A Cautionary Tale: Prepaying Medical Bills
Some health care providers are asking patients to pay the deductible on their insurance before being treated, but patients are not legally bound to do so
The week before my husband's spine surgery we received a call from our surgeon's billing office. My husband had not met his annual deductible so we would owe $654 — paid up front.
Frankly, in the moment I didn't think much of it. We had a $1,000 deductible, so the request seemed reasonable. And the week before a major surgery, you don't want to rock the boat with your surgeon's office! So, I wrote a check thinking it would be applied to my deductible, and then added the receipt to my growing surgery documents folder.
I had to track when bills were mailed, how much each was for and whether the balance would be paid by the insurance company or by us.
However, my experience with this pre-payment, while a common request from doctors' offices, is quite a cautionary tale as one prepares for a major medical procedure.
Not a Bill but an Estimate
Following the surgery we started getting bills from the different doctors who treated my husband in the hospital. And like the pre-bill I had from the surgeon, those first bills we received were for our unmet deductible. There were actually 19 different claims for my husband's surgery from a variety of medical practices and procedures — not unusual for a 6-hour operation and a six-day hospital stay.
However, all those different claims don't arrive at the insurance company at the same time. The first ones to arrive are the first to be processed and the first applied to the deductible. The surgeon, whom we had pre-paid, was not among those early completed claimants. Through this I learned that I had not paid my deductible before surgery, what I really paid was an estimate of that deductible.
That pre-payment to the surgeon may never even apply to the deductible since claims by all providers, including the hospital and anesthesiologist, are processed in the order they're received by the insurance company. Bills processed quickly are the ones actually applied to the deductible and are now outstanding debts that we are responsible for paying.
Learning the Rules of the Game
So what did I learn from this process?
First lesson: In addition to being my husband's caregiver, I also needed to become a bookkeeper. I had to track when bills were mailed, how much each was for and whether the balance would be paid by the insurance company or by us. What we would actually owe the surgeon depended on when the surgeon's claim was processed. Since other medical bills did not exceed the deductible before the surgeon's bill arrived, the estimated amount I paid in advance was more than I would actually owe.
To get a refund of what I had overpaid when I pre-paid, I needed to work with the doctor's billing office. In the meantime, I needed to pay the bills that were processed before the surgeon's invoice since they were applied to the deductible; and of course, I also had to pay all the required co-pays.
The Peril of Low Savings
Second lesson: Doctors' requests for payment before their services are rendered mandates that people have healthy savings. My husband and I are fortunate that we do, so the prepayments and overpayments have not been a financial disaster for us. Yet this is not the case for many others.
In Florida, where we live, many individuals live below economic security. About a quarter of married households, 40% of single-adult households and 38% of retired households were economically insecure in 2022. And the numbers are even more stark when we look across gender and race.
Half of Americans have less than $500 in savings, with 36% having less than $100 in savings.
Of course, Florida is not unique in this regard. A 2024 GOBankingRates survey found that half of Americans have less than $500 in savings, with 36% having less than $100 in savings. They do not have the money to pay bills upfront and then wait for refunds if they overpay.
We are also lucky that our deductible is relatively low at $1,000, so deductible prepayments would not have been more than that. However, CNN recently reported that the average yearly deductible for an individual was $5,101. For major surgery, such as my husband's spinal procedure, that full deductible could easily be required as the pre-payment.
If you somehow scrape together enough to prepay such a deductible, you may not have the wherewithal to pay other medical bills that arrive after your surgery but before the insurance company sorts out who really gets paid out of your deductible. Meanwhile, you will be responsible for groceries, rent, car payment and other routine expense. That is a financial reality that could bankrupt most Americans.
Fallout from High-Deductible Plans
Third lesson: Prepayments for major medical procedures are becoming increasingly common as medical offices and hospitals want to ensure that patients pay what they owe fully and promptly. This is, in part, because hospitals receive 30% of their revenue from patients, up from 10% in 2002. This results from the growing numbers of people who are covered by high-deductible health care plans. In 2014, about one-third of workers were in high-deductible insurance plans, according to Bureau of Labor Statistics data; by 2023 that jumped to over half of all workers (51%). Doctors want to be sure that they will be compensated for the care they provide.
Fourth lesson: It is not illegal to be asked to pay what you may owe in advance for a major medical event. But if you are asked to pay upfront, legally you don't have to. "You don't realize that you could and should say no, because you're already in a very vulnerable state," Courtney Hedderman, AARP's Illinois associate state director of advocacy and outreach told Advisory Board, a research firm.
It is illegal to withhold care in an emergency room if one doesn't pay before services are performed. The Emergency Medical Treatment and Active Labor Act ensures patients access to emergency care regardless of ability to pay.
Finally, this experience further highlights for me the confusing and inequitable health care system in the United States. The movement toward prepayment of an estimated deductible for major medical procedures seems rooted in real concerns about uncompensated care. Growing numbers of Americans carry high deductible plans and medical debt is crippling families.
Many Americans Cannot Pay for Care
A 2023 report from the Commonwealth Fund found that half of working-age adults said it was very or somewhat difficult for them to afford their health care costs for their families. And, regardless of insurance status, one-third of Americans carry medical debt. This not only means they are more likely to delay or forgo treatments, it also carries with it financial anxiety and stress.
Requiring pre-paying on estimates of care and then navigating a refund system to recoup payments is an additional burden for patients and their caregivers — one that in many ways can slow recovery and may leave them in an economically precarious position.
