MONEY Health Care

The Most Expensive Medicare Mistake You Can Make

hospital patient in bed
Masterfile—Radius Images

Hundreds of thousands of people skip this key step.

Tens of millions of Americans rely on Medicare to help cover their healthcare costs after they retire. Yet as simple as the program might seem, many people make a mistake in claiming their Medicare coverage that can lead to their having to bear higher costs for their healthcare needs for the rest of their lives.

This key Medicare mistake involves what seems like a simple process: signing up for Medicare in the first place. As long as you follow the right rules in applying for and getting onto Medicare, then you can steer clear of potential problems. If you slip up, though, the consequences will haunt you for a lifetime. Let’s take a closer look at a mistake that currently affects hundreds of thousands of people with the goal of making sure you never become one of them.

Signing up for Medicare

Most people jump at the chance to enroll in Medicare at their first opportunity, given the benefits that it offers at a price that’s typically lower than any available alternatives. Indeed, if you’re already receiving Social Security benefits before you reach the usual Medicare eligibility age of 65, you’ll automatically get enrolled for Medicare in most cases, starting on the first day of the month of your 65th birthday. Disability recipients also automatically get Medicare after receiving 24 months of benefits from Social Security Disability or similar programs.

For many people, though, those automatic enrollment provisions won’t apply, and they’ll have to enroll on their own. The initial enrollment period for Medicare begins three months before you turn 65 and ends three months after your 65th birthday.

The reason the initial enrollment period is so important is that there are consequences if you don’t sign up for Medicare on time. Late-enrollment penalties can be onerous, with the most common one that people face involving Medicare Part B coverage for medical insurance. Specifically, for every full 12-month period that you go without enrolling, your Part B premiums will go up by 10%.

That might not sound like much, given that the typical Part B premium for 2015 is $104.90 per month for most Medicare participants. But for those who go for multiple years without applying for Medicare, a 20%, 30%, 40% or greater increase in monthly premiums adds up to several hundred dollars per year in penalties. Moreover, those late-enrollment penalties never go away, and you’ll have to pay them for as long as you have Part B coverage throughout your lifetime.

Other penalties can affect a limited number of recipients. Most people get Medicare Part A for free, but if you have to pay premiums, they’ll go up if you sign up late. Part D prescription drug penalties can also apply, with charges based on a percentage of a predefined typical premium amount multiplied by the number of months you weren’t covered.

Special enrollment to the rescue
Fortunately, there are some provisions to help some of the people who might otherwise face Medicare penalties. The most common involves what are known as special enrollment periods.

Those who are still working when they turn 65 are most likely to qualify for a special enrollment period. If you have qualifying group health plan coverage based on either your job or your spouse’s job, then you can sign up for Medicare at any time as long as you or your spouse is still working and you’re still covered under the employer group plan.

Moreover, when you finally do retire from your work, Medicare grants you an additional eight-month special enrollment period starting the month after the job ends. Usually, as long as you sign up for Medicare during that special enrollment period, you won’t have to pay a late enrollment penalty.

It’s important to realize, though, that not all insurance coverage qualifies to give you a special enrollment period. Specifically, if you have continuing coverage under COBRA, or if your employer provides retiree health insurance, you won’t be eligible for a special enrollment period when that coverage ends. Only coverage based on current employment qualifies.

As long as you’re aware of these rules, it’s easy to follow them and avoid a costly Medicare mistake. Given how important Medicare is for your healthcare finances in retirement, the savings from following the rules can be well worth paying a bit of attention as your 65th birthday approaches.

MONEY Health Care

Getting a Second Opinion From a Doctor May Not Improve Your Health

There’s little hard data showing that second opinions lead to better health results overall.

Actress Rita Wilson, who was diagnosed with breast cancer and underwent a double mastectomy recently, told People magazine last month that she expects to make a full recovery “because I caught this early, have excellent doctors and because I got a second opinion.”

When confronted with the diagnosis of a serious illness or confusing treatment options, everyone agrees it can be useful to seek out another perspective. Even if the second physician agrees with the first one, knowing that can provide clarity and peace of mind.

A second set of eyes, however, may identify information that was missed or misinterpreted the first time. A study that reviewed existing published research found that 10 to 62 percent of second opinions resulted in major changes to diagnoses or recommended treatments.

Another study that examined nearly 6,800 second opinions provided by Best Doctors, a second-opinion service available as an employee benefit at some companies, found that more than 40 percent of second opinions resulted in diagnostic or treatment changes.

But here’s the rub: While it’s clear that second opinions can help individual patients make better medical decisions, there’s little hard data showing that second opinions lead to better health results overall.

