a presumed income not received. 

Excess business losses  IRS publication

They are not business losses, they are contractual write offs. Now I don't claim to be an accountant but I am sure that somewhere along the line there is a tax advantage gained however it appears to be a very convoluted way to go. Here is an article that explains it.

[Ray,IN]

9 hours ago, Barbaraok said:

They bill, expecting to be told that no, the procedure/item is worth x,y,z and then take the difference between what they bill and what is paid AS A LOSS on their corporate returns.   This is especially true when things are billed onto Part B.  Usually Part A billing is close to what Medicare approves.   But part B (office visits, lab work, outpatient surgery) have the huge gaps.   Another reason why more and more procedures are now "day surgery" not overnight, so considered part B.   

I once worked for a world-wide electrical mfgr. That was their accounting method too. While making billions, their accounting dept. could prove they were losing money on paper. All legal under US corporate tax laws. Still unethical IMO.

[Kirk W]

50 minutes ago, Chalkie said:

They are not business losses, they are contractual write offs.

Thanks for the linked article. Nowhere in that article is there any mention of the billing of excessive amounts, only the subject of contractual prices, coding errors and such. It was interesting but I could find no discussion of the numbers being billed, when they know that the contractual payment will be far less and there is nothing there to indicate that they somehow make money but writing it off against taxes, which simply makes no sense. I am no accountant either but I do have about 30 hours of college accounting and a wife who worked in accounting and tax preparation. Our education is dated but we do understand the principles of accounting. The IRS has a lot of information available so a link to your source of information would be helpful.  Here is another article that might be helpful, but really still doesn't address the billing mystery.

Here's Why Hospital Bills Are So High In The U.S. Health Care System

Quote

Over the past three decades, hospital systems have been consolidating rapidly, merging with other hospitals and buying up physician practices.

And when hospitals consolidate, prices go up. On average, private insurance plans pay 247% of what Medicare pays, according to the RAND Corp., a nonpartisan think tank.

And that’s just the national average. North Carolina hospitals charge private payers 273% of Medicare rates, says RAND analyst Christopher Whaley.

Quote

“Medicare is a very low payer across the board,” Hand said. “(For most services) it’s less than 80% of the cost they reimburse. And so because of that, we have to figure out how to collect that difference somewhere else in order to stay open.”

But If that were true, Whaley said, then hospitals with more Medicare patients would have to charge their private patients more. But the data doesn’t show that.

“There’s actually no relationship between a hospital’s share of patients that are on Medicare and Medicaid and that hospital’s prices,” Whaley said.

 

Edited May 13, 2022 by Kirk W

[Vladimir]

22 hours ago, Ray,IN said:

I once worked for a world-wide electrical mfgr. That was their accounting method too. While making billions, their accounting dept. could prove they were losing money on paper. All legal under US corporate tax laws. Still unethical IMO.

I worked as a Economist for a Federal agency that had accountants.

I got teased a lot about my comment " plus or minus 20% is close enough for a decision".  

The accountants were ALL sure that their calculations were "accurate" to the penny. 

Yeah, right.  They were tracking to the penny, but when I got the opportunity to "audit" their data sheets, well folks, we are talking real money here and yeah, it was WAY OVER the 20%!!!

Here is a link to goodwill write off's....pretty funny reading.

https://yourbusiness.azcentral.com/appropriate-reporting-treatment-writeoff-inventory-due-obsolescence-28000.html

Accountants are NOT unethical.  They rewrote the tax code to make it ETHICAL.  

It, however, is clearly immoral.

On Medicare, the acid test...will the Dr. or Clinic take a Medicare patient.  Some rural hospitals and doctors will NOT do that.

 

 

 

Edited May 14, 2022 by Vladimir

[sandsys]

On 5/12/2022 at 4:34 PM, Randyretired said:

Any business I have been in you can only take a loss if you actually lose money. Of course there is depreciation and other numbers involved. You can't take a loss on receiving less than you wanted unless costs are higher than income.  The only thing this means is they received less than they wanted.  It is still income minus expense.

