Patients negotiate for care with cash HEALTH CARE

Palo Alto public relations specialist Ed Lee started paying out of pocket when he realized that premiums and deductibles were costing him thousands before his insurance kicked in. Palo Alto public relations specialist Ed Lee started paying out of pocket when he realized that premiums and deductibles were costing him thousands before his insurance kicked in. Photo: Michael Macor, The Chronicle Photo: Michael Macor, The Chronicle Image 1 of / 3 Caption Close Patients negotiate for care with cash 1 / 3 Back to Gallery

Palo Alto resident Ed Lee routinely negotiates for his own health care services, everything from the cost of a scan to an urgent-care visit - often securing discounts of 30 to 50 percent off the original charges.

Lee, 61, a self-employed public relations expert in the semiconductor industry, started bypassing his health insurance and paying out of pocket last year when he realized that premiums and deductibles were costing him more than $12,000 before his insurer paid a dime.

With that decision, Lee became part of a new breed of health care consumer - people who pay such a large portion of their health costs that they're questioning the value of insurance. And because they're footing so much of the bill, they feel they owe it to themselves to get a decent price.

Sometimes that means shopping around for prices for blood work or offering to pay cash for a procedure in exchange for a discount.

Eroding shelter

Lee's advice is simple: Just ask.

"The worst they can say if you ask is 'no,' " said Lee, who has bargained for better prices at times than what his insurer could get.

"Every time I've asked," he said, "I've gotten some sort of discount."

Patients, especially those covered by their employers' health plans, used to be sheltered from much of the costs of health care because they paid little more than a co-payment.

But more employers are shifting toward high-deductible policies or requiring employees to pay a percentage of each health service they receive. In addition, an increasing number of self-insured consumers find they can afford little more than catastrophic coverage.

"We're on the cusp of a very significant transition to consumers being very concerned about costs," said Dr. John Santa, director of the Consumer Reports Health Ratings Center, a research arm of Consumer Reports magazine.

Taking chance on insolvency

In Lee's case, he opted to drop his insurance as of June 30. He said he never came close to reaching his $5,200 deductible, even during a year in which he had two bouts of pneumonia.

He realizes that a major health problem could drive him into bankruptcy, but he has decided to take that chance.

"I know it's a huge risk, but I felt I was just flushing the money down the toilet," said Lee, who has no spouse or dependent children who need coverage.

Financial and health experts don't advise going Lee's route. Health insurance, even with very high deductibles, can protect consumers from financial ruin and prevent providers or the general public from being stuck with patients' unpaid medical costs. Insurance offers access to low- or no-cost preventive care.

Still, U.S. health care costs, which now amount to $2.6 trillion and constitute 18 percent of gross domestic product, are rising faster than inflation - and that's likely to continue. Insurers and employers are shifting an increasing share of costs to consumers leading up to 2014, when the industry will undergo major changes under the federal health law.

So some people are deciding to negotiate their health services on their own.

But what to pay?

But consumers might have a tough time figuring how much that rotator cuff surgery or CT scan will cost. Negotiated rates that insurers pay to health care providers are proprietary, leaving the end consumer in the dark.

"To call it a confusing mess is a gross understatement," said Dr. David Belk, an Alameda internist who hosts a website called the True Cost of Healthcare. "It's the one industry in which virtually everyone involved has decided to abdicate all financial transactions to a third party that isn't telling anyone anything."

Belk said negotiating for lab prices or offering to pay up front for simple services in exchange for a discount is one thing. "But how much leverage do you have to negotiate when you're sitting on a gurney having a heart attack?" he said.

Some companies offer services to help consumers figure out how much doctors, labs and hospitals charge for their services.

Castlight Health, a San Francisco company founded in 2008, helps people covered under a certain type of employer plan to shop for health care services to keep deductibles low.

Healthcare Blue Book of Nashville uses industry data from large employers to calculate a fair price and allows consumers to look up a fair market cash price for medical procedures, diagnostic tests, medications and other services by ZIP code.

"You should always understand what the fair price of care should be and ask about your price before you get your care," said Dr. Jeffrey Rice, chief executive officer of Healthcare Blue Book. "If it should cost $500 and someone's trying to charge $2,000, you might want to consider other options."

Rice recommended that patients shop around because prices can vary greatly, even within the same area.

Pricing variables

A UCSF analysis released in April found enormous discrepancies in hospital prices throughout California. Bills for almost 20,000 cases of routine appendicitis at 289 hospitals ranged from a low of $1,529 to a high of almost $183,000 with a median cost of $33,611.

But Jan Emerson-Shea, spokesman for the California Hospital Association, said patients simply can't bargain for hospital prices like they would for a car.

"Hospitals are willing to give discounts to people who truly cannot afford their care, but if you have insurance, that's what insurance is for," said Emerson-Shea, adding that the state's hospitals lose $12 billion a year in uncompensated care.

State law in place since 2007 requires hospitals to offer free or discounted care to patients who are uninsured or underinsured. "If you have a high deductible, that's the choice you made, and the hospitals shouldn't be responsible for that," Emerson-Shea said.

But patient advocates say some providers are willing to deal.

Linda Garvin, a registered nurse and founder of Patient Advocate Bay Area Inc. in Alameda, said patients can ask for discounts - especially if they offer cash - but they need to be polite.

"A lot of people get so frustrated. ... They've gotten to such a point where they're not on speaking terms with the billing department," she said. "Sometimes it's just a matter of telling somebody that, 'This is the income I have to work with - is there something we can work out?' "

Meanwhile, Lee said he will continue to buy his medication from an online Canadian pharmacy, negotiate for services when needed, and try to stay healthy.

"I'm just crossing my fingers till I'm eligible for Medicare," Lee said.