The Medical Good Faith Estimate

What do automotive service, TV repair, and mortgages have in common?

All three are things that don’t happen frequently in most people’s lives, can be complex and inscrutable to the average human, generally require that one take the word of an expert for guidance, and, as a result, all three usually require an estimate be given in advance.

That estimate is a way of demystifying the process, giving the customer a better idea of what is going to be done and how much that will cost.

Without an estimate – provided by the expert – most people would have no idea what they were getting into financially.  And no way to shop for the same services with other providers.

Are there any other situations in life where you’re faced with a need get something done involving a complex and inscrutable process, guided by the advice of an expert, where the end result could be financially significant?

Why, healthcare, of course.

In healthcare we see the same dynamic at work.  An expert tells us we need something done, we have no way of knowing the extent or cost, and the financial consequences can be extreme – more so than almost any other transaction we’ll make in our lives, at levels that  often lead to bankruptcy.

… but no one will tell us how much it will cost in advance…?

In what world does that make any sense at all?

Let’s talk mortgages for a minute.

Mortgages are, to most people, impenetrably opaque.  What will an amortized payment be?  How do “points” paid up front affect the final loan amount?  What is “title insurance”, why do I need it, and how much does it cost?  What will the appraisal cost me?  Etc, etc, etc….

Unless you’re an excel dweeb (well…. er…. like me….) the idea of setting up a spreadsheet to calculate all this – and do it multiple times for different potential lenders – is not something you look forward to.

And of course that complexity lends itself to misunderstandings or even outright deceptive practices.

Prior to 1975, however, getting out the pencil and calculator (or, at that time, your slide rule) was the only option.  That, or simply trusting every mortgage broker you talked to to give you accurate data. 

From which they stood to make thousands of dollars if you chose them.

Right…..

In 1975, the government solved that, in the Real Estate Settlement Procedures Act (RESPA.) The RESPA, among other things, specified the Good Faith Estimate (GFE) process.

A Good Faith Estimate gave the borrower all the relevant details they needed to know, in a common standard format and in somewhat plain English.  With that, they not only had a general idea up front what things would cost, but it also gave them the ability to compare pricing from more than one provider.

The result of this transparency?  Not only were people no longer surprised by the final cost of the mortgage process (and the loan itself), but were now able to “shop around” to find mortgages that had better terms.

What if we did this for medical procedures?

As we noted above, medicine shares some of the same characteristics as mortgages – a potentially significant financial commitment made by people who simply do not have the skills and understanding to truly know “what they’re getting into”.

Medicine also has an additional factor – one that is huge.  The fact that you’re far more emotionally committed to your healthcare than almost anything else in your life.

Certainly some people become very invested in the home buying process, to the point where they’ve “got” to get a specific house (or one might think they’re on the verge of dying…), but in medicine one might literally be on the verge of dying.

Dealing with financial commitments at a time when one is overcome with concern about their (or their loved ones) health seems like a recipe for clouded decision making.  Combining that emotional impact with the need to commit to a path that could very well lead to bankruptcy certainly seems to make a strong argument that we should require medical providers to lay out the potential costs in the clearest possible language.

What if we had a Medical “Good Faith Estimate”? 

We’ll call it the “MGFE” for short, here.

What if….

When you scheduled any procedure that was initially a low cost event (a vaccination, a checkup, an office visit to check out a cough, etc), it was a requirement that the provider give you a verbal estimate and get your approval?

What if….

When you scheduled any procedure that had an initial cost exceeding some “low cost” threshold (let’s call it $200 for argument), it was a requirement that you be given an estimate in writing – the MGFE, using a standardized format so they all looked the same – and that they get your written approval, at least 3 days before the procedure was performed?

What if….

The standard MGFE form required them to both give you the estimated cost for your procedure, data on the quality of care at their facility (per existing Medicare reporting requirements), and data on the top 5 most common additional procedures needed in conjunction with the one you have scheduled, along with their cost and quality data?

What if….

That MGFE were required to be complete “actual charges to you” as much as possible, and take into consideration your specific insurer’s rates and co-pays for the procedure or service, to be a true reflection of what you will likely be asked to pay?

Why, then you’d know, up front, what you’re in for, wouldn’t you? 

Not only for the procedure the doctor ordered but the most likely add ons that might be needed as a result.

And, if the procedure was elective or something that had no immediate time need, you could use that estimate to “call around”, couldn’t you?  Not only to compare cost, but also quality ratings?

And, if you were concerned about your deductible status, you could most certainly call your insurance provider and get their word on how much of that bill you were going to have to pay.

Imagine that.  Complete knowledge of what your medical visit is likely to cost.  Before the procedure or service is done.

Instead of how it works now, which is to find out afterward, when you have no choice but to pay “whatever rate they chose to charge you”, perhaps for years. 

Or declare bankruptcy…

Now, I know there are many out there who are raising their hands with various objections…

Most of those objections are based on myths, not reality.  For more on that see my post on “The Myths of Healthcare Competition” but to touch on some of them briefly here:

  • “How can I approve an estimate when I’m being rolled into ER in a stretcher!!” 

    OK, you can’t.  Fortunately less than 10% of medicine is done this way.  For the remaining 90%, it is more than possible to discuss the cost and get approval before the procedure or service. 

    And any rational system would include provisions for this – perhaps by mandating that any procedure done without the ability to get approval only be charged at Medicare rates, or other rates per some commonly accepted guideline.

  • “Healthcare is too complex!” 