“What we don’t know is the outcomes,” says Dr. Hardeep Singh, a patient safety researcher at the Michael E. DeBakey VA Medical Center and Baylor College of Medicine in Houston, who co-authored both those studies. “What is the real diagnosis at the end? The first one or the second one? Or maybe both are wrong.”

That doesn’t mean second opinions are a bad idea. Experts estimate that diagnostic errors occur in 10 to 15 percent of cases.

“There’s no getting away from it, diagnosis is an imprecise thing,” says Dr. Mark Graber, a senior fellow at RTI International who also co-authored the studies. Graber is the founder and president of the Society to Improve Diagnosis in Medicine.

Second opinion requests were related to diagnosis questions in 34.8 percent of cases in the Best Doctors study. These included 22.5 percent of patients whose symptoms hadn’t improved, 6.3 percent who hadn’t gotten a diagnosis and 6 percent who had questions about their diagnosis.

In Wilson’s case, she wrote that after two breast biopsies she was relieved to learn that the pathology analysis didn’t find any cancer. But on the advice of a friend, she decided to get a second opinion, and that pathologist diagnosed invasive lobular carcinoma. Wilson then got a third opinion that confirmed the second pathologist’s diagnosis.

Getting a second opinion may not involve a face-to-face meeting with a new specialist, but it will certainly involve a close examination of the patient’s medical record, including clinical notes, imaging, pathology and lab test results, and any procedures that have been performed. Some people choose to have that second look done by physicians in their community, but other patients look for help elsewhere.

In addition to employer-based services like Best Doctors or Grand Rounds, medical centers such as the Cleveland Clinic and Johns Hopkins in Baltimore also offer individual patients online second opinions.

“It really does give people relatively easy access to expertise,” says Dr. C. Martin Harris, chief information officer at the Cleveland Clinic.

The medical center’s MyConsult service doesn’t accept insurance. A medical second opinion costs $565, while a consultation with a pathology review costs $745.

Face-to-face meetings with specialists who provide a second opinion and review a patient’s medical record are more likely to be covered by insurance than an online consult, but nothing is guaranteed.

“Usually it’s not the second opinion where the hiccup is,” says Erin Singleton, chief of mission delivery at the Patient Advocate Foundation, which helps people with appeals related to second opinions. “It may be that the MRI that they want to do again won’t be approved.” Many insurers won’t pay for diagnostic or other tests to be redone, she notes.

Patients seeing an out-of-network specialist for a second opinion may encounter significantly higher out-of-pocket costs, particularly if they want to subsequently receive treatment from that provider. In those instances, the foundation can sometimes work with patients to make the case that no specialist in their network is equally experienced at treating their condition.

Of course, asking for a second opinion doesn’t necessarily mean accepting the advice. In the Best Doctors survey, 94.7 percent of patients said they were satisfied with their experience. But only 61.2 percent said they either agreed or strongly agreed that they would follow the recommendations that they received in the second opinion.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

TIME Diet/Nutrition

12 Reasons Why Dehydration Is Bad for Your Body

Being dehydrated can take a toll on your body and even your mind

It doesn’t take much to become dehydrated. Lose just 1.5% of the water in your body (the human body is usually about 60% H2O), and you’ve reached the tipping point of mild dehydration. It can be brought on by many things—and it can do much more to your body than just make you feel thirsty. Dehydration also brings on health effects ranging from fatigue and smelly breath to more dangerous consequences like distracted driving.

It gives you bad breath

It’s easy to forget to drink water during a busy workday, but at the end of the day you may find people standing unusually far from you when you open your mouth. “Dehydration can give you bad breath,” says Marshall Young, DDS, a dentist in Newport Beach, Calif. “Saliva has important antibacterial properties. When dehydrated, the decreased saliva in the mouth allows bacteria to thrive, resulting in bad breath.” So drink up for your own sake, and for those around you as well.

It makes you crave sugar

Dehydration can mask itself as hunger, particularly sugar cravings. This may happen particularly if you’ve been exercising, says Amy Goodson, RD, sports dietitian for the Dallas Cowboys. “When you exercise in a dehydrated state, you use glycogen (stored carbohydrate) at a faster rate, thus diminishing your stores more quickly.” So once you finish exercising, you will likely crave carbs to help you replenish those glycogen levels and get you ready for your next exercise bout.

It wrecks your workout

Even being slightly dehydrated affects your ability to put effort into your workout. “A 2% dehydration level in your body causes a 10% decrease in athletic performance,” says Goodson. “And the more dehydrated you become, the worse performance gets.” Measured by “perceived exertion,” how hard you feel you’re exercising, you might be working at a 6 but you feel like you are working at an 8, says Goodson.

