Last night I read an article in Kiplinger’s reporting on the growing trend of people who are opting out of third-party medicine and simply paying directly for their care. Kiplinger’s, for those of you unfamiliar with the publication, bills itself as a source of personal finance and investment information, and they provide a pretty good overview of self-pay healthcare.
In an era of higher health insurance deductibles, rising out-of-pocket costs, shrinking provider networks and fewer choices in health care, more people are taking matters into their own hands. Instead of using their health insurance for all of their care, they’re going off the grid and paying cash so that they can see the doctors they choose or get the drugs they prefer. Some are paying a fee to their primary care physician in exchange for longer office visits and 24/7 access.
Going off the grid doesn’t mean ditching your health insurance altogether. You’ll still need insurance for big-ticket medical care. But it usually makes sense to get a high-deductible policy to save on premiums. Payments you make in cash may count toward your deductible, and if you contribute to a health savings account or a flexible spending account, you can usually use that money tax-free to cover your out-of-pocket costs for medical expenses, even if your insurer doesn’t count them toward the deductible. The payoff: more control over your care, which may cost less than you’d pay with your health insurance policy…
One quibble, of course, would be that you don’t necessarily need health insurance for big ticket medical care – plenty of self-pay patients do fine without it and are able to afford what would otherwise be too expensive simply by shopping around and considering all of their options, including medical tourism. And of course there are alternatives to conventional health insurance too, such as critical illness policies and health care sharing ministries.
The article covers concierge care and direct primary care, as well as describing how the story of Jeff McElroy and his experience at the Surgery Center of Oklahoma:
Jeff McElroy’s 8-year-old daughter, Caroline, needed surgery to remove a mass in her ear. McElroy had recently changed jobs, and the McElroys’ first choice for the procedure, the Surgery Center of Oklahoma, in Oklahoma City, wasn’t covered in his new insurer’s network. McElroy asked the surgery center how much it would cost if he paid cash to have the surgery done there. The answer: just $1,700.
His policy would have covered the surgery at a local hospital for $7,600, but because McElroy’s policy had a $6,400 deductible, he would have had to pay most of the bill out of pocket. So he chose the surgery center and paid cash. “It was the same surgeon and the same surgery,” says McElroy. The surgery center submitted the expense to his insurer to count toward his deductible. He also used money from a health savings account to pay the bill.
McElroy, who is a certified financial planner, thought about switching to a lower-deductible policy during open enrollment for 2015 coverage but changed his mind after he did the math: He could save $150 a month in premiums with the high-deductible policy, make the most of the growing number of stand-alone facilities and providers in Oklahoma City that offer cash discounts, and contribute up to $6,650 to a health savings account to pay the bills with tax-free money.
McElroy’s story is something I expect to be replicated many times in the coming years, as high-deductible health insurance spreads and more people realize the ‘negotiated’ rate they’re being asked to pay, often billed as a ‘discount,’ far exceeds what they’ll pay if they just go to a cash-only or cash-friendly provider or facility.
Getting a publication like Kiplinger’s to promote the benefits of self-pay medicine is significant, I think, and hopefully will help more providers of health care services to realize there is a growing market filled with patients who don’t want to invite a third party into the doctor-patient relationship and instead just want to pay directly for their health care just like they pay for other important goods and services.