    Yes, it certainly is.  Good things we have specialists, called “doctors”, who know everything about it, so you don’t have to. 

    Every medical procedure has what is called a CPT code.  If the MGFE were properly implemented, a requirement of the standard format would be to give you that code.  You then don’t need to know you’re needing a “MRI OF THE HEAD AND NECK WITH AND W/O CONTRAST”, you just need to know you’re getting CPT code 123456.

  • “You can’t shop for quality in healthcare!”

    Please don’t tell Medicare this, they’ve been collecting quality data for some time now, and publishing it in a limited form on their site.

  • “Medical procedures aren’t predictable!”

    Nope, but very little in life truly is.  You may go in for a certain procedure, but they find in the middle of it you need something else.  “What, are they going to wake me up and ask me to sign?”

    No, of course not.  That’s part of the reason why a MGFE would contain the “top 5 additions or complications” and their prices.

    So, for instance, if you’re going in for a colonoscopy and they find polyps to remove while you’re under, you would know in advance how much extra that might add to the procedure.  

    Not that it’s going to do you much good while you’re unconscious, but at least when you schedule the procedure you’ll be able to see if those add on’s seem reasonable – and shop for another doctor if not.

    And the MGFE is by nature an “estimate” – which, by definition means “not exact.”  The law would most certainly have to allow for procedures to be done without consent of the patient if necessary, and as with ER procedures, could very well regulate the cost of those add on procedures.

  • “How can the provider keep track of the thousands of prices related to different insurers!”

    Reader, meet computer. 

    Computer?  Please give me a list of all possible CPT codes!  Now!  Stat!

    There are approximately 10,000.  That took Google 0.65 seconds.

    You don’t think your provider keeps track of all the prices they’ve negotiated for insurers they have contracts with, all in their computers, and can’t pull up any single one of them by CPT code in seconds?

    Really?  Do you live under a rock?  Ask your doctor’s office someday.

… and here’s a related side issue that would also be solved if an MGFE were a requirement in the process…

One of the current hot button topics in healthcare costs is “surprise billing” (sometimes called “balance billing”). This is rather narrowly defined as a situation where you make arrangements to have some medical procedure done, ostensibly covered through your insurance, and then later find out some portion of that procedure was not done by a provider authorized to bill your insurance. That provider then bills you directly, which can be very, very expensive.

Why does this happen?

When you called the facility your doctor recommended, do you think that facility did not know what your insurance plan was?

Those of us who have ever done that know the odds of that are exactly zero. When scheduling a procedure, the first words out of the administrative personnel’s mouth (hopefully after “Hi Mrs.Smith!”) is usually “can I get your insurance information“, which requires you to get your card out and read them the numbers. Or let them make a copy.

Always.

With that, of course they either know everything there is to know about your plan (from their contract with that company) or they can easily find out. And if they don’t know, its guaranteed they will find out.

First.

Before touching you.

Because no one wants to work for free, right?

So… They know exactly what your plan is, all the time.

Now, when they schedule, do you think they do not know where your procedure us going to be done, who is going to be involved, and what they need on hand to do it?

Of course they know. That’s what “scheduling” means.

To set a date and time they need to know the facility has the space available for you as well as the right people – doctors, surgeons, anesthesiologist s, nurses, etc – on hand. They also need to know what supplies they commonly need, as well as what additional things may have a chance of popping up, I.e. “complications.”

Now… Why, at that time, could they not give you that list of preparations and expected needs, since they already know them, along with the amounts they will bill your insurance for them, per their contract with your insurer?

In other words, our “Medical Good Faith Estimate’?

When you see – on that estimate – that the surgeon is in- network and set to bill to insurance, but the anesthesiologist is not, and the line item for their services is stratospheric, wouldn’t that be a great time to discuss that – with the staff at the provider and/or your insurance company?

In other words, before the procedure is done?

And wouldn’t that largely eliminate the problem of surprise billing, at least for any scheduled procedure?

Why doesn’t that happen, just as a routine “best practice” in the industry?

Some may see a grand conspiracy here, to keep patients in the dark so that more money can be extorted from them. After all, if you don’t find out that the procedure you thought would cost $5000 actually costs $50,000 until after it’s done – or, a key event, after you’ve signed the financial responsibility forms – then you are on the hook to pay, no matter what (or declare bankruptcy…)

I don’t think so…

There are undoubtedly those in medicine that are of a reprehensible sort that have no qualms about driving poor, sick people into bankruptcy to fund their second home in Vail, just as there are people everywhere who prey on the less fortunate for personal gain.  But I like to think that type is rare, and likely rarer still in medicine, a profession most get into because they want to help people.

I also don’t think it’s because medicine is so complex that systems don’t exist that can handle the process.

Every medical provider had a billing system sufficient to produce a bill at the end of the process.  Putting together that same data at the beginning, for only the parts that can be predicted, would seem trivial.

Matter of fact, that initial entry could easily be the template for the final bill, with just corrections needed to reflect what ultimately happened, meaning most of the prep is not even duplicate work…

Would it take some effort to set those things up?  Certainly, but all the pieces are there already, it’s more a matter of having the will (or, perhaps, the need to comply with a federal regulation) than a technical or monetary hurdle.

OK, OK, do you give up?

Are you now willing to accept the fact that having someone tell you up front what you’re going to pay for something is a good thing?

The rational view is that it could only be a good thing for medical providers to be required to actually tell you in advance what they’re going to charge you, before they knock you out, right?

If not, why not?