Cash Is King in Healthcare

Last week I saw a post on Twitter (‘X’) that reminded me how crazy the American healthcare system is.

A father had to take his son to the ER. He thought his son was having appendicitis. After 45 minutes of painful sounds coming from his son, the son burped for 5 seconds and was fine.

That was it. Son just had some gas.

The hospital then gave him the bill.

$4,179.

$2,215 for “The visit”.

$740 – Meeting with doctor. Lasted 2 minutes.

$1,224 – “Standard” nurse’s swab of son’s throat and nostrils for covid/strep (no symptoms of either)

$0.07 Tylenol (apparently they received the discounted rate).

The father told the hospital administrator that he is part of a healthcare sharing organization and will be technically paying cash.

He then asks for the ‘cash’ price.

“Let me calculate that for you”, replies the administrator.

$685. Total. For everything.

That’s almost an 84% discount for paying cash.

There’s a lot of implications of this. You would think that insurance companies are large corporations with all kinds of leverage with hospitals. Yet it seems like they pay MUCH more than the lowly consumer paying cash.

Well there are many reasons.

Insurance billing adds all kinds of overhead to hospitals. Hospitals have to hire outside firms or create separate departments to navigate the filing of insurance claims and make sure they are paid.

Insurance companies often short pay invoices. Or find one small thing incorrect on the claim and delay or refuse to pay the claim. Hospitals have to resubmit claims over and over to get paid.

I can vouch for this. I have to bill Medicaid insurance companies for some of my residents. It can be very painful chasing payment.

If patients decide not to pay the deductible part of the insurance, the hospital has to just eat it. The insurance company will not reimburse them.

Many poor people will go to hospitals without any insurance, be treated, and then say they can’t pay. By law hospitals can’t turn them away. The higher insurance payments will cover some of the uninsured.

Compare that to a hospital just receiving cash payment for treating you. They just put in the bank and they’re done. They can mostly count on the payment. Convenience can be used as leverage for lower prices.

Sometimes cash pay for procedures can be cheaper than insurance deductibles. The trouble is we don’t know what will happen to us in the future. That’s why healthcare insurance makes sense.

It’s crazy to me that we go to hospitals or healthcare providers in general and don’t ask the price. The whole healthcare industry knows that if you’re in pain, your willingness to pay increases.

Couple that with having insurance that covers the costs, and people are fine receiving treatment no matter what the price.

That’s why different types of healthcare occupy 4 of the top 5 industries by revenue in the United States in 2024. Seems like a great recipe for national bankruptcy.

Next time you or your loved one goes to the hospital in the United States, ask them for the cash price. I bet you will be amazed at the discount.

Hal Cranmer

A Paradise for Parents