Insights

How Paying Cash Could Save You Thousands in Medical Bills

Have you ever questioned yourself why is healthcare so expensive in the US? Here are some secrets insurance companies may not want you to know.

Liam recently moved to Austin, Texas to pursue his dream software engineer job. Along with his job, he got the best of the best benefits. 24/7 cafeteria, gym membership, unlimited remote work and PTOs, just to name a few.

But one problem: Liam has chronic asthma and he was offered a high deductible health plan with no coverage for asthma inhalers.

Like the 40 million Americans living with asthma, being able to afford prescriptions often requires top-notch insurance or plenty of disposable income.

Different from co-pays, a health plan’s deductible is the amount the patient has to pay before benefits kick in, typically the full cost of a doctor visit and medications. With his insurance, Liam would have to pay $6500 out of pocket, almost ten times what he has in savings.

Why is U.S. healthcare so expensive?

Unlike other countries with universal healthcare, 50% of Americans receive health coverage through private insurance sponsored by their employers.

Different from Medicare and Medicaid, which pay fixed fees, private insurers negotiate directly with hospitals to set price. While insurers are supposed to negotiate on behalf of members, they also make money by charging a 10–20% administrative fee on each dollar paid out to the hospital.

The symbiotic relationship between insurer-hospital creates a conflict of interest: the higher the hospital charges, the more money the insurer can keep to “administer” claims.

Evidently, private insurance’s reimbursement rate is often two or three times higher than that of Medicare. And for patients with a high deductible, this means paying twice of three times as much out of pocket for the same procedure.

Doctors are frustrated, 23% of physicians time are spent on non-clinical administrative paperwork.

Patients are not alone, to take insurance, doctors are spending hours a day on filling out paperwork and fighting with insurance companies to get paid. Additionally, because of the many middlemen, only 60–70% of healthcare payments go toward doctors.

The breaking point: to sustain the level of reimbursement, doctors have to invest thousands or millions on reporting systems. This pushes many doctors into early retirement and sell out their practices to bigger health systems.

Younger doctors, on the other hand, have to be creative and are finding new ways to circumvent the systems. Many of them are converting to cash-only practices, which save patients money and take out the administrative burdens associated with taking insurance.

Paying $120 for a $500 doctor visit.

Since settling into the new company, Liam discovered that he is not alone, many co-workers of his who have the same health plan are turning into a new method of payment: cash.

Following the advice, the first time Liam went to an urgent care downtown Austin, he awkwardly asked for the cash price and was received with a warm smile from the receptionist lady — “Honey, it’s okay. We treat everybody the same and you are no different”.

By using the Price Estimator tool on his insurance website, the co-pay amount for the urgent care visit plus lab tests would be upward of $500 for Liam. By asking for a cash price, he was able to walk out of the doctor office with only $120 spent — four times less than what he would have to pay using insurance. Paying cash could save you thousands in healthcare, literally!

But add-ons and surprise bills are still a big problem. And finding high quality doctors can also be tough.

Because paying cash means you have to negotiate directly with the clinic and wish for the best in term of care quality, cheapest doesn’t mean best.

Two weeks after his visit, Liam got a $100 bill in the mail without an explanation. Caught off guard by the surprise, he called the office and was routed to a collection agency.

3 ways to get high-quality care at a low price.

  1. Avoid Monday and Friday. Monday morning and Friday afternoon are the two most popular choices for doctor appointments, while Wednesday tends to the least busy weekday. By avoiding peak times, you can get seen faster and have more face-time with the doctor since they are not being rushed from one case to another.
  2. Ask for cash price but don’t push it. Most doctor offices have a cash “menu” for self-pay patients. This list is not often public, however. And because they are often itemized by individual procedure, getting a quote beforehand is difficult.
  3. Use a booking platform. Startups like Mira help you get upfront cash prices for common healthcare needs like urgent care, STD test, and physical exam. Mira contracts directly with established urgent care clinics to get you straightforward upfront prices ahead of the visit. The platform uses a feedback system to rank the clinics based on quality, experience, and wait time. Urgent care cost without insurance has never been this affordable and approachable.

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