Catastrophic Illness — And the Bills to Match
When medical care becomes a matter of life and death, the money demanded by the health care ecosystem reaches a wholly different order of magnitude, churning out reams of bills to people who can’t focus on them, let alone pay them. Soon after he was diagnosed with lung cancer in January 2011, a patient whom I will call Steven D. and his wife Alice knew that they were only buying time. The crushing question was, How much is time really worth? As Alice, who makes about $40,000 a year running a child-care center in her home, explained, “[Steven] kept saying he wanted every last minute he could get, no matter what. But I had to be thinking about the cost and how all this debt would leave me and my daughter.” By the time Steven D. died at his home in Northern California the following November, he had lived for an additional 11 months. And Alice had collected bills totaling $902,452. The family’s first bill — for $348,000 — which arrived when Steven got home from the Seton Medical Center in Daly City, Calif., was full of all the usual chargemaster profit grabs: $18 each for 88 diabetes-test strips that Amazon sells in boxes of 50 for $27.85; $24 each for 19 niacin pills that are sold in drugstores for about a nickel apiece. There were also four boxes of sterile gauze pads for $77 each. None of that was considered part of what was provided in return for Seton’s facility charge for the intensive-care unit for two days at $13,225 a day, 12 days in the critical unit at $7,315 a day and one day in a standard room (all of which totaled $120,116 over 15 days). There was also $20,886 for CT scans and $24,251 for lab work. Alice responded to my question about the obvious overcharges on the bill for items like the diabetes-test strips or the gauze pads much as Mrs. Lincoln, according to the famous joke, might have had she been asked what she thought of the play. “Are you kidding?” she said. “I’m dealing with a husband who had just been told he has Stage IV cancer. That’s all I can focus on … You think I looked at the items on the bills? I just looked at the total.”
Steven and Alice didn’t know that hospital billing people consider the chargemaster to be an opening bid. That’s because no medical bill ever says, “Give us your best offer.” The couple knew only that the bill said they had maxed out on the $50,000 payout limit on a UnitedHealthcare policy they had bought through a community college where Steven had briefly enrolled a year before. “We were in shock,” Alice recalls. “We looked at the total and couldn’t deal with it. So we just started putting all the bills in a box. We couldn’t bear to look at them.”
The $50,000 that UnitedHealthcare paid to Seton Medical Center was worth about $80,000 in credits because any charges covered by the insurer were subject to the discount it had negotiated with Seton. After that $80,000, Steven and Alice were on their own, not eligible for any more discounts. Four months into her husband’s illness, Alice by chance got the name of Patricia Stone, a billing advocate based in Menlo Park, Calif. Stone’s typical clients are middle-class people having trouble with insurance claims. Stone felt so bad for Steven and Alice — she saw the blizzard of bills Alice was going to have to sort through — that, says Alice, she “gave us many of her hours,” for which she usually charges $100, “for free.” Stone was soon able to persuade Seton to write off $297,000 of its $348,000 bill. Her argument was simple: There was no way the D.’s could pay it now or in the future, though they would scrape together $3,000 as a show of good faith. With the couple’s $3,000 on top of the $50,000 paid by the UnitedHealthcare insurance, that $297,000 write-off amounted to an 85% discount. According to its latest financial report, Seton applies so many discounts and write-offs to its chargemaster bills that it ends up with only about 18% of the revenue it bills for. That’s an average 82% discount, compared with an average discount of about 65% that I saw at the other hospitals whose bills were examined — except for the MD Anderson and Sloan-Kettering cancer centers, which collect about 50% of their chargemaster charges. Seton’s discounting practices may explain why it is the only hospital whose bills I looked at that actually reported a small operating loss — $5 million — on its last financial report.
