Paying Cash for Health Care

There just seems to be a tremendous mental block people have about paying cash for health care.  Megan McArdle is surprised at how strong this bias is in some of her readers.  I'm not, as I see it in my wife and friends all the time.

Several years ago we switched to a high-deductible catastrophic health care policy.  We save a TON of money with this policy, such that year in and year out, even with fairly high out of pocket expenditures, our total health care expenses have been lowered.

Generally, I go ahead and wash all of the charges through the policy so I get credit for them against the cumulative deductible.  But since we have never hit the number, I am increasingly less attached to this approach.  Particularly since a number of doctors and other providers are offering cash discounts now for bypassing insurance and paying cash.

Here is an example -- my son has had some elbow pain pitching lately, so seeing all the kids who are having to get Tommy John surgery before they are out of high school, we decided to make sure everything was OK.  We took him to a GP who specialized in sports medicine and works with a number of MLB pitchers as a team physician to the Brewers.   For cash, he charged me $50 and spent nearly 30 minutes with my son.  Then he sent us downstairs for some x-rays of his elbow, and the radiology group there, again for cash, charged us $35 total for three x-rays.  There are people who pay more for a pedicure.

Nothing is ever going to improve in health care costs until individuals take more responsibility for the cost-benefit tradeoffs of the services they receive.


  1. silvermine:

    That would require people to be responsible and set aside money for the inevitable emergencies and medical issues. They would have to bear the cost of what they wanted, instead of just having a steady amount of money taken out of their paycheck. They worry that they would be out of money and wouldn't be able to have a service.

    Yet... the same people don't buy a food plan to make sure they don't run out of food. I guess the costs of food are more regular. Yeah, I'd have to bet it's because health care is considered very expensive and the costs are immidiate, large, and required and people don't like having that looming over their head.

    Personally, I'd rather just have the ton of money I pay in insurance every month. I wish employers offered catastrophic plans. Instead I end up paying for a PPO, because I will never be stuck with a primary care doctor again. Because for me, it's more scary to find out how bad your doctor is when you suddenly need them for something urgent.

    (Why, yes, I was horribly let down once. Why do you ask? ;D No one knew what was wrong with me, but it was incredibly painful abdominal pain and the doctor wanted to go on vacation while I took pain pills for 2 weeks. Unknown abdominal pain just doesn't seem like an "ignore for 2 weeks" kind of thing to me. I never went back to her.)

  2. me:

    The problem of course starts with doctors billing $200 surgery for taking a blood sample, not to mention an additional $120 for the injection of a vaccine I bought myself (odd, junkies seem to do this sort of thing all by themselves just fine) plus a $50 consultation fee for a total of 15 minutes in the office. I can see folks being fearful of what a real procedure would cost.

  3. Don Lloyd:

    The real problem is the very existence of insurance for everyday expenses. If a provider is allowed to charge an individual w/o insurance the same price that the provider negotiates with the insurance company why would an individual sign up for insurance? For most provider services, the insurance company will be able to negotiate a 50-75% discount because insurers dominate the demand for provider services. This means that providers cannot price down to maximize profit for uninsured patients. Typically an insured patient will pay the negotiated discount price for deductible (not talking about taxes)services, but mostly the uninsured at least run the risk of paying the full, undiscounted price.

    Regards, Don

  4. epobirs:

    I regard that disconnect as the root of the problem in health care. This is a service like any other. It shouldn't be any more complicated than hiring a plumber.

    The push towards employer provided health insurance is one of the worst legacies of the FDR administration, among so many bad trends in government they birthed. That the insurers were able to get new tax laws passed in the 50s to give large businesses a special advantage over smaller competitors was classic 'Road to Serfdom' material. It's been with us so long that hardly anyone realizes it wasn't always this way.

    So few people even realize how bizarre health insurance is compared to other forms of insurance. Does your car insurance get involved in oil changes? Does your homeowners' policy keep your refrigerator stocked? Health insurance should be solely concerned with catastrophic situations where a policy holder might otherwise face financial ruin. It shouldn't be involved with sniffles and boo-boos.

    I'm surprised we don't have amusement insurance to handle purchasing cable/satellite service for us.

  5. Bob Smith:

    Choice is an important thing here. When I was insured by Kaiser I was assigned a female primary care physician. That by itself wasn't a problem, but the dozen women's health subspecialty certifications on her wall was. Not only was examining me a total waste of her talents, but she was a little too aggressively disinterested (hardly surprising given the plaques) for my tastes. It is fortunate I was healthy, because her attitude was the sort that make doctors miss things. Why was any man assigned to her?

  6. toni ayis:

    thanks for the information, your blog is very interesting, I like it

  7. dullgeek:

    This has been my experience as well. Although I've only been on an HSA qualified plan for about 9 months.

