Reasonable and Customary Charges

The American healthcare industry is carrying on a ridiculous scam: They do everything possible to obscure their prices, and then try to bill astronomical fees for services.  Anyone who has medical insurance should be amused when they see every single bill reduced by their insurer by factors ranging from three to as much as ten.  (I.e., the doctor may bill $100 for a service but agree to accept a payment of just $10 from the insurer.)  In most cases this final payment amount is known in the industry as the “reasonable and customary fee.”  And even if you don’t have insurance you should not have to pay more than that.

If you ever buy medical services without insurance, make it clear ahead of time that you will pay only “reasonable and customary fees.”  Of course your first bill will probably be for the inflated amount, not the reasonable and customary amount.  I don’t know of a realiable public source for these.  I have always had some insurance, and even when it didn’t cover a particular service I have been able to call my insurer and ask them what the reasonable and customary fee should be.  They must have a secret catalog they all share.  Because I send that amount in along with a note saying I’m only paying reasonable and customary fees, and that has always been the end of the matter.

If you don’t have access to an insurer, and the billing office isn’t forthcoming with the reasonable and customary amounts, you might try contacting one of the numerous government agencies who have become involved in healthcare to ask what they expect to pay.

And this doesn’t just apply to healthcare:  I have also learned that there are industry standard fees for automotive repairs — another area where lack of information can result in bills that are many times larger than they need to be.  Here owning an extended warranty can save you the trouble of finding and applying the standard fees.  Otherwise you need to appeal to someone with access to the industry’s “Labor Time Standards” manuals, which set out the amount of time that a mechanic should reasonably bill for every conceivable service.

The value of this billing expertise is, incidentally, why I buy extended warranties for all of the cars that I keep past the manufacturer’s base warranty.  Of course, extended warranties are often an enormous profit center, so I bargain aggressively to get them near wholesale cost.

One thought on “Reasonable and Customary Charges

  1. federalist Post author

    Interesting note from an Op-Ed in today’s WSJ backs up the idea of paying insurance companies solely for their administrative expertise:

    [W]hat “insurance” firms actually sell to large employers — which account for the single largest segment of the entire health-care market — is usually administrative services, not actual insurance. (Large companies are not insured; they pay benefits directly.)

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