It dries your skin out

Keeping skin healthy and glowing requires drinking enough water, says Anne Marie Tremain, MD, a dermatologist with Laser Skin Care Center Dermatology Associates in Long Beach, Calif. “It’s best to hydrate from the inside out,” she says. “Depending on your lifestyle you may need to adjust your water intake.” If you work out every day or are a caffeine fiend, for instance, then you’ll need to drink more., because workouts make you sweat and caffeine is a diuretic, which can dehydrate you. For smooth, moisturized skin, Dr. Tremain also suggests keeping showers short (less than five minutes) and using only lukewarm water as hot water can dry your skin out even more.

It may affect your ability to drive safely

Few things are more uncomfortable than being stuck in traffic or on a long drive when you need to use the restroom. Logically, it makes sense to simply not drink water before hitting the road. But new research published in Physiology and Behavior shows that the number of driving errors doubled during a two-hour drive when drivers were dehydrated versus hydrated—an effect similar to driving while drunk (defined by most states as .08% blood alcohol). Since often people purposely avoid drinking prior to a long road trip to prevent bathroom stops, dehydration could increase the risk of traffic accidents.

It makes you tired

A mid-afternoon slump may have more to do with hydration than you think. “When you’re dehydrated your blood pressure drops, heart rate increases, blood flow to the brain slows – all of which can make you tired,” says Luga Podesta, MD, sports medicine specialist at Kerlan-Jobe Orthopaedic Clinic in Los Angeles, Calif. A lack of water to muscles also makes physical tasks feel more difficult and tiring.

It sours your mood

Cranky much? Drink a glass of water and your mood may change. “Neurological effects of dehydration can cause irritability,” says Dr. Podesta. A small study published in the Journal of Nutrition tested mood and concentration in 25 young women who were either given enough fluids to remain properly hydrated, or who became mildly dehydrated by taking diuretics and exercising. The dehydrated women—who were at a level that was just 1% lower than optimal—reported headaches, loss of focus, and irritability.

It can give you the chills

It may seem counterintuitive, but dehydration can bring on chills. “This occurs because your body starts to limit blood flow to the skin,” says Dr. Podesta. In addition, water holds heat, so if you become hydrated it can be more difficult to regulate your body temperature, which can make you become chilled faster, even when you’re not in a cold environment.

It can cause muscle cramps

A lack of water causes less blood circulation, which can make muscles cramp up, says Ray Casciari, MD, medical director of the La Amistad Family Health Center in Orange, Calif. “The body will protect its vital organs, so it shifts fluid away from muscles and anything that’s not vital,” he says. Muscle cramps can be extremely painful, making muscles feel harder than normal to the touch. Changes in sodium and potassium through sweat loss can also contribute to cramping.

It makes you feel dizzy and foggy

Along with muscles, your brain also gets less blood circulation when you’re low on water, which can make you dizzy, says Dr. Casciari. Additionally, mild dehydration may affect your ability to take on mental tasks and cause you to feel foggy headed, according to a study from the British Journal of Nutrition. Interestingly, a study that appeared in the Journal of Nutrition showed greater mood changes in women than in men, both at rest and during exercise.

It can give you a headache

Dehydration can cause headaches in a couple of different ways. “Lack of water affects your body’s serotonin levels, which can give you headaches,” says Dr. Casciari. In addition, small blood vessels in the brain respond quickly to hydration levels (which is also behind hangover headaches), leading to dull aches and even full-blown migraines. Try downing a glass or two of water the next time you have a headache and you may discover it disappears. You could also eat fruit, which contains a high percentage of water, Dr. Casciari suggests.

It constipates you

Your body needs water to keep things moving through your colon. When you’re not getting enough H2O, your body compensates by withdrawing more fluid from stool, making it harder and more difficult to pass. That said, it’s worth noting that drinking more water when you’re already properly hydrated won’t necessarily relieve constipation caused by other factors, like the medications you’re taking, medical conditions, or a lack of fiber in your diet.

This article originally appeared on Health.com.

Read next: 12 Mental Tricks to Beat Cravings and Lose Weight

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MONEY health insurance

Why Too Many Health Insurance Choices Are Costing You Money

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Consumers are bewildered by dozens of health plan options—and they're making expensive mistakes. Insurers could learn from 401(k) plans.

It’s time for health insurance plans to take a page out of 401(k) playbooks. People need simpler choices, as well as guidance that will nudge them toward the best plan for their needs.

That’s what 401(k)s are designed to do—though it took years for plans to evolve. As the traditional employer-managed defined benefit pension began to disappear, the early generations of 401(k)s and other defined contribution plans presented workers with new and complicated sets of investment choices.

