ABLEnews Extra

                         Co-Payment Con

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WASHINGTON (AP) -- Millions of Americans who think they're paying 15
percent or 20 percent of the cost of medical procedures actually are
paying a far bigger share, according to representatives of consumers
and the elderly.

Patients typically get a bill for a procedure and are charged a
percentage co-payment. Their insurance pays the rest. What they don't
know, according to consumer activists, is that insurers often
negotiate deep discounts with hospitals. So, patients -- in percentage
terms -- are paying much higher co-payments than they think.

It works like this, according to an example used during hearings last
year of the Senate Permanent Subcommittee on Investigations:

A medical bill is $1,000, the co-payment is 40 percent and the
subscriber pays $400. But the insurance company has a confidential
agreement with the hospital that gives it a 30 percent discount, so
the actual cost is $700, not $1,000.

The patient ends up paying $400 (40 percent of $1,000 but 57 percent
of $700) and the insurer pays the remaining $300. If the discount had
been shared proportionately by the patient and insurance company, the
patient would have paid $280 instead of $400.

Robert Hunter, director of insurance for the Consumer Federation of
America, said the billing practice, by law, is standard under Medicare
for outpatient procedures from CT scans to cataract removal. But it
also is becoming increasingly common among private insurers, he said.

"It's at least deceptive and may be illegal," he said. "Insurance is
supposed to be a business of utmost good faith. You give your money to
somebody and they give you a piece of paper. They're supposed to live
up to their end of the deal."

The practice, little known at first, is coming under increasing fire
and more than 20 class-action lawsuits have been filed challenging it,
Hunter said.

"People see a bill and they pay it. What they don't realize is the
hospital is sending a different bill to the insurance company. There
are two sets of books," he said.

Insurers, however, defended the practice and said it helps restrain
increases in premiums.

"Our size allows us to negotiate significant discounts for our
subscribers. These discounts are anything but private and they are one
of the reasons we are able to keep premiums low for 65 million
subscribers," said Alixe Glen, spokeswoman for the Blue Cross and Blue
Shield Association.

"Blue Cross and Blue Shield does not realize any windfall whatsoever,"
she said.

But Sen. Sam Nunn, D-Ga., in last year's hearings said the
practice--by increasing co-payments and reducing premiums--"amounts to
a transfer from the sick to the well."

The insurers say employers they deal with know about and approve of
the arrangement, which should be disclosed in employee handbooks.

However, Mary Ellen Bliss, an analyst with the American Association of
Retired Persons, said only an expert would be able to know what's
going on.

"It's totally hidden. There is no way you can figure it out from the
paperwork alone," she said. "Nobody is being straight about this. They
don't outright lie. It's just explained in terms no one can
understand."

One person who did understand was Gerald Haeckel of Scottsville, Va.,
a retiree who spent years working in corporate finance.

In October 1992, his wife had a small malignancy removed from her
breast in an outpatient procedure. He noticed a discrepancy between
the statement they received from the hospital and the statement from
his insurer.

His persistent questioning and letter-writing helped spotlight the
problem for Nunn and triggered an investigation by Virginia regulators
that led in September 1994 to his insurance plan paying a $5 million
fine and a $23 million repayment to its 132,000 customers.

"I'm retired. This gives me something to do. It was their misfortune
to pick on somebody who was retired," he said.

Haeckel's case was featured in stories Monday in The Washington Post
and The Wall Street Journal.

[with a tip of our ABLEnews' hat to Paul Hughes-Cromwick on HEALTHRE]

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