Why healthcare costs will make you sick

What’s a Charge Master?

In the United States, the chargemaster, also known as charge master, or charge description master, is a comprehensive listing of healthcare supplies and services billable to a patient or a patient’s health insurance provider. In practice, it usually contains highly inflated prices at several times that of actual costs to the hospital.

Insurance companies negotiate discounts off these rates to create their networks. So, when a facility is “in network”, both the insurance company and the patient pay lower rates. If you are out of network, there is no discount. The insurance company will pay some or none of the charges. And you will be responsible for the difference

How is your healthcare bill assessed?

Have you ever wondered how nursing homes, home health services, or assisted living facilities decide how much to charge for services? CPA’s with advanced degrees sitting in a large board room, full of computers with stacks of papers covering the table, creating complex algorithms, utilizing detailed costs metrics and incorporating insurance reimbursement forecasting models while constantly evaluating local and regional competition. Or they just guess.

Honestly, it’s closer to the latter than the former. The process to build a charge master is not completely random. These facilities use some analysis. But in the end, there is no methodology, law, or governing body that regulates or standardizes how these organizations create prices.

Not only is the pricing process inconsistent, there is no transparency for the consumer. How much would you pay for a gallon of milk, someone to landscape your lawn, or for a car? I bet you have a price range in your head. Now how much would you pay for assisted transportation to your primary care doctor, for a nurse to visit your home for three hours, or for an assisted living facility for one year? And if you don’t know the answer, surely your insurance company will know. Wrong! Call the customer service hotline and ask for an in network price schedule. Better yet, call the healthcare facility and request a complete and unredacted charge master. Let me know how that works out.

There is absolutely no correlation between cost and quality in healthcare

Perhaps long-term care follows a value-based payment design. The higher the quality of the facility or the doctor, the more they charge. There is some truth to this. The highest-rated and quality long-term care facilities will charge exorbitant amounts. However, so can the poorly performing facilities.

In fact, the definition of quality is skewed in the industry. Although measurable and verifiable statistical categories have been established by nonpartisan organizations, these are disputed by low-quality health systems and their advocates. Prominent publications like US News and World report bases their 100 Best Hospitals rankings on opinion only. That’s right, it’s based on how someone feels, not the post-surgical recovery rate or fewest accidental injuries which are metrics proven to lower overall healthcare costs in the long run. Access to real quality scores is extremely difficult to find, especially if you don’t want to pay for it. Even geographic regions bare only a little weight to their pricing strategy. Logically you could assume expensive cities like New York and Los Angeles must charge more to cover costs compared to Albuquerque or Des Moines. Or perhaps cities with more competition would see prices fall or at least trend flat. However, that isn’t necessarily true. For instance, the price of a lower back MRI in Denver Colorado range from $235 to over $3,000! The same procedure in the same metro statistical area vary that much. The one exception to this rule are non-emergent, elective medical procedures such as Lasik or breast augmentation. These also are not covered by insurance. Nor should they be. Acute medical issues happen without notice and can quickly develop into life altering chronic conditions which require long term care. Instantaneously, your location options could become extremely limited depending on your circumstances.

Prepare yourself for long-term healthcare costs

So, what does this mean for you, should you become unable to care for yourself? This could happen before or after retirement. How does this apply to long term care insurance? Here are your takeaways:

1. Healthcare facilities can charge whatever they want. Can you afford that blank check price tag?
2. Stabilizing costs for long term care are unlikely to happen though government intervention or market forces. With healthcare inflation climbing towards 10% again, tripling the rate for other goods and services, long term care is going to cost a lot more than it does currently.
3. Researching to find a high quality reasonably priced nursing home or assisted living facility is very difficult. Yes, they are out there. However, there is nothing reliable and unbiased like Consumer Reports for healthcare. So, will the expensive facility you select to live in for the rest of your life rank in the highest or lowest quality tier?
4. Moving to a city with a lower cost of living won’t help. Healthcare is expensive everywhere.

Get help finding the best long term healthcare solution for you

It might seem like there is no hope. But there are strategies to help pay for future healthcare costs and long-term care. Please contact us to discuss your options.