Who Pays What and How? Confusion Between Insurers, Medical Providers, and Patients

As all of us know, medical debt is a growing problem in this country. People are living longer, and medical complications arise with age. Insurers have created a complex payment system, and medical providers often worry whether they’ll be paid or not. In the midst of all this, medical costs have skyrocketed, with many consumers unaware of what they’re being charged, or how they can afford to pay the bill. It’s been said that the country is going through a medical crisis; with a rapidly changing environment for care, cost, insurability, and long-term sustainability of our current medical care system.

In this blog post I’m not going to look at the role of medical insurance providers, nor the quality of care provided by our healthcare system. I want to discuss how the medical provider is paid by the patient, when insurance doesn’t apply, and the consumer has no quibble with the quality of services he was provided.

It often happens that consumers are taken by surprise when it comes to medical costs. An unexpected visit to the emergency room or a sudden medical crisis can cause costs to spiral out of control. Assuming insurance doesn’t cover the medical costs, what options does the patient have to negotiate the cost of medical services? Obviously, this situation is aggravated by the fact that many times a patient doesn’t have time to “shop around” in order to find the right price for comparable medical services.

Of course, it is a far more transparent transaction when the insurer isn’t involved. Third parties tend to make the negotiation between the first two parties more complex, and more difficult. When a patient can deal directly with the doctor or hospital, he or she has a greater awareness of what he’s committed to pay, and how best to move the transaction forward.

Aside from cost, a lawyer looks at the transaction as essentially a contractual one. The parties get together and agree on particular services to be provided, and those services have a particular market value. Regardless of what the parties have agreed on in terms of price, the contract is effectively completed by the performance of the services. But what happens when there is no agreement on price? Is the consumer cut off from the option to negotiate, when he didn’t know exactly what he was being charged, and the service was provided without discussion of cost?

This is the essence of the dilemma that patients face. Let’s say, for instance, that a patient receives emergency services (for which he is grateful). After he gets home from the hospital, he wants to pay the “fair market value” of the services, but was never told the cost. When he is confronted with the bill a number of months later, from a number of different providers to whom he has no relationship, what is the appropriate charge which should be paid? Is he bound to all of those providers for monies to be paid as stated in each invoice? What if he gave no consent to the provision of all of those individual services, and never met a number of those individual providers? As every consumer knows, these decisions can be a fairly exhausting set of concerns.

But the law looks at this type of situation in a much more straightforward manner. If there was no agreement on price, price being one of the essential terms of the agreement, there is no enforceable contractual arrangement. In essence, the consumer is free to negotiate with the provider as to the fair market value of the services after they have been provided, due to the fact the provider failed to secure agreement on the contract price. Failing to get the consumers agreement, there is no contract price, and the price is then open to negotiation by the parties.

This brings up the legal theory known as quantum meruit, which is a Latin phrase meaning, “how much has been earned”. Through comparing a particular medical service to other similar services in the marketplace, the consumer can bring a qualified expert opinion in to make the case as to an appropriate price. Obviously, medical providers don’t wish to squabble over the price they’ve stated is due. Nevertheless, the patient has the right to negotiate, and given competent evidence of the fair market value of the service, he has the right to pay what is deserved, not what is claimed.

Of course, all of this can become fairly tangled in the legal transaction, as medical providers do not wish to communicate on these issues, they simply wish to have the bill paid. If the bill they assert is due is not paid, typically they will send it to collectors and the collector will demand payment or put a negative reference on the credit report.

Moving further along, the medical provider may send the bill to an attorney who will seek a judgment, with the consumer totally unaware of the dangers involved until they eventually receive notice of garnishment. Once a judgment is obtained, the medical provider may issue a garnishment of wages, attachment on bank accounts or other property, or a lien on the consumer’s home. Of course, these are fairly harsh remedies, given the fact that there was no agreement on price when the service was performed. This type of process is often a one-sided transaction: “I billed you as I pleased, and now I’m going to take it out of your wages”.

Do you have a medical bill over $20,000 that you suspect is not in fact a “fair price” for the service performed? I’m happy to consult on these matters, and may be able to help you get some relief, if approximately 60 percent of the bill can be paid in cash. Quite often, the amount that’s owed to the medical provider, according to the Social Security reimbursement standards, is approximately half of the bill which the medical provider demands is due. Should you choose to investigate these matters, please do not hesitate to call our office, and ask to discuss these matters with me personally. Give us a call at (317) 266-8888, or email me directly at mike@mikenorrislaw.com.