    I wrote about this in more detail here:

  8. perlhaqr:

    Me: The reason doctors do shit like that, though, is because they accept Medicare. They have to bump the cost of things like that, because once the bill gets submitted to Medicare, Medicare decides, unilaterally, that they'll only pay 1/3rd or 1/4th of the total bill, and that's the end. And doctors get charged with crimes for billing Medicare more than they bill other patients... even though everyone knows Medicare will actually be paying out less.

  9. tomw:

    If it is free, or has negligible cost, it will be in high demand.[and likely wasted...]

    If someone else is footing the bill, I don't care to try to limit costs. [I want it no matter what it costs]

    If I don't pay the bill, or even see the bill for that matter, I have no incentive to attempt to negotiate price. [and retail prices have nothing to do with reimbursement rates from insurance companies]

    If I don't have any incentive to price shop, I will not take the time to compare price from different practices. [why should I?]

    There is no incentive for the CONSUMER of health benefits to contain costs. [see above]

    There is EXTREME incentive for the PAYER of health care bills, or the provider of services in an HMO, to limit as much as possible the covered services.

    It seems every supply is dis-connected from the demand in this bastardized system. Said system has also been plundered by 'rent seekers' limiting competition to within the individual states, and to limiting the coverage of policies to 'Cadillac featured & priced' or placing the burden on the populace for the 'must insure' who consume a larger portion of the product.

    Those who have employer paid insurance are effectively getting a untaxed income. Those who pay for their own are using taxed income to do so.
    Patent [long a] discrimination, no?


  10. Dan:


    You hit it right on the head. It is illegal if you charge anyone less than what you are charging Medicare. The contracts providers sign with large insurers also stipulate that they are getting the lowest cost possible and that they won't charge anyone else any less. To make up for the discounts that they have to show the plans that they are saving (reminds me of jobs saved / created math) they massively overcharge for their "published rates" and then show discounts over those. To get a provider who does any business at all with Medicare or even any major insurer to give you a decent cash discount can be very difficult because they are either breaking the law / contract or they are very very limited in the patients that they see.

    This is what makes the cash route really expensive many of the times. For every story like I hear from Coyote with reasonable rates for cash, there are 100 where the rates are outrageous.

  11. EscapedWestOfTheBigMuddy:

    US$100/hr for a specialized professional?

    That's a fantastic rate.

    It's easy to pay that much for a plumber if you have to get him out of bed.

  12. silvermine:

    Heck, I know tech writers and coders who can make $100+ per hour. (Or at least did a few years ago. Not sure if the economy has killed those jobs). And they don't have to pay malpractice insurance or med school loans or overhead on an office, or for nurses or...

  13. jeff:

    My wife does renewals for a large health insurance customer. I can't tell you the number of times she's heard the stories of people languishing in pain because they couldn't afford their $500 deductible. I'm always trying to get her to ask if they have a big screen TV (that cost way more than $500).

    Everyone paying cash for regular health expenses and having catastrophic plans would do more to bring costs down than anything. Of course, doctors wouldn't like it much, people would start price shopping....

  14. Dr. T:

    My family has no health insurance. I'm a big supporter of high deductible plans (or no plans if you've got a big nest egg like us.) Paying cash can save money on doctor's visits and on x-rays, and may save money on ER visits and hospitalizations if you negotiate firmly. Unfortunately, in my own field of laboratory medicine, paying cash almost never saves money. The list charges on laboratory tests are obscenely high (typically five to ten times higher than the fully-loaded true costs), and the big labs (with extensive test menus) do not offer cash discounts. Today, a simple lab test such as a lithium blood level will cost $10 for blood collection (a reasonable charge) and $75 for the actual test (that is profitable at $10). If you were insured, the insurance company would pay about $8 for the blood collection and about $15 for the test. You pay 400% more for the lab test even though the lab has no billing costs.

    This deplorable situation began decades ago when Medicare (and later the private insurance companies) reimbursed labs based on a percentage (typically 50-60%) of their charges. Not surprisingly, labs kept raising charges. Eventually, even Medicare bureaucrats realized that a fixed fee schedule was needed, but the fixed fees were based in part on "usual and customary" charges. Therefore, if labs give discounts to customers paying cash, then their usual and customary charges fall, and Medicare reduces reimbursements the next year. Isn't this a great system?

  15. Rusty Shackleford:

    "Even more troubling to me is that the meaning of the word insurance has become corrupted in public discourse. What most people mean when they talk about obtaining health insurance is "How can I find a third party who will provide me with unlimited consumption of health care at no or minimal cost to me?" The current health care debate seems to be about the search for a system where everyone can obtain unlimited care at no cost to anyone."

    Robert Blumen