Will I Have to Pay My Deductible Before I Can Get Medical Care?

Over the last few years, it's become more common for hospitals to ask people to pay their deductibles before medical services are provided. It's important to know why this is happening and how to navigate our current health care system.

A stack of 100 dollar bills and a stethoscope
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The Way It Used to Be

In the past, it was generally accepted that patients were expected to pay their copays at the time of service, but charges that counted towards the deductible would be billed after the fact.

So, if your health plan had a $20 copay for an office visit, the doctor's office would collect that when you arrived for the appointment.

However, if your plan had a $2,000 deductible and you were going in for surgery, you'd pay nothing at the time of the surgery, but would get a bill from the hospital a few weeks later.

First, they would send the claim to your insurer, where the network negotiated rate would be calculated and amounts over that would be written off. Then the insurer would pay their portion, and notify the hospital about your portion of the bill.

At that point, the hospital would send you a bill for your deductible and any applicable coinsurance.

Why They're Billing Upfront

Most hospitals still use the traditional method of waiting to send you a bill until after your procedure is complete and your insurance company has processed your bill.

It's becoming increasingly common, though, for hospitals to ask for payment of your deductible—partial or in full—before scheduled medical services are provided. This is due to a variety of factors, including increasing medical costs and rising deductibles and total out-of-pocket costs.

Hospitals don't want to be stuck with unpaid bills, and they know after the procedure is completed, people may not pay what they owe. The hospital can send them to collections, but obtaining payment upfront is a more effective method of ensuring that the bill gets paid.

If They Ask for Payment Upfront

Ideally, when you're expected to pay is something you'll want to discuss with the hospital billing office well in advance of your procedure. Finding out 18 hours before your surgery that the hospital wants you to pay your $4,000 deductible immediately is stressful, to say the least. 

If you're scheduling a medical procedure for which your deductible will apply, inquire about the hospital's policies right from the start. Talk with your insurer to see if they have any contract negotiations with the hospital that require the bill to be sent to the insurer before the patient is charged.

If not, the hospital may very well want you to pay at least a portion of the deductible up front.

If in doubt, it's also wise to contact your state's insurance department to see if they have any advice about rules and regulations in the state that pertain to medical billing practices.

The more you know, the better you'll be able to navigate the system (note that state insurance regulations don't apply to self-insured group plans, as those are federally regulated under ERISA).

How Much Will You Actually Owe?

Ask the hospital to provide you with an estimate of what you'll owe, keeping in mind that negotiated medical costs tend to be far lower than retail costs.

For example, let's say your deductible is $5,000, you've paid nothing toward it this year, and you're scheduling an MRI.

The average cost of an MRI in the U.S. is about $1,120, although it varies considerably from one facility to another, and what the facility charges is likely to be quite a bit higher than the rate your insurer has negotiated with that facility.

Your hospital might bill $2,000, but the insurer's negotiated rate might be $1,050. In that case, the amount you would have to pay towards your deductible would be $1,050, not $2,000

This isn't really an issue if you're having a procedure that's many times more costly than your deductible. If you're about to have a knee replacement, which averages about $34,000, and your deductible is $5,000, you're going to have to pay the full deductible.

The hospital might ask you to pay all or part of it upfront, or they might bill you after they submit the claim to your insurer, but there's no getting around the fact that you're going to have to pay the full $5,000.

In the previous example about the MRI, however, the actual amount you'll have to pay isn't certain until your insurer has processed the claim.

If the hospital is asking you to pay a portion of your deductible in advance, and it's unclear as to how much you'll actually owe, be sure you discuss the situation with your insurer before giving any money to the hospital.

One way or another, you'll want to make sure that you're only paying the amount that your insurer's explanation of benefits ultimately says you owe, rather than the amount that the hospital charges. 

Are Payment Plans Available?

Hospitals are increasingly working with banks to establish payment plans for patients who need them, often with no interest and with availability that doesn't depend on the patient's credit history.

If the hospital asks you to pay your deductible in advance of a medical procedure and there's no realistic way you can do so, ask them about the possibility of a payment plan.

The hospital wants you to get treatment, but they don't want to be stuck with bad debt if you can't pay your portion of the bill. Letting you stretch out payments is better than your going without care or the hospital not getting paid at all.

If you can't pay the amount that they're asking for, suggest an amount that you can pay, and ask if they'll let you schedule payments for the rest. 

