How to Reduce Out-of-Pocket Medical Expenses
By Marlo Sollitto
Making sound financial decisions for another person can be very overwhelming for even the savviest caregiver, particularly when it comes to health care. And, while selecting the right Medicare plan for your loved one is critical during this year's annual enrollment, it's only the first step, as out-of-pocket costs not covered by Medicare continue to be a major financial burden.
In fact, The Center for Retirement Research at Boston College recently calculated that a typical 65-year-old married couple without chronic conditions will need $197,000 to pay for out-of-pocket medical costs throughout retirement.
However, there are simple steps both caregivers and seniors can take to reduce these out-of-pocket expenses throughout the year.
10 tips to help you take charge and lower medical bills
- Understand your paperwork. If you have ever received a medical bill or an Explanation of Benefits form (EOB) from your insurance company and are confused by the two, you are not alone. Most of us wonder if the bill is correct and why we received the EOB in the first place if it is not a bill. Here's the difference: Your medical provider sends you a bill telling you what you need to pay. Your insurance company sends you an EOB explaining why you need to pay that amount. An EOB will usually state the retail rate of the service you received, the lower contracted rate the provider has agreed to accept as payment in full, how much the insurance company will pay, and how much you should pay.
Here's a brief explanation: Let's say that the typical retail rate for knee surgery is $45,000. An insurance company may negotiate a contracted rate as low as $5,000 for this surgery with certain "in network" providers. If you went in for knee surgery with one of these providers, you are billed at the reduced rate, which can represent a huge savings over the retail rate.
Providers that do not have negotiated contract rates with insurance companies are called out-of-network providers. These providers do not agree to a lower rate and may charge anything they deem appropriate for the medical service you received. What the insurance company will pay for that bill depends on your policy.
- Don't pay immediately. Many of us want to pay what we owe, and tend to write a check for a bill as soon as we receive it. However, given the number of cases in which a medical bill contains inaccuracies and overcharges, it is different from the other bills you receive and requires closer examination. Do not pay the bill until you have determined the amount billed is what you truly owe. If you make a payment to a provider and then find out later that you paid too much, it can be very difficult to recoup that money.
- Check the basics. Make sure that the bill has the correct basic information. This includes your name, address, and dates of service. If the bill lists the insurance companies they have on file for you, make sure that this information is correct as well, especially if you recently changed insurance carriers or have both a primary and a secondary insurer.
- Understand and verify the charges. Many medical bills are difficult to understand because they are vague and don't contain the details needed. Or, they may contain the details, but in a cryptic code that you can't understand. Don't pay what you don't understand. Request an itemized bill from your provider. Go through the itemized bill to make sure you did indeed receive the services for which you are being charged. You would be surprised at the number of bills that contain errors. For example, according to Medical Billing Advocates of America, more than 80% of bills for an overnight hospital stay contain errors. Always check, before you write a check.
- Make sure the bill is adjusted for contracted rates and insurance payments. If you go to a network provider, that provider submits a claim to your insurance company. If your bill does not contain line items that show an adjustment for the contracted rate or insurance payments, that means your insurance was not applied to the bill. Instead of working the issue out with your insurance company, the provider has decided to simply bill you instead. If your bill does not reflect an insurance payment or an insurance discount, it is a red flag that it may be billed incorrectly.
- Check that the EOB matches the bill. The EOB your insurance company sends you is its counterpart to the medical bill your provider sends you. Make sure you that you have an EOB for a bill before making a payment. If you have not received an EOB, that means your insurance company has not finished processing the claim and have not determined what your portion of the bill should be. An EOB should arrive at around the same time as its matching medical bill. In addition to making sure you have an EOB for the medical bill, you also need to make sure that it matches the medical bill. Your EOB should state exactly what you can expect the provider to bill you for the service. If you compare this amount to what you are actually billed and it is different, then that is a red flag that the bill may be incorrect.
- Be persistent and don't back down until the issue is resolved. If you spot any of the red flags mentioned above, call the provider and your insurance company immediately to resolve the issue. Be polite but persistent, and document all your phone calls. Make sure that you write down the name of the person you spoke to and the date and time. Be sure to follow up all until your issue is resolved and you receive a revised and corrected bill.
- Don't ignore bills and let them go to collections. This may seem contradictory to tip number three, but providers are sending past due accounts to collections more quickly than ever before. You should certainly take the time to make sure your bill is correct, but do not ignore the provider's request for payment while you take the time to do this. Let your provider know that you are working on the bill and request that they do not send the account to a collection agency. When your provider knows that you are actively working on a bill and not simply ignoring it, they will often give you extra time to resolve the issue. The key here is to make sure your bills are correct before paying them, but do not let them pile up without any action.
- You can negotiate! If you do not have health insurance, many providers will give you a discount to bring your bill closer to the contracted rates that they have with insurance companies. If you do have insurance and have determined that the amount you owe is correct but unaffordable, ask the provider if there is a prompt payment discount. Some providers will give you a discounted rate if you are able to pay in full right away. There are also certain Prescription Drug Assistance Programs that can help patients defray the costs of prescription medication.
- Ask for an interest-free payment plan or application for financial assistance. If you have determined that the bill is correct, but cannot pay the bill all at once, ask your provider if you can arrange for an interest-free payment plan. Many providers are happy to do this and the arrangement can be set up quickly and easily. Once the provider has allowed you to set up interest-free monthly payments, be sure to keep up your end of the arrangement and make these monthly payments on-time.
Many providers, especially hospitals, have a financial assistance program available to those who meet the income requirements. Most such programs will ask for proof of income by requiring documents such as payroll stubs or income tax filings. If you qualify and are accepted, your bill can be significantly reduced.