Willam E. Jones, MD

Have you looked at a doctor bill recently and felt "sticker shock"? Have you thought to yourself, "How in the world can he (or she) get away with charging so much?"

Even if you only have to pay a $15 copay, you probably think to yourself, "Boy, am I ever glad I have insurance; so I don't have to worry about paying this exorbitant bill."

Well, you're not alone. I'm a doctor; and even I am sometimes shocked when I receive medical care and see what many of my colleagues bill to the insurance company for their services.

But what if you've decided on an insurance plan with a high deductible in order to keep your premium costs down? Then you're probably getting seriously overcharged on your routine medical bills until you've reached your deductible for the year.

Why?

First, it is important to understand that no doctor these days expects to collect more than a fraction of what he (or she) bills to insurance; so in most cases it doesn't make any difference if he bills $100 or $1,000 because he knows the managed care company is only going to pay him $80 anyway.

Because of their inherent complexity, medical services such as high-tech procedures, surgery, and hospital stays have always been costly; so most of us must have some sort of health insurance to protect us in case we need high-tech care.

However, until the advent of managed health care, most patients paid their primary care doctor themselves. Family Doctors were mindful of this; so they used to keep their fees at a level that seemed fair to both their patients and themselves.

Not any more.

Nowadays even the (modest) fees of primary care doctors are being paid by third parties (managed care companies, Medicare, etc.), not by patients themselves; so doctors give little thought to how high their billed charges may seem to their patients. Since doctors know that each insurance company is going to pay only that company's paltry "Maximum Allowable Fee" anyway, doctors have been forced to employ any method available to obtain the maximum reimbursement they possibly can from each managed care plan.

One technique virtually every doctor now uses is to automatically raise the fee for ANY service if ANY insurance plan ever pays him 100% of what he bills for that service. Why? Because it is the policy of every insurance plan to pay either 100% of a doctor's billed charge or their "Maximum Allowable Fee" for that service, whichever is LESS.

Consider how this works in the real world. If a doctor bills an insurance plan $75 for a service but the company's Maximum Allowable Fee for that service is actually $80, the company is going to pay him only the $75 he billed and never even tell him that they would have been willing to pay up to $80 for the service. The doctor has thus "thrown away" the extra $5 difference. That may not seem like much; but it adds up to a substantial amount of money over a year, especially since most primary care doctors these days are scrambling just to remain solvent (please remember that links on this web site are brown).

Since the insurance companies refuse to reveal their Maximum Allowable fee schedule, the only way a doctor can determine the "best" fee to charge is to keep raising his fees until he discovers the point at which there is no company that will pay 100% of his fee.

Thus it has become the policy in almost every doctor's office to automatically raise the fee for any individual service any time ANY insurance company pays 100% of the billed charges; since that is the only way the doctor can discover what each company's "Maximum Allowable" is.

I call this "fee creep" because it has resulted in "billed" physician fees creeping inexorably higher (often to absurd levels) as they were ratcheted steadily upward to match the amounts being paid by those few insurance plans whose Maximum Allowables were perhaps "overly generous" at some point in the past.

Every insurance company has sharply reduced their reimbursements over the past several years; yet a managed care doctor would clearly be foolish to reduce the amount he bills to insurance lest he receive less reimbursement that he could from even that one isolated company that might be willing to pay a few dollars more.

Since managed care doctors know that their patients won't have to pay any more than their $10-15 copay anyway, they don't have any reason to care how high (sometimes preposterously high) they may have raised their fees.

As the managed care plans continue to grow ever more malignant, many Family Doctors would love to be able to drop off some (preferably all) of these plans and transition their practices back in the direction of simple fee-for-service (as I have done), but they are caught in a trap.

The problem for these doctors is that each of their managed care contracts stipulates that they must bill the exact same fees to a cash-paying patient that they bill to insurance. This means that doctors cannot legally bill a cash-paying patient one dime less than they bill to managed care companies for that same service. While the managed care companies will then deeply discount what they actually pay doctors, these doctors are precluded by their managed care contracts from offering the same discounts to their cash-paying patients. BUMMER!

Most Primary Care Physicians (Family Practitioners, Internists, and Pediatricians) are thus caught a paradoxical situation because their over-inflated fee schedule scares off cash-paying patients (i.e., patients with high deductible insurance), the very patients they're hoping to attract and retain...

... Yet the doctor is prohibited from reducing his "cash-pay" fee schedule as long as he is bound by the terms of even one managed care contract! HE'S TRAPPED!