Ask if a case manager or social worker at the hospital can assist you in navigating the billing and payment process. You don't have to figure this out alone, and the hospital's payment requirements could be more flexible than they first appear.

Depending on your financial situation, you should also ask about the hospital's charity care program, or whether they can write off a portion of your costs based on your income. 

Denying Care Based on Ability to Pay

There's sometimes a misconception about hospitals' obligations in terms of providing care regardless of a patient's ability to pay.

Since 1986, the Emergency Medical Treatment and Labor Act (EMTALA) has required all Medicare-accepting hospitals (virtually all U.S. hospitals) to provide screening and stabilization services to anyone who arrives in the emergency room, including women in active labor, regardless of their insurance status or ability to pay for care.

The emergency room is required to:

  • Screen you to determine what the problem is
  • Provide stabilization services (they can't let you bleed to death due to lack of funds)

They don't have to provide anything beyond that if they're not certain you can pay for it, and EMTALA doesn't extend to any care beyond emergency services.

So a pre-scheduled medical procedure is not going to be subject to any rules that require hospitals to provide care regardless of the patient's ability to pay. 

Increasing Deductibles

The uninsured rate is lower than it was when the Affordable Care Act was implemented, although it has increased under the Trump Administration.

According to U.S. Census data, 14.5% of the U.S. population was uninsured in 2013. That fell to 8.6% by 2016, but grew slightly, to 8.7%, in 2017.

Although Census data for 2018 is not yet available, other data indicate the uninsured rate has continued to climb since 2017—but it is still well below the pre-ACA uninsured rate. However, some of those newly insured people have particularly high out-of-pocket costs.

The ACA limits how high in-network out-of-pocket costs can be, but the limit itself is fairly high. In 2019, health plans can have out-of-pocket costs as high as $7,900 for an individual and $15,800 for a family. For 2020, those upper caps are set at $8,150 and $16,300, respectively.

Many health plans have out-of-pocket limits well below those amounts, but deductibles on individual market plans are often multiple thousands of dollars (cost-sharing reductions lower these deductibles for eligible people, as long as they select a silver plan in the exchange).

Employer-sponsored plans have to abide by the ACA's cap on out-of-pocket costs too, but they tend to have deductibles and out-of-pocket costs that are lower than those in the individual market.

In 2018, the average deductible for people with employer-sponsored health insurance was $1,350, but that included the lucky 15% of covered workers who didn't have a deductible at all.

If you only consider the 81% of covered workers who did have deductibles, their average deductible was more than $1,500.

Yet the Federal Reserve reported in 2017 that 44% of respondents to their Survey of Household Economics and Decision Making would not be able to come up with $400 to cover an unexpected bill, or would have to sell something in order to cover the cost.

That presents a conundrum when people have an unexpected but necessary medical procedure and a fairly high deductible.

It also presents a conundrum for hospitals—tasked on one hand with providing health care to residents, but also needing to generate enough revenue to stay financially viable.

Requiring upfront payment of at least part of the deductible is one way for hospitals to avoid situations in which patients end up unable to pay their bills.

Consider an HSA

If your employer offers an HSA-qualified high deductible health plan (HDHP), or if you're purchasing your own health insurance in the individual market, consider enrolling in an HDHP.

They aren't the right fit for everyone, but if you're covered by an HDHP, you can contribute pre-tax money to an HSA, and it will be there if and when you need it. 

In 2019, you can contribute up to $7,000 to an HSA if you have family coverage under an HDHP, and up to $3,500 if you have self-only coverage under an HDHP (these amounts will increase to $7,100 and $3,550 in 2020).

Even if you can only contribute a small amount each month, it will add up over time, and there's no "use it or lose it" provision—the money remains in your account until if and when you need to withdraw it.

You can build up a cushion in an HSA while you have coverage under an HDHP, and withdraw it at a later date to cover future medical expenses, even if you no longer have HDHP coverage at that point.

The takeaway is: If you have access to an HSA-qualified plan, enrolling and making contributions will make it easier to deal with a potential future situation in which a hospital suddenly asks you to pay a significant chunk of money upfront before you can get medical care.

If your employer offers an FSA, that's also a good option, but keep in mind that unused money in your HSA will remain in the account from one year to the next— that's not the case with FSA funds

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Article Sources
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