Dennis Not The Menace

Here’s what happened to this Dennis:

He was at work at a bank branch in Martinsville in 2014 when other staffers noticed he was not feeling well. A co-worker drove him to an urgent care facility, but the staff there called an ambulance to take him to a hospital.  Dennis was having chest pains that recalled an earlier heart attack, and nitroglycerin did not seem to relieve his pain, according to a summary by Henry County Circuit Judge David V.

Williams. Dennis’ wife said he was “crying … upset … [and] agitated,” the judge wrote.  Dennis arrived at Memorial Hospital of Martinsville & Henry County “in acute emotional and physical distress,” Williams said.

While lying in a hospital bed awaiting treatment, a hospital staffer had him sign a “Financial Responsibility Agreement.” The agreement provided that the patient was obligated to promptly pay the hospital in accordance with charges listed in the hospital’s “charge description master” or CDM.  Dennis was in the hospital two days and underwent surgery to place five stents in his arteries, his lawyers said. 

Dennis and his insurance company paid $27,000 which was the approximate amount the hospital would have accepted from other insurers, including Medicare, with which it had an agreement in advance, but the hospital billed at its “charge description master” (CDM) rate $111,000 because it had no agreement with Dennis’ insurer, meaning he had “chosen” an out-of-network hospital.  Memorial Hospital sued Dennis for the $84,000 balance based on the contract he had signed.  I found these case descriptions by Googling “contract of adhesion hospital bill”, Dennis 1 and Dennis 2.

In my law school Contracts course we learned that for a contract to be enforceable both parties must have the legal capacity to contract and willingly enter into the agreement with knowledge of its terms.  By contrast a contract of adhesion “is a contract between two parties, where the terms and conditions of the contract are set by one of the parties, and the other party has little or no ability to negotiate more favorable terms and is thus placed in a “take it or leave it” position.”  Such a contract is not enforceable and was the basis of the judge’s decision for Dennis that he owed only $500 more and that was enough.

This outcome just last year in a Virginia court was definitely an exception.  By some estimates over half of bankruptcies in the United States are in part due to unpaid medical bills.  (bankruptcy 1 and bankruptcy 2)  While that level may be overstated (FactCheck) there is no dispute that medical bills are a very substantial contributor to bankruptcies in our country.  This fact simply underscores the reality of the medical services “marketplace” and demonstrates how most consumers are at the mercy of their insurance companies at best, or large hospital chains with inscrutable charge description masters at worst.  Those engaged in the current national debate over the future of how we pay for medical services in this country who advocate more reliance on “markets” and “competition” need to explain how consumers are to make rational, and competitive, decisions (assuming they’re even conscious at the time), like they do when shopping at the mall or online, when they aren’t even allowed to know the prices of the services being provided.

Lest you think Dennis is an exception, here is my true story about a friend who sought my help after she suffered from a suicidal episode about 15 years ago.  Fortunately, at the time she had health insurance through her employment and she knew about COPES, the local mobile psychiatric service that responded to her call for help.  COPES, though, took her to the psychiatric ward of a Tulsa hospital that was, like Dennis’, out-of-network.  Gratefully the intervention was successful and my friend was discharged after two weeks of treatment.

Then the billing came, which was not supportive of my friend’s road to recovery.  Knowing what I did about hospital charging practices I was able to negotiate a 50% reduction which brought it somewhere nearer to what the in-network cost would have been.  With assistance my friend’s bill was paid and she has had no other hospitalizations or significant illnesses since, which is typical of those who are not old geezers like I am.   That experience was when I first reflected on the possibility that many hospital patient contracts are contracts of adhesion—especially when the patient arrives in no condition to make a contractual commitment of any kind.

My friend eventually lost her job with that employer and since has been employed by a series of employers that did not offer health insurance.  She was locked out of the private insurance market because that one hospitalization constituted a “pre-existing condition” that made her uninsurable.  After her COBRA coverage ran out from the ex-employer she then maintained coverage first, at a very high cost, through the State of Oklahoma’s High Risk Pool, which once kicked her out for not remembering to use 4.3 instead of 4 when converting a weekly income to monthly, and more reasonably through Insure Oklahoma, before finally having the actual right to purchase an individual plan through the Affordable Care Act (Obamacare).  Now we wait in fear to see what happens next.

Who knew health care could be so complicated?  I did; Mr. Dennis did; my friend did; and you do too.  The “market” by itself won’t get it done.  We can provide reasonable care for all Americans and it is simplest and most cost effective if we do it collectively and together.  We’ve figured out how to take care of us old geezers through the single payer Medicare system, which no politician is trying to eliminate, so why can’t we do the same for our working population.  They are the source of our nation’s wealth and future productivity; just as we need to invest in our physical infrastructure we need to invest in our workforce by assuring every person of working age has the health care they need to remain productive—and paying for my Social Security retirement income.

Again, you’ve got to read Bitter Pill How Medical Bills Are Killing Us; I close with an excerpt:

Unless you are protected by Medicare, the health care market is not a market at all. It’s a crapshoot. People fare differently according to circumstances they can neither control nor predict. They may have no insurance. They may have insurance, but their employer chooses their insurance plan and it may have a payout limit or not cover a drug or treatment they need. They may or may not be old enough to be on Medicare or, given the different standards of the 50 states, be poor enough to be on Medicaid. If they’re not protected by Medicare or they’re protected only partly by private insurance with high co-pays, they have little visibility into pricing, let alone control of it. They have little choice of hospitals or the services they are billed for, even if they somehow know the prices before they get billed for the services. They have no idea what their bills mean, and those who maintain the chargemasters couldn’t explain them if they wanted to. How much of the bills they end up paying may depend on the generosity of the hospital or on whether they happen to get the help of a billing advocate. They have no choice of the drugs that they have to buy or the lab tests or CT scans that they have to get, and they would not know what to do if they did have a choice. They are powerless buyers in a seller’s market where the only sure thing is the profit of the sellers.   

Indeed, the only player in the system that seems to have to balance countervailing interests the way market players in a real market usually do is Medicare. It has to answer to Congress and the taxpayers for wasting money, and it has to answer to portions of the same groups for trying to hold on to money it shouldn’t. Hospitals, drug companies and other suppliers, even the insurance companies, don’t have those worries.   

Moreover, the only players in the private sector who seem to operate efficiently are the private contractors working — dare I say it? — under the government’s supervision. They’re the Medicare claims processors that handle claims like Alan A.’s for 84¢ each. With these and all other Medicare costs added together, Medicare’s total management, administrative and processing expenses are about $3.8 billion for processing more than a billion claims a year worth $550 billion. That’s an overall administrative and management cost of about two-thirds of 1% of the amount of the claims, or less than $3.80 per claim. According to its latest SEC filing, Aetna spent $6.9 billion on operating expenses (including claims processing, accounting, sales and executive management) in 2012. That’s about $30 for each of the 229 million claims Aetna processed, and it amounts to about 29% of the $23.7 billion Aetna pays out in claims. 

As always lunch is on me for the first to ID the photo.

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