Yes, You Can Pay Cash for Health Care. Even if You Have Health Insurance

Pam wanted to pay cash for her expensive medical tests but was told she had to use her health insurance. She pushed back and saved about $2,000.

Pam tagged me on Twitter last week with a frustrating and familiar problem.

She needed urgent and expensive medical tests and found she could save about $2,000 by paying cash instead of using her health insurance plan.

But the people at the medical facility would not let her pay cash. She pleaded with three different employees in the billing department. They all told her — WRONGLY — that she must use her health insurance. The medical provider had a contract with the insurance company that required her to use her health plan, she was told.

I often hear this from insured patients who want to pay the cash rates. They get bullied into using their insurance, even though it means paying more than they should.

It’s more common than you might think for cash prices to be lower than the prices negotiated by insurance companies. In the past month I’ve looked up hospital prices in Oklahoma City, Phoenix and Las Vegas, where I’ve been speaking at conferences. In all three cities I picked a hospital at random that’s posting its prices on its website, as the federal government requires. In each case the hospital makes many of its insured patients pay more than its uninsured patients for various services. I have a whole chapter about cash prices in my book, “Never Pay the First Bill: And Other Ways to Fight the Health Care System and Win.” The takeaway: Always ask for the cash price.

Pam is 52 and lives in Akron, Ohio. She’s going through a stressful time medically right now and needed an MRI of the brain and an EEG - which measures brain waves. Financial hassles from our health care system are the last thing she should need to deal with right now. But she is a good advocate for herself and knows her insurance policy. She is covered by a high deductible health plan that requires her to pay the first $5,000 before her coverage kicks in. That’s on top of the $10,000 a year she and her husband shell out for their portion of the plan’s monthly premiums.

Since she’d be paying out of pocket whether she paid cash or used her health insurance, Pam checked the prices at the medical facility. The MRI, with her insurance company’s discount, was about $1,100. If she paid cash, it would be about $300. The EEG required three days of monitoring at about $900 a day with insurance, and about $500 without. Thus, the self-pay route would save her about $2,000 total.  

Pam follows me on Twitter. She was getting stonewalled, so a few days before the tests, she reached out to see if I had any ideas. At her request, I’m not naming her facility or insurer, because she’s still depending on them for medical treatment.

On Twitter, I suggested that Pam call the Ohio Department of Insurance, which regulates fully insured health plans. Pam called the regulator and the woman who helped her was, to say the least, not helpful. Pam said she was told that if everyone paid the lower cash rates then there would not be any reason for people to use their health insurance. That’s exactly the point, Pam told me, incredulous. She and her husband are getting crushed by their premiums and deductible. And yet the insurance company can’t get them a better deal than they would get if they were uninsured!? “It boggles my mind,” Pam said to me. “I don’t understand it.”

Yeah, that sums up the health care experience for working Americans. It boggles the mind!

Pam and I talked on the phone and came up with a tactic that could also help others who face this situation. Here’s the key: cite the Health Insurance Portability and Accountability Act of 1996, the federal privacy law more commonly known as HIPAA. The entire medical community — clinicians, administrators, billing managers, everyone! — has had HIPAA compliance drilled into their brains. And there may be protection within the HIPAA law for insured patients who want to pay cash.

The federal Office for Civil Rights has a helpful HIPAA brochure that describes a patient’s right to restrict who has access to their private health information. Here is an excerpt:

To sum it up: You can ask your doctor or hospital or other health care provider not to share your private health information with your insurance company. Tell them that you do not give your consent, and cite as your authority this HIPAA guidance from the Office for Civil Rights. That would raise the stakes for the medical provider if they continue to disagree with your request. The catch is that you must pay in full, which Pam was willing to do. I realize this will not be possible for every patient and that it’s no guarantee. But it increases your leverage, which helps in these type of negotiations. (Also, if you pay cash, the amount will not apply to your health insurance deductible, which is also something to consider.)