I liken this to a car dealer putting a large number on a car and giving you a "deal".

My Dave got out of accounting because he couldn't handle everything being balanced down to the last penny then they made up a number for depreciation. That turned out well, though, because he stumbled on computing during his exit from a accounting.

Linda

[Randyretired]

9 hours ago, sandsys said:

My Dave got out of accounting because he couldn't handle everything being balanced down to the last penny then they made up a number for depreciation. That turned out well, though, because he stumbled on computing during his exit from a accounting.

Linda

When you own a small business the owner has to do everything, including accounting.  Accounting was my least favorite.  For awhile I was the managing partner of a small business and that was worse because the partners always wanted the numbers and sometimes didn't agree with decisions. Thankful to be retired from that!

[Ray,IN]

On 5/13/2022 at 8:05 PM, Vladimir said:

I worked as a Economist for a Federal agency that had accountants.

I got teased a lot about my comment " plus or minus 20% is close enough for a decision".  

The accountants were ALL sure that their calculations were "accurate" to the penny. 

Yeah, right.  They were tracking to the penny, but when I got the opportunity to "audit" their data sheets, well folks, we are talking real money here and yeah, it was WAY OVER the 20%!!!

Here is a link to goodwill write off's....pretty funny reading.

https://yourbusiness.azcentral.com/appropriate-reporting-treatment-writeoff-inventory-due-obsolescence-28000.html

Accountants are NOT unethical.  They rewrote the tax code to make it ETHICAL.  

It, however, is clearly immoral.

On Medicare, the acid test...will the Dr. or Clinic take a Medicare patient.  Some rural hospitals and doctors will NOT do that.

 

 

 

That is why the "just-in-time" method of managing inventory was created in the USA, inventory reduction/elimination. Then after WWII American businessmen taught the method to the Japanese manufacturing sector. The present turmoil in the world is  playing havoc with that method of managing inventory.

 

I apologize for getting off-topic friends. Back to medicare charges and payments.

I agree, we do not make appointments with medical facilities that will not accept medicare.

Edited May 15, 2022 by Ray,IN

[Kirk W]

13 hours ago, Ray,IN said:

Back to medicare charges and payments.

Everything that I read seems to agree that insurance companies, Medicare, Medicaid, and all larger healthcare payers have previously negotiated rates for all common medical procedures, yet in any EOB (explanation of benefits) there is a list of amounts billed and amounts approved and the two seem to get farther apart every year. An  article in Healthline states that insurance pays 250% or 2.5 times what Medicate pays, yet if you use those numbers, the amount billed was between 19 & 35 times the amount paid. Extending that out based on payments of 250%...........

1) Amount Charged $2806.00  ~ Medicare Approved $148.44  ~ private insurance pay $371.10

2) Amount Charged $585.00 ~ Medicare Approved $15.08 ~ private insurance pay  $37.70

3) Amount Charged $3391.00 ~ Medicare Approved $163.52 ~ private insurance pay $408.80

EDIT: Edited to point out that private insurance payment is not the same as paid by a supplemental insurance policy.

Edited May 15, 2022 by Kirk W

[Randyretired]

I think the only negotiation doctors and hospitals have with Medicare and Medicaid is take the amount paid or do not accept these plans.  Our Advantage plan will pay Medicare rates so we can go anywhere Medicare is accepted.  

I am confused about the amount insurance pays after Medicare.  I thought Medicare typically paid 80% and the insurance picked up 20% of Medicare approved charges.  The numbers don't reflect that.   We don't see a lot of bills so I am not familiar with this.

[Kirk W]

17 minutes ago, Randyretired said:

  I thought Medicare typically paid 80% and the insurance picked up 20% of Medicare approved charges. 

That is exactly what happens. Medicare pays 80% of the amount that they approve and the remaining 20% is paid either by the patient or by supplemental insurance. At least that is the case with standard Medicare. I'm not certain how it works if you have a plan C (Advantage). What I listed my last post was what private health insurance would pay if they actually pay the 250% of what Medicare approves, as suggested in the linked article. A private health insurance policy is not affected in any way by what Medicare approves, but a supplemental policy only pays based on what Medicare has approved but not paid. 

