Posted on April 3, 2001

Medical Fees Are Often More for Uninsured by Gina Kolata



When patients go to Dr. Stephen Brenner, an internal medicine specialist, for a routine exam, their bills can vary by 45 percent. The uninsured pay the most and patients with insurance plans are charged the least.

It is not his doing, said Dr. Brenner, who practices in New Haven. He explains that it is because health insurance companies insist on hefty discounts. "It's a take it or leave it situation for doctors," Dr. Brenner said. But he said he knew that the insured paid much less than their share. For the insured, he said, "it's almost like getting a BMW or Mercedes at half price."

Other doctors cite more extreme price disparities. A New York gynecologist says he gets $25 for a routine exam for a woman insured by Group Health Insurance and charges $175 for the same exam for a woman without insurance.

"It's horribly ironic," said Paul Menzel, a professor of philosophy at Pacific Lutheran University in Tacoma, Wash. The care of the poor once was supported by the wealthy and the insured, but now the opposite is happening, he said. "It is the people who are most provided for, not the people who are least provided for, who get the benefit of cost-shifting," Professor Menzel said.

In a medical emergency, uninsured people can get care, even if they walk away from their bills. But if it is not an emergency, doctors and hospitals may insist on payment, often requiring a deposit in advance. As a result, some uninsured people struggle for years to pay medical bills and others put off seeing a doctor until minor problems become major ones.

Some health policy experts like Uwe Reinhardt, an economics professor at Princeton University, see the situation as "brutal and inhumane." But, Professor Reinhardt said, doctors and hospitals are trapped in it.

Despite the discounts they have negotiated, some large insurance companies have had their own financial troubles lately. For example, Aetna, the nation's largest health insurer, reported in January that its fourth quarter earnings had declined by 65 percent.

Mark Pauly, a professor of health care systems at the Wharton School of the University of Pennsylvania, said there was no real villain. "I don't think it's exactly good versus evil," he said, "it's just business." The problem crept up on them, doctors and hospital administrators say, after they began agreeing to slash their prices for health insurers in return for a steady flow of patients. Then they found themselves scrambling to maintain their cash flow.

They found an answer with patients outside the managed care system, like those with fee-for-service plans in which the patients pay their own bills and are reimbursed by an insurance company. But the uninsured also are outside the system, and have no one to negotiate for them. So they end up charged the higher prices, too.

Most patients paying the full fare have no idea that their bill may be many times that of the people next to them in the doctor's waiting room. And, in interviews, many doctors said they did not offer patients information on pricing disparities, however much they might agonize over the inequities of the system.

While this may not be a problem for people who can afford fee-for-service plans, which typically are far more expensive than other health insurance, it can be devastating for the uninsured.

"If you're a partner in a law firm you can afford to pay more than your legal secretary can," said Dr. Darcy Hansen, an internist in private practice in Washington. "But," she said, "it's the uninsured who really falter."

Dr. Hansen said the pattern began about 10 or 15 years ago when she started negotiating with managed care companies. "I thought it was the wave of the future," she said. "I have a lot of poor patients, a lot of single moms who don't have a huge income. I thought that if they could pay $5 for an office visit they were more likely to come in than if they have to pay a $400 or $500 bill," she said, referring to the co-payment, the amount a patient might have to pay when a managed care company covers virtually the entire bill.

"Then the fees slowly ratcheted down," Dr. Hansen said.

In the meantime, she said, with fewer and fewer patients who pay the full rates, she has no choice but to keep prices for those patients high. Her take-home income, she said, is half that of two or three years ago.

Individual doctors are not the only ones in difficult straits. Hospital administrators say the same sequence of events happened to them, with often devastating effects.

The administrators said their problems began about a decade ago when insurance companies offered to make their hospitals "preferred providers," meaning that patients insured by the companies would go to those hospitals en masse, if the hospitals slashed their prices.

It sounded workable volume in exchange for a discount. But soon the insurers discovered that their patients wanted a choice of providers. So instead of sending all their patients to one hospital, insurers offered choices. The hospitals were left with the low prices and without the steady stream of patients.

The next step was for hospitals to compete by offering even lower prices to insurers, not so much to get business but to avoid losing it.

Hospitals that tried to hold the line lost business. Then their revenues dried up. "Now the spiral gets deeper," said James D. Shelton, the chairman and chief executive of Triad Hospitals Inc., a chain of for-profit hospitals and surgery centers.

Mr. Shelton said that he knew the uninsured had been victims of this situation. But, he said, what are hospitals supposed to do?

"There's a limit to what these people can pay," Mr. Shelton said. "But what is the greater good if the hospital goes bankrupt and it's the only provider in the community or if you try to collect every bill you can within reason and the person goes bankrupt?"

At New York-Presbyterian Hospital in New York, Dr. Herbert Pardes, the president and chief executive, said that so few patients were paying undiscounted rates and the discounted rates were so low that it was becoming increasingly difficult to provide free care for poor people who could not pay.

"I like the fact that we help people who are poor," Dr. Pardes said. But, he said, the financial pressures on his hospital are so great that "the last thing we want is to get a reputation as the place to go for somebody who's poor."

He recently got a call from a friend at another hospital who had a poor, uninsured patient who needed an expensive treatment. Dr. Pardes's friend said his hospital could not afford to do it. Could New York- Presbyterian take it on? Dr. Pardes' staff members advised him to say no, that they already were accepting too many charity cases.

"I'm left as the final decision maker," Dr. Pardes said. "I told them to do it. Then I put the phone down and I started to cry."

"It is a real ethical and personal dilemma for me," Dr. Pardes said.

Kenneth E. Thorpe, the chairman of the department of health policy and management at Emory University's School of Public Health, said he thought he knew about health care prices and the differences between what could be negotiated and what individuals might be charged.

Then his sister-in-law, who is 22 and without health insurance, was hit by a car as she walked along a road in California. She suffered a head injury so severe that she was in a coma. Her medical bills soared to more than $500,000. Yet the man who hit her had no job and no assets and less than $20,000 in insurance, so suing him would not help.

She was covered under an uninsured motorist clause in her father's car insurance policy. Soon her lawyers started negotiating prices for her medical care. The insurance company's cap was $300,000 and the lawyers, working on a contingency basis, would get a third of whatever the insurance company paid.

"Lo and behold, they got the rate down so that it fit below the cap," Professor Thorpe said. The medical charges were reduced to $200,000. That meant that the lawyers got their maximum amount, $100,000, and the insurance company paid its full amount, $300,000.

Professor Thorpe said he was startled by how arbitrary medical pricing seemed to be. "It was a real eye- opener," he said.

Irene Wielawski, who studied local efforts to provide care for the uninsured under a grant from the Robert Wood Johnson Foundation described pricing disparities in a recent issue of the journal Health Affairs.

When Ms. Wielawski's son needed a hernia operation, she wrote, her insurance company, Aetna, paid $3,509.50 for a surgeon, the surgical suite, a pediatrician, laboratory tests and an X-ray. But an uninsured Sacramento carpenter she was following as part of her research also needed a hernia operation. Hospital officials told him that the surgeon's bill alone would be $3,000 to $5,000 and that he needed to make a down payment of $1,500. Unable to pay, he put off the operation for a year until a charity project paid for it.

"That happens everywhere," said Dr. Guy Clifton, the chief of neurosurgery at the University of Texas- Houston Medical School. "If it's not an emergency and you can't pay for it, you don't get care."