I ran this idea by Shelley Safian, who has written multiple textbooks on medical billing. She said it’s obvious that insured patients should be allowed to pay cash. But some medical providers, she said, don’t really understand the nuances of HIPAA. Safian explained that new patients sign a health information release form when they first go to a medical provider. But that release can be retracted. Existing patients can submit, in writing, that they now have changed their desires, and now refuse to allow their private health information to be submitted to an insurer. The written instruction should be signed and dated. “Then the medical provider is forbidden from submitting the information to the insurance company, and the patient can pay the cash price,” Safian said.

There is another potential complication with this strategy. In a non-emergency case like this the clinic could turn Pam away. And quite honestly, under ideal circumstances I would say to stay away from any medical provider that is trying to force you to pay more than you should by using your insurance plan. Find clinicians who will be fair with you - lots of them are out there. Cash rates are common now throughout the health care system and many providers do not hassle insured patients who want to self pay. I’ve done it myself several times with no issue.

In this case, Pam didn’t have the luxury of going someplace else. I suggested that if they fussed about her cash-pay request she could always concede and get the tests, and then contest the bills afterward if necessary. I go into this in detail in my book, and she would have a lot of leverage. She could file a HIPAA complaint, which could come with serious penalties. And she could also sue in small claims court and show that she was coerced into paying more by using her insurance.

On Friday, just a few days ago, Pam had her appointment to get the tests. Before the appointment she printed the Office of Civil rights brochure about privacy rights and put it in her purse. The moment of truth came when she checked in and they asked for insurance information. Pam politely explained that she had been through two weeks of grief trying to get approval to be self-pay, and that she would like to pay cash. The woman at the desk checked with her supervisor, who said it was all good. Pam could pay cash. Pam didn’t even need to bring up the guidance from the Office of Civil Rights. The response came as a surprise, but Pam was relieved!

Then something amazing caught Pam’s eye. She saw, posted near the check-in desk, the facility’s payment policy. She read it, and to her shock their own policy said patients could be self-pay. (That makes sense because the policy would be consistent with the federal government’s rules and guidance.) Pam couldn’t believe that the facility’s billing department didn’t even know its own payment policy. Or, worse than that, they probably did know their own payment policy, she thought to herself. “If those notices are posted throughout their facility, they probably do know their policy,” she said to me later. “They are probably trained to go through insurance. They get more money that way.”

Pam got the tests she needed, and paid with her credit card. But she felt betrayed by the whole experience. No one – at the clinic, her insurance company, or the state insurance department – had stood up for her. And all this happened when she was already under a lot of stress because of her medical concerns.  

I asked Pam what this whole scenario — the misinformation and the fact that she saved money by not using her insurance — told her about American health care. “It’s in a lot of trouble,” she said. “It’s not here for our benefit. I feel that I am harmed more than I am helped by having private health insurance.”

Pam’s story has important takeaways for all of us:

1. Always ask whether it’s cheaper to pay cash than use your health insurance. My wife just did this for an X-ray of her toe. With our insurance the X-ray would have been $100. We paid $55 cash.

2. Ask to read the hospital or clinic’s payment policy if they won’t let you pay cash. If your case is like Pam’s, you might need to tell them to read their own policy!

3. Show the hospital or clinic the guidance from the Office of Civil Rights if they say you can’t pay cash. You can tell them that they do not have your consent to share your private health information with your insurance plan.

4. Do not assume people who work in a billing department are giving you information that is accurate or absolute.

5. Be persistent. You may get blocked in your initial attempts to be treated fairly. But press on! Often you just need to find the right person to grant your request.

None of this is fair to patients, of course. It reminds me of one of the hidden reasons we need to fight back that I mention in my book. In the United States, we believe that the customer is always right. But the health care power players treat each other, not the patients, as their favored customers. The medical providers and insurers are often more loyal to each other than they are to the patients who receive the treatment and pay for it. Pam did a great job standing up for herself, and each of us might have to do the same.