Employees were so overwhelmed that many did nothing, leading Congress to pass reform laws to simplify 401(k) decisions, including providing default plan choices and using auto-enrollment—putting employees into plans unless they opt out. Today many employers are going a step further by turning 401(k)s into pension-like plans, removing the need for decisions unless workers choose to make them.

But health insurance is still stuck in an old-school 401(k) world. Obamacare exchanges have created extensive menus of plan choices that many consumers don’t understand. The exchange concept has also become popular among employer plans for both current workers and retirees. Exchange providers, led by big employee-benefits firms, are signing up lots of health insurers to offer employers and their workers extensive sets of plan choices.

The confusion extends to Medicare, as consumers are often required to choose among 30, 40 or more Medicare Advantage plans or Part D prescription drug plans. They are simply overmatched by the task, research shows.

As with 401(k)s, the primary problem consumers face with health insurance choices is that they don’t understand how the policies work, studies show. Nor do they understand the industry jargon—in the case of health insurance, that may mean even basic terms like deductibles and co-payments.

Consider this alarming study: A Fortune 100 company offered 48 new health insurance plans to more than 50,000 employees. All of the plans were offered by the same health insurer and offered identical coverage. They differed only by premiums, deductibles and other cost-sharing variables.

In roughly 80% of their selections, workers made bad decisions—opting for the low-deductible but high-premium plans that cost them more money yet provided no additional insurance protection. Lower-income and female employees made particularly bad choices.

The amounts of wasted money often equaled 40% or more of the employee’s annual premium expenses. Employees who chose low-deductible plans paid $631 more on average in premiums, but saved only $259 a year in out-of-pocket costs compared with available higher-deductible plans.

Even more discouraging, when researchers went back and told employees about their mistakes, it had very little effect. More than 70% of employees did not understand insurance well enough to make an informed choice. Further, it had never occurred to the workers that their employer would include lousy choices in its plan offerings, the researchers found.

Improving insurance literacy is crucial in helping employees understand how to make better choices. But as behavioral research with 401(k)s has shown, the most effective solution is to reduce the number of plan choices and their complexity.

“The promise of recent reforms that expand choice and aim to increase provider competition is premised on the assumption—challenged by our research—that enrollees will make sensible plan choices,” the researchers concluded.

So how can you be a better health care consumer? Justin Sydnor, one of the researchers and an economist at the University of Wisconsin business school, suggests the dreaded school math-class crucible: the story problem. First consider how much you expect to spend on health care. Then calculate whether your total payments would be higher with a low-deductible plan or a high-deductible plan. Asking people to compare premiums with out-of-pocket expenses helped set his research subjects on the right course.

If you’re not sure how to estimate your future health care spending (and that’s true for most people), run several calculations based on varying medical costs, Syndor says. For example, what would your out-of-pocket costs be if your health expenses were, say, $2,000 or $5,000 or $10,000 over the next year? You also can seek help from their employer’s health plan administrator or from the free counseling available for Obamacare and Medicare enrollees.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Americans with Obamacare Are Still Afraid of Big Medical Bills

MONEY Health Care

Americans with Obamacare Are Still Afraid of Big Medical Bills

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A new survey finds most Americans are satisfied with their Obamacare plans, but they're still worried about one thing.

Americans gave Obamacare plans high marks in a survey out today from the Kaiser Family Foundation. Three-quarters of those enrolled in health plans through the marketplace say they’re satisfied with the choice of primary care doctors, 73% express satisfaction with their doctor’s visit copays, and 65% say they’re satisfied with their premiums. Overall, 40% say they’ve mostly benefitted from the Affordable Care Act, while only a third say they’ve mostly been negatively affected.

But there’s one nagging problem. Even though Americans are generally happy with Obamacare plans, a large minority—38% of marketplace enrollees—say they still “feel vulnerable to high medical bills.” (A similar proportion of people in non-Obamacare plans agree.)

Most alarmingly, Americans enrolled in plans that meet ACA requirements are more likely to struggle with medical bills than Americans enrolled in plans that do not meet ACA requirements. Americans in ACA-compliant plans are also more likely to report skipping care because of cost. Even though the Affordable Care Act outlawed annual and lifetime coverage maximums—the health insurance provisions that saddled the insured with hundreds of thousands of dollars in medical debt and doomed the sick to bankruptcy—more than half of Americans enrolled in ACA-compliant plans say they’re worried they won’t be able to afford the health care services they’ll need in the future.

One culprit may be high deductibles. In a previous survey, the Kaiser Family Foundation found that Obamacare silver plan enrollees have an average $3,453 deductible, meaning they need to pay more than $3,000 out-of-pocket before insurance would cover part of the cost. On average, Americans enrolled in bronze plans need to pay more than $5,372 out-of-pocket before insurance kicks in.