Of course, had the D.’s not come across Stone, the incomprehensible but terrifying bills would have piled up in a box, and the Seton Medical Center bill collectors would not have been kept at bay. Robert Issai, the CEO of the Daughters of Charity Health System, which owns and runs Seton, refused through an e-mail from a public relations assistant to respond to requests for a comment on any aspect of his hospital’s billing or collections policies. Nor would he respond to repeated requests for a specific comment on the $24 charge for niacin pills, the $18 charge for the diabetes-test strips or the $77 charge for gauze pads. He also declined to respond when asked, via a follow-up e-mail, if the hospital thinks that sending patients who have just been told they are terminally ill bills that reflect chargemaster rates that the hospital doesn’t actually expect to be paid might unduly upset them during a particularly sensitive time. To begin to deal with all the other bills that kept coming after Steven’s first stay at Seton, Stone was also able to get him into a special high-risk insurance pool set up by the state of California. It helped but not much. The insurance premium was $1,000 a month, quite a burden on a family whose income was maybe $3,500 a month. And it had an annual payout limit of $75,000. The D.’s blew through that in about two months. The bills kept piling up. Sequoia Hospital — where Steven was an inpatient as well as an outpatient between the end of January and November following his initial stay at Seton — weighed in with 28 bills, all at chargemaster prices, including invoices for $99,000, $61,000 and $29,000. Doctor-run outpatient chemotherapy clinics wanted more than $85,000. One outside lab wanted $11,900.
Stone organized these and other bills into an elaborate spreadsheet — a ledger documenting how catastrophic illness in America unleashes its own mini-GDP.
In July, Stone figured out that Steven and Alice should qualify for Medicaid, which is called Medi-Cal in California. But there was a catch: Medicaid is the joint federal-state program directed at the poor that is often spoken of in the same breath as Medicare. Although most of the current national debate on entitlements is focused on Medicare, when Medicaid’s subsidiary program called Children’s Health Insurance, or CHIP, is counted, Medicaid actually covers more people: 56.2 million compared with 50.2 million. As Steven and Alice found out, Medicaid is also more vulnerable to cuts and conditions that limit coverage, probably for the same reason that most politicians and the press don’t pay the same attention to it that they do to Medicare: its constituents are the poor. The major difference in the two programs is that while Medicare’s rules are pretty much uniform across state lines, the states set the key rules for Medicaid because the state finances a big portion of the claims. According to Stone, Steven and Alice immediately ran into one of those rules. For people even with their modest income, the D.’s would have to pay $3,000 a month in medical bills before Medi-Cal would kick in. That amounted to most of Alice’s monthly take-home pay.
Medi-Cal was even willing to go back five months, to February, to cover the couple’s mountain of bills, but first they had to come up with $15,000. “We didn’t have anything close to that,” recalls Alice.
Stone then convinced Sequoia that if the hospital wanted to see any of the Medi-Cal money necessary to pay its bills (albeit at the big discount Medi-Cal would take), it should give Steven a “credit” for $15,000 — in other words, write it off. Sequoia agreed to do that for most of the bills. This was clearly a maneuver that Steven and Alice never could have navigated on their own. Covering most of the Sequoia debt was a huge relief, but there were still hundreds of thousands of dollars in bills left unpaid as Steven approached his end in the fall of 2011. Meantime, the bills kept coming. “We started talking about the cost of the chemo,” Alice recalls. “It was a source of tension between us … Finally,” she says, “the doctor told us that the next one scheduled might prolong his life a month, but it would be really painful. So he gave up.”
By the one-year anniversary of Steven’s death, late last year, Stone had made a slew of deals with his doctors, clinics and other providers whose services Medi-Cal did not cover. Some, like Seton, were generous. The home health care nurse ended up working for free in the final days of Steven’s life, which were over the Thanksgiving weekend. “He was a saint,” says Alice. “He said he was doing it to become accredited, so he didn’t charge us.”
Others, including some of the doctors, were more hard-nosed, insisting on full payment or offering minimal discounts. Still others had long since sold the bills to professional debt collectors, who, by definition, are bounty hunters. Alice and Stone were still hoping Medi-Cal would end up covering some or most of the debt.
As 2012 closed, Alice had paid out about $30,000 of her own money (including the $3,000 to Seton) and still owed $142,000 — her losses from the fixed poker game that she was forced to play in the worst of times with the worst of cards. She was still getting letters and calls from bill collectors. “I think about the $142,000 all the time. It just hangs over my head,” she said in December.
One lesson she has learned, she adds: “I’m never going to remarry. I can’t risk the liability.
