A growing number of medical services, from MRIs to blood work to outpatient surgery, could cost you less—sometimes a lot less—if you pay the provider out of your own pocket and leave your insurer out of the picture.
That this is possible seems contrary to what many of us have come to understand about how health insurance is supposed to work. We think using it always saves us money, partly because we assume our insurer negotiates the best rates for health services, and partly because we expect our insurer to pick up the tab for whatever cost remains, or at least much of it.
In many cases, that is still true—but not always, especially for the growing number of people in high-deductible plans who must spend thousands of dollars on health services before insurance even starts to kick in to cover some of the cost.
According to experts Consumer Reports talked to and a review of pricing options offered by dozens of healthcare providers, more doctors, hospital networks, and treatment centers are touting big discounts for patients who pay cash upfront and forgo using their insurance.
Companies like MD Save, with a network of hundreds of hospitals, clinics, labs, and doctors in 25 states, illustrate the shift. It bills itself as an online healthcare marketplace that connects healthcare providers offering big discounts to people willing to prepay their bill online.
That doesn’t mean you shouldn’t have health insurance. Like homeowner and auto insurance, health insurance protects you from financial shocks that could bankrupt you if you or a family member has a medical crisis that requires major hospitalization or expensive treatments.
But as consumers shoulder more of the cost of their care, they are seeking ways to save money.
And healthcare providers are finding that by charging people who pay cash less than the insurer-negotiated rate for some health services, they can come out ahead financially too, says Bill Kampine, co-founder and senior vice president of analytics at Healthcare Bluebook, which uses insurance claim databases to estimate prices for medical care.
Healthcare providers make up for charging lower prices other ways, Kampine says. Cutting out the insurer as the middleman can significantly reduce the provider’s administrative and billing costs. And healthcare providers who get cash upfront don’t have to chase down the money later, either from a patient or the insurance company. “It’s a much easier transaction in a cash pay environment,” Kampine says.
Reduced fees for paying cash are more common for diagnostic procedures, such as CAT scans, X-rays, and ultrasounds, but cash payers can also often get a better deal for certain lab work, prescription drugs, out-patient surgeries, and therapeutic services, such as physical therapy, Kampine says.
Some imaging centers even offer off-peak discounts for patients who pay cash and use services after traditional business hours, say, getting an MRI after 7 p.m. “It’s like surge pricing by Uber,” says Jeanne Pinder, CEO of ClearHealthCosts, a business she founded that researches healthcare prices and allows you to compare costs for specific procedures at different providers around the U.S. The site’s PriceCheck tool gets data on insurance-negotiated prices, Medicare rates, and cash prices directly from healthcare providers, as well as from patient crowdsourcing.
The differences in price can be significant, Pinder says. A woman in Louisiana who shared her story with ClearHealthCosts reported paying $766 for an echocardiogram using her insurance. She later learned that the cash price for the same procedure was almost half as much: around $400.
Still, even if paying cash is likely to reduce your annual outlay for medical expenses, there are some important drawbacks to consider.
The main one is that the money you spend typically won’t count toward your deductible. As a result, those dollars will be “wasted” if you need medical care that requires you to meet your whole deductible anyway, Pinder says.
The money you spend also may not be counted toward your out-of-pocket maximum, which caps the total amount you owe for deductibles, copays, and coinsurance. After you meet your out-of pocket max, your insurer picks up 100 percent of your costs.
Here’s how to figure out whether paying directly, rather than using your insurance, is the right move for you.
Weigh the situation. Whether it makes sense to use insurance depends on your specific circumstances. Cash payment generally makes sense only if you're seeking care subject to a deductible which you haven't met yet and don’t think you will reach anytime in the same calendar year (deductibles reset annually). Of course, you never know when you'll get sick and need expensive medical care. Make sure you put enough money aside to meet your deductible.
Research price and cost compare. Healthcare prices vary widely, even within the same local area and especially by provider, so it's important to shop around.
First, check your insurance company's website, or call your insurer, to get an estimate of the cost of your test or procedure. Don’t forget to consider copays and coinsurance, which requires you to pay a percentage of the cost of a service (typically 20 percent). Then see whether you can do better by paying cash. Healthcare Bluebook and ClearHealthCosts publish both insurance-negotiated prices and cash rates where available. And a growing number of healthcare providers are being transparent and publishing their cash prices online.
Some, like The Surgery Center of Oklahoma, which bills itself as “a free market-loving, price-displaying, state-of-the-art surgical facility,” don’t take insurance at all. The Surgery Center posts cash prices for dozens of outpatient procedures, such as an Achilles tendon repair ($5,730) and cataract surgery ($4,000). Its prices are all-inclusive, bundling all related fees for the surgery, such as medications or needed specialists. That's still a lot of money, but for a family with a high deductible—say $8,300, the average for families who buy insurance on their own—paying cash could help them save thousands.
Keith Smith, an anesthesiologist and medical director of The Surgery Center, also co-founded an organization called the Free Market Medical Association that lists hundreds of other providers that publish cash prices.
There’s also a push for greater price transparency from the Trump Administration. Last month, the Centers for Medicare and Medicaid Services proposed a rule that would require all hospitals to post their standard charges online by Jan. 1, 2019.
Be persistent. Not all healthcare providers make it easy to find out the cash price. That's because if they have a contract with your insurer, undercutting the negotiated price could be a contract violation. So you should ask directly how much your care would cost you with your insurance, and how much if you pay cash, Pinder says. If the healthcare provider balks, keep asking. “You may have to be persistent or go to another provider," she says.
Talk with your insurer. Although most insurers won’t count cash payments toward your deductible, it’s not a hard-and-fast rule, Kampine says. Ask your insurer what its policy is. Request from your doctor's office what is known as a “superbill," which is an itemized statement of charges and includes information such as diagnosis and procedure codes. Submit that to your insurance company when asking whether your payment can be applied to your deductible.
Use tax advantaged dollars. You can ease the pain of using your own money if you have a flexible spending account or health savings account. Money in FSAs and HSAs, which can be spent on a wide range of healthcare services, is put away pre-tax, so it lowers your taxable income. Most employers offer flexible spending accounts, which you can fund up to $2,650 a year. You have to have a high-deductible health plan to have an HSA, but if you do, you can put away $3,450 a year pre-tax for an individual and $6,850 for families to spend on out-of-pocket medical expenses.
Shop around for drugs, too. As with procedures and tests, you can sometimes save on prescription drugs by paying cash. But your pharmacist may not be able to reveal whether their retail, cash price is lower than your insured price due to "gag clauses" in their contracts with middleman known as pharmacy benefit managers. To work around this, you have to directly ask the pharmacist whether there is a lower price available.
First, look for online discounts at websites such as GoodRx or Blink Health. Then bring them to a pharmacy. Most will honor those coupons, our Consumer Reports secret shoppers have found, and the discounted price could be lower than your insurance copay. Or consider low-cost pharmacies, such as Costco, Sam's Club, or HealthWarehouse.com, all of which often have everyday low prices. Read more about how to shop around for prescription drugs.