Unsurprisingly, people with high-deductible plans, whether ACA-compliant or not, feel more financially vulnerable. Only 7% of Americans on high-deductible plans say their health insurance is an “excellent” value for the cost, compared with 19% of Americans on lower deductible plans. And fewer than a third of Americans on high-deductible plans say they could pay a $1,500 medical bill without borrowing money—which is a problem, because a $1,500 bill is a real possibility with a $3,000-plus deductible.

How to save on medical care:

MONEY Health Care

Even an Appendectomy Can Hurt Your Credit Rating

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The medical billing error from hell

When Saideh Browne had an emergency appendectomy in the summer of 2012, she had no idea it would raise the cost of a car loan three years later.

The 44-year-old personal trainer from New York recently visited a dealership to buy a new Honda Accord and discovered her credit score had been dinged by two lingering medical bills for $770 that had gone to collection.

Browne says she did not purposefully ignore the bills, nor did she shirk them because she could not pay. Like many other people, she got caught in an endless loop of indecipherable paperwork between the many providers involved in her care and the insurance company. The amounts due and the reasons listed for the charges kept shifting. Browne did not want to pay a wrong bill and never see the money again.

“I’m an astute consumer, but it gets confusing,” Browne laments. “You don’t know what bill is what.”

Almost 50 percent of medical bills have errors, according to government data studied by NerdWallet, which has a medical bill review service.

“It’s quite staggering,” says Christina LaMontagne, a general manager for NerdWallet. “Probably all of us have been mis-billed on a medical service.”

That includes LaMontagne, who recently received a medical bill she did not understand that was due in 30 days. Her first recommendation to consumers: ask for an itemized statement.

Therein lies the dilemma for most consumers.

“There are cobwebs in the system,” LaMontagne says.

So what is a consumer to do? Here are the three steps to keep your credit healthy:

1. Communicate immediately, in writing

You can pick up the phone to call your provider and the insurance company, but you need documentation, says LaMontagne. The doctor and insurance company need to respond back to you in writing, or you have grounds for appeal because you were not properly notified.

Disputing a charge should stop the clock, but there is no guarantee your unpaid bill will not be sent to collection.

The average time a provider will carry a bill is usually 120 days, which is how long Medicare providers are required to wait, says Chad Mulvany, director of healthcare finance policy for the Healthcare Financial Management Association, a trade group for hospitals.

LaMontagne says significant anecdotal evidence exists that more bills are being sent to a collections agency after 90 days, so the transition to collection could be quick.

1. Get outside help

If you are getting nowhere with your provider, turn to your state insurance commission.

You can also hire a bill resolution company, such as NerdWallet Health or Medical Billing Advocates of America, which charge either a flat fee or take a percentage of the savings you achieve.

Some workplace human resources departments also offer assistance, or at least can run interference with insurance companies.

Expert help is important because many collection agencies prey on consumer fear and tend to go away quickly if confronted by somebody who knows the law, says Pat Palmer, president of Medical Billing Advocates.

For instance, collection agencies are not supposed to be familiar with your medical details. So the first thing Palmer does for clients is call and ask about the charges. If the agents know what the bills are for, she tells them they have violated medical privacy laws. “You never hear from them again,” Palmer says.

3. Negotiate a payment plan

Most medical providers want to close out your account. Setting up a payment plan could get the monkey off your back, says Healthcare Financial Management’s Mulvany.

Most of all, paying something allows you to move forward, says credit expert Beverly Harzog, author of “The Debt Escape Plan.”

“If you don’t take care of it, it’s going to drag you down,” Harzog says.

That is exactly what Browne has done, setting up a payment plan for the unexplained bills.

“At this point, I just want it to go away,” she says.

MONEY Shopping

Why Stores Can’t Sell You Cheaper Contact Lenses

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Can you say: price fixing?

Costco and online sellers like 1-800 CONTACTS would love to sell you cheaper contact lenses. But in recent years, the country’s biggest contact manufacturers have instituted minimum prices for their products that make it impossible for retailers to offer them at lower price points.

In testimony before Congress last summer, the Consumers Union declared such policies “uncompetitive” and tantamount to price fixing: “Consumers are denied more affordable alternatives. They pay more than they need to, and sellers who would like to make those affordable alternatives available are denied the opportunity to do so.”