Edited May 15, 2022 by Kirk W

[Randyretired]

24 minutes ago, Kirk W said:

That is exactly what happens. Medicare pays 80% of the amount that they approve and the remaining 20% is paid either by the patient or by supplemental insurance. At least that is the case with standard Medicare. I'm not certain how it works if you have a plan C (Advantage). What I listed my last post was what private health insurance would pay if they actually pay the 250% of what Medicare approves, as suggested in the linked article. A private health insurance policy is not affected in any way by what Medicare approves, but a supplemental policy only pays based on what Medicare has approved but not paid. 

Okay that explains my confusion. I misread what you posted.  Type C Advantage is dependent on the plan and varies.  Ours is a company provided plan and minus 2 small co-pays  (emergency room and specialists) covers everything 100%.

[Ray,IN]

What upsets me about Medicare and private insurance adjusted payments is the huge difference those without any insurance  must pay. IMO it should be the same price for the same procedure for everyone.  It seems those without any insurance are tasked with making up the difference those insurance companies have negotiated down.

 

 

[TXiceman]

Oh, they will negotiate the price down.  I have had them TRY to bill me for out of network charges at a hospital.  I learned a long time back to note on the mass of papers you have to sign when getting into the hospital to add a note under the Financial Responsibility section...."All services to be provided within insurance policy coverage and limits.  Initial and date it.

Then when they come at you for the excess charges from an out of network doctor or whatever and I refuse to pay, the place will start cutting the price in hopes of getting something out of me.  The EOB from the insurance would show the billed amount, the amount allowed as if network and the payment.  I would base what I would pay off the allowed amount and the amount I owed under the deductible section.  It worked every time and I paid not a dime more than I was required to per the insurance.

Our daughter had a severely handicapped son that she used this same technique for, and it worked every time.

Ken

[Kirk W]

Here is some interesting reading from the American Hospital Association.

Fact Sheet: Hospital Billing Explained

[Randyretired]

1 hour ago, Kirk W said:

Here is some interesting reading from the American Hospital Association.

Fact Sheet: Hospital Billing Explained

That article talks about hospitals that accept Medicare and Medicaid not covering expenses yet many of us are shocked at the amounts paid for some services.  Additionally I have seen articles that talk about specialists making well over $300,000 annually.  Some much more.  Then larger hospitals are actively buying other hospitals.  Some of the specialties such as cancer and heart disease and others seem to have a large number of seniors probably on Medicare yet these hospitals are building large often pretty fancy areas for these diseases and actively advertise for patients. That article shows a small number of hospitals not making money and I suspect those are mostly rural. All combined something seems not quite right.  Hospitals actively buying other hospitals advertising for some specialities that seem to have a large number of seniors doesn't sound like a business that isn't making money.  A business paying that kind of money to some employees. Maybe it isn't highly profitable but there must be some reasonable profit or things would be different.  That of course is just my take.

[Vladimir]

My observation has been, when things don't make sense at first glance it just means your NOT an accountant!!

Or a tax advisor, there are a LOT of things in this country that do NOT make any sense, until you have a good understanding of the tax code.

All the economics I took on decision making stressed interest rates, growth rates, costs, revenues and EVERY ONCE in awhile the professor would say and there is the tax code.  

Years later, I realized that IF you rub a magic lantern and the gennie pops out and says "Your choice, you can understand the background in all fields OR you can understand the tax code"

Chose the TAX CODE, you will be rich WAY beyond your means in a relatively short time.

[Kirk W]

12 hours ago, Vladimir said:

My observation has been, when things don't make sense at first glance it just means your NOT an accountant!!

While I'm not an accountant, I lack only a few hours of a BA in accounting and my wife has worked in accounting for many years, much of it doing taxes. We no longer subscribe to the annual tax bulletins, we did for many years and I think that we do have a fairly good understanding of the tax regulations. That said, why not explain to us the steadily widening gap between what the medical community bills and what Medicare pays? Keep in mind that there is no connection between the Medicare agency and the IRS.