The manufacturers are taking advantage of a 2007 U.S. Supreme Court decision that established that it was legal for price floors to be set in certain situations. The one stipulation is that the manufacturers must not be “actively coordinating prices among themselves or with retailers,” as Marketplace put it. It’s impossible to prove that Johnson & Johnson, Alcon, Bausch & Lomb, and other big sellers are conspiring to set prices, yet all have instituted unilateral pricing, which means that retailers aren’t allowed to sell their products below a certain price. The net result is that stores and online sellers can’t discount the vast majority of name-brand contact lenses on the market, so there’s no point in consumers shopping around.

Earlier this year, the Utah legislature passed a bill that would prohibit the setting of price floors on contact lenses. It’s worth noting that online discounter 1800CONTACTS.com backed the bill and just so happens to be headquartered in Utah.

The big contact lens companies followed by suing Utah in federal court, and the latest news is that an appeals court declared the law unconstitutional, blocking it from being enforced. Essentially, the court has said that the contact lens manufacturers are within their legal rights to mandate a price floor.

Novartis, owner of the Alcon brand, has argued that price minimums are necessary to combat “showrooming,” the nickname for the practice in which consumers scope out prices from one seller—often, the optometrist’s office where they receive prescriptions—before shopping around and getting the product at a cheaper price elsewhere, typically online. “Eye-care professionals incur the cost of studying and appraising the new technology, but online and big-box retailers do not,” the company wrote in defense of price floors.

Costco, which says the price minimums have forced it to charge prices that are 20% higher than they would have for some contacts, warned that if eye care professionals don’t have to compete on price, they will “leverage their control over prescriptions and brand selection to also control and monopolize contact lens sales.” The result wouldn’t be bad just for Costco; it would negatively affect consumers too.

For the time being at least, the discount retailers—and by extension, consumers seeking contacts at lower prices—are on the losing side of the battle.

MONEY Health Care

How One Company Beat High Hospital Costs by Setting Its Own Price

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Employers who pay workers' health costs directly are pushing back against astronomical hospital bills.

In the late 1990s you could have taken what hospitals charged to administer inpatient chemotherapy and bought a Ford Escort econobox. Today average chemo charges (not even counting the price of the anti-cancer drugs) are enough to pay for a Lexus GX sport-utility vehicle, government data show.

Hospital prices have risen nearly three times as much as overall inflation since Ronald Reagan was president. Health payers have tried HMOs, accountable care organizations and other innovations to control them, with little effect.

A small benefits consulting firm called ELAP Services is causing commotion by suggesting an alternative: Refuse to pay. When hospitals send invoices with charges that seem to bear no relationship to their costs, the Pennsylvania firm tells its clients (generally medium-sized employers) to just say no.

Instead, employers pay hospitals a much lower amount for their services — based on ELAP’s analysis of what is reasonable after analyzing the hospitals’ own financial filings.

For facilities on the receiving end of ELAP’s unusual strategy, this is a disruption of business as usual, to say the least. Hospitals are unhappy but have failed to make headway against it in court.

“It was a leap of faith,” when Huffines Auto Dealerships, which provides coverage to 300 employees and their families, signed on to the ELAP plan a few years ago, said Eric Hartter, chief financial officer for the Texas firm.

What he says now: “This is the best form of true health care reform that I’ve come across.”

Huffines first worked with ELAP on charges for an employee’s back surgery. The worker had spent three days in a Dallas hospital. The bill was $600,000, Hartter said.

Like many businesses, the dealership pays worker health costs directly. At the time it was working with a claims administrator that set up a traditional, “preferred provider” network with agreed hospital discounts.

The administrator looked at the bill and said, “‘Don’t worry. By the time we apply the discounts and everything else it’ll be down to about $300,000,’” Hartter recalled. “I said, ‘What’s the difference? That doesn’t make me feel any better.’”

Instead he had ELAP analyze the bill. The firm estimated costs for the treatment based on the hospital’s financial reports filed with Medicare. Then it added a cushion so the hospital could make a modest profit.

“We wrote a check to the hospital for $28,900 and we never heard from them again,” Hartter said.

Now Huffines and ELAP, which launched this service in 2007 and has been growing since, treat every big hospital bill the same way. The result has saved so much money that what the dealership and workers contribute for health costs stayed unchanged for six years while benefits remained the same, Hartter said.

More than 200 employers providing health coverage to about 115,000 workers and dependents have hired ELAP. Company CEO Steve Kelly said he is aware of only one other, smaller, benefits consultant with the same approach.

Normally customers who don’t pay bills get hassled or sued. This sometimes happens to ELAP clients and their workers. Hospitals send patients huge invoices for what the employer refused to pay. They hire collection agents and threaten credit scores.

ELAP fights back with lawyers and several arguments: How can hospitals justifiably charge employers and their workers so much more than they accept from Medicare, the government program for seniors? How can hospitals bill $30 for a gauze pad? How can employee-patients consent to prices they will never see until after they’ve been discharged?

The American Hospital Association and the Federation of American Hospitals did not respond to requests for comment about ELAP.

ELAP is not merely a medical-bill auditor, like many other companies, combing hospital statements for errors. It sets the reimbursement, telling hospitals what clients will pay.

Eventually, “overwhelmingly, the providers just accept the payment” and leave patients alone, Kelly said. A federal district judge in Georgia decided a 2012 case against a hospital and in favor of ELAP and its furniture chain client.

Most patients being dunned by hospitals are unlikely to meet with the same success on their own, lacking backup from ELAP and its legal firepower.

Under ELAP’s main model, neither employers nor their claims administrators sign contracts with hospitals. Employers detail the reimbursement process in documents establishing how the plan covers workers. That gives it legal weight, ELAP has argued in court. ELAP agrees to handle all hospital bills for an employer and defend workers from collections in return for a percentage fee tied to total hospital charges.

There is no hospital network. Employees may use almost any facility. Payments are made later based on ELAP’s analysis.

That may change, Kelly said. Often it makes sense even for medium-sized employers to contract directly with hospitals to treat their workers, he said. That way prices are clear.

But for now ELAP clients such as Huffines and IBT Industrial Solutions are giving hospitals a different dose of medicine.

At IBT, a Kansas distributor of bearings and motors, “runaway health costs were starting to threaten the long-term viability of our company,” said chief financial officer Greg Drown. After reading “Bitter Pill,” a critical Time magazine piece about hospitals, IBT executives decided to try something else.

They hired ELAP, which was “not a simple or risk-free move,” cautions Drown.

About one IBT worker in five using a hospital gets “balance billed” for amounts the employer won’t pay, he said. That can take months to resolve even with ELAP’s legal support. But ELAP’s program cut health costs by about a fourth, he added.

Recently managers at a big medical system in metro Kansas City “finally figured out we were doing something a little bit different,” sent “a nasty letter” and followed up with a call, he said.

The hospital executive on the phone “was very condescending and thought I was stupid and had been duped by a predatory consultant and had been sold a — quote — crappy plan,” Drown said.

Drown listened. He told the man he would consult with his colleagues and reply.

“I called him back a week or two later and left him a rather detailed voicemail that said, ‘We’re not changing anything. We’re staying where we are.’ And the guy never called me back.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MONEY Health Care

7 Strategies for Lowering Your Medical Bills

stethoscope wrapped around wallet
Getty Images

Pay less out of pocket by being a smart negotiator

Can you imagine buying a car a piece at a time — and trying to figure out what the total cost is? One person sells you the tires, another a steering wheel — oh, and a specialist will give you a transmission. And you need an engine? The cost will depend on which network you’re in.

That is, of course, how health care is sometimes sold in the United States. You want to know the price of your surgery? OK, but that doesn’t include the operating room, the anesthesiologist or the pathologist . . . they’ll be billing you separately.

But things are beginning to change, partly because Americans are now demanding answers. Motivated by high-deductible health plans and other health care changes, we want to know what we are paying for, and whether the services we receive are competitively priced. And the health care world is responding.

Stephen D. Neeleman, MD, founder and vice chair of HealthEquity, which offers health care savings and spending accounts, says many consumers don’t yet know how to negotiate for the best prices.

And to understand how to work within that system, it’s important to know a few things. First, hospitals may bill for about twice what they actually expect to receive, he says. Networks with negotiating power have agreements with the health care providers that allow them to pay less than the price you’ll see on your bill. So the amount you are billed can depend on whether you have insurance and which network you’re in. Different people pay different prices for the same service. Why can’t you get the best discount? The good news is, you may be able to. Here are some of Neeleman’s tips.

1. Offer a lower lump sum cash payment instead of payment in monthly installments. Yes, they give up a little money, but they are assured of payment and that there will be no need to write off the bill or send it to collections.

2. Talk to the right person. The right person is typically the office manager, and you can open the conversation with, “I’m here, and I’m ready to pay. I realize there are other patients that get better discounts because they are in bigger networks. I want the best deal you give anyone if I pay right now.” Even if your plan has a negotiated rate that is on the high side, the health care provider is free to charge you less than that, Neeleman said.

3. Call at the right time. The right time is as far ahead of your procedure as you can. Having surgery? There can be a dramatic difference in what facilities charge. You have time to find out where your surgeon performs surgery and if having it done at facility X on Tuesday is cheaper than having it done at facility Y on Wednesday, you’ll want to know that. Explain that you want to understand how the charges are determined because you will be paying for a lot of your expenses yourself. (Neeleman said you may be surprised to discover that many conditions don’t require emergency treatment, citing an example of a patient who, on a doctor’s advice, flew cross-country with a complex fracture so that she could be treated within her network, for a much lower price.)

4. Request that your services and procedures be recoded and verified for accuracy. You can look online to check the meanings of the CPT codes. Make sure those agree with what you believe the diagnoses and services were, and ask questions if they do not. Mistakes happen. Neeleman compares it to when grocery store cashiers keyed in prices and now when items are scanned. There is no scanning of medical procedures, and you need to check your bills at least as carefully as your mother checked her grocery receipts.

5. Know what the cost should be before making any payment. Your insurance company may have a tool to help you figure it out. You can find similar information here:

  • clearhealthcosts.com
  • healthcarebluebook.com
  • newchoicehealth.com

6. Don’t pay your bill right away. Give yourself time to be sure the bill is accurate, checking codes and expected prices carefully. However, you do want to pay on time. Medical bills can affect your credit. If you don’t pay, the account may be turned over to collections. (In fact, try to figure out which providers should be sending you bills, and ask questions if you don’t get one. Even bills you never received can wind up as collection accounts.)

7. Be nice. Understand that patients and providers who actually know what things cost is a fairly new phenomenon. So ask rather than demand, and let them know that you’re looking for a solution that will benefit both parties. Your mother was right: It pays to be polite.

Health care is changing, Neeleman said, but it’s slow. In some cases, charges are now being bundled so you DO know the final cost of a procedure. But it’s a whole new world. He compares it to being an early buyer of a Model T — you have the car, but where are the roads? Where are the gas stations? Concerned consumers are forcing a new transparency, though, and that can only be good in the long run.

More from Credit.com:

MONEY Health Care

Now You Can Really Get Free Birth Control Under Obamacare

assortment of birth control pills
Ted Morrison—Getty Images

The Obama administration just tightened the law that says insurance companies must cover all types of contraceptives.

Following recent reports that many women still pay for birth control methods that should be covered by insurers under the Affordable Care Act, the government just released a new document clarifying and tightening the law.

“Insurance companies have been breaking the law and today the Obama administration underscored that it will not tolerate these violations,” Gretchen Borchelt, National Women’s Law Center vice president for health and reproductive rights, said in a statement. “It is past time for insurers to adhere to the law and stop telling women that their chosen method isn’t covered or that they must pay for it.”

Whereas previous government FAQs about Obamacare were not as clear about the types of birth control covered under the law, the new guidance includes an explicit list—printed below—of all the contraceptive methods insurers must cover.

Until now many women, including one MONEY staffer, have found that insurers have been able to skirt the law by lumping together certain categories of contraceptives and charging expensive co-pays on all but a small number of methods. Since the previous language was vague, insurance companies have been able to deny coverage of brand name contraceptives—even when an equivalent generic is not available.

In particular, the new rules are especially good news for those who use IUDs, patches, and vaginal rings, since those are the birth control methods that women have had the most trouble getting covered, according to a recent study by the NWLC.

If your insurer is still making you pay out of pocket for your preferred method of birth control—and a generic substitute is not available to or appropriate for you because of, say, side effects—you should fight back by first talking to your doctor, who could advocate for you to your insurer.

This should be especially effective since the rules make it clear that doctors get the final say over whether a particular birth control method is medically necessary.

According to the new statement: “If an individual’s attending provider recommends a particular service or FDA-approved item based on … medical necessity … the plan or issuer must cover that service or item without cost sharing. The plan or issuer must defer to the determination of the attending provider. Medical necessity may include considerations such as severity of side effects, differences in permanence and reversibility of contraceptives, and ability to adhere to the appropriate use of the item or service.”

If that doesn’t work, consider resources like the National Women’s Law Center: Its website has templates for appeal letters and a free hotline (866-745-5487) you can use to get further help.

Here is the list of contraceptive methods that are now fully covered. Insurers must cover at least one type of birth control in each of these 18 categories:

(1) sterilization surgery for women
(2) surgical sterilization implant for women
(3) implantable rod
(4) IUD copper
(5) IUD with progestin
(6) shot/injection
(7) oral contraceptives (combined pill)
(8) oral contraceptives (progestin only)
(9) oral contraceptives extended/continuous use
(10) patch
(11) vaginal contraceptive ring
(12) diaphragm
(13) sponge
(14) cervical cap
(15) female condom
(16) spermicide
(17) emergency contraception (Plan B/Plan B One Step/Next Choice)
(18) emergency contraception (Ella)

The new government statement also clarifies that insurers must cover preventive services for transgender people when such services are medically appropriate, anesthesia services during preventive colonoscopies, and preventive screening for mutations in the BRCA-1 or BRCA-2 gene.

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