Paperless?

I came into adulthood in the era when utilities, companies that provided services, and those that extended credit used the U.S. Mail to send an invoice. In most cases the invoices came at the end of the month and it was expected that you paid them within ten days or so. The method of payment was to write a check and use the enclosed envelope to return the payment by mail. I don’t remember the postage rate exactly, but it was probably somewhere between ten and fifteen cents when we began our married life. Large companies had access to lower postage rates by presorting the invoices.

I’m not unhappy that business is making a transition from that system. It is very convenient for me to pay bills electronically by using the computer and the Internet to transfer money from my checking account to the businesses with whom I do business. I like the convenience of automatic payments that are set up in advance and allow for important bills such as our mortgage, insurance and utilities to be paid on time without every experiencing a delay. Having things like that set up also makes it much easier to travel. I don’t have to worry about checking the mail in order to keep up with payments that need to be made.

More and more businesses are getting into electronic and paperless billing systems. Usually it works fairly flawlessly, but occasionally there are small glitches. I’ve been paying attention to the glitches in the area of medical bills lately. We’ve been more aware of medical expenses since my wife’s hospitalization this fall.

We are covered by medicare and we have a very good supplementary insurance to cover other medical expenses. Although we don’t fully understand the system, we are aware that the process begins with the health care provider sending bills to Medicare and to our supplementary carrier. Medicare is the primary insurance, so they respond first. They send the provider a check, but they don’t just pay the bill. They discount the amount billed to another figure. This not only decreases the medicare portion of the payment, but also the amount remaining to be paid by the other carrier. The bill is then processed by the supplementary insurance company which also applies discounts. We receive explanation of benefits statements from Medicare and from the insurance company which, if carefully studied, eventually tell us what portion of the bill we are supposed to pay. A bill that starts out at $1,500, for example may result in a total payment to the provider of perhaps $800, with the portion that we pay being $20. It takes a couple of months or more for all of the paperwork exchanges to be made before we finally know what we are supposed to pay. Although we have signed up for “paperless” billing, we will receive multiple invoices, explanation of benefits sheets, and other pieces of paper in the mail from the insurance company and from the health care providers.

A week ago, I received notice from a health care provider that the process on one bill had been completed and it was time for me to make a payment. The amount was small, less than $30. I immediately used the provider’s online payment method to make a transfer from my checking account and pay my portion of the bill. I was pleased with how well the process went and how easy it was to make a payment. The amount I paid was exactly the amount the explanation of benefits report from the insurance company said I should pay. Then, yesterday, I received a paper statement from the provider in the mail for the amount that I paid electronically. Since I have already paid the bill, I filed the statement together with the explanation of benefits and a hand-written note to myself with the date of the electronic payment. I know that the provider will catch up with the payment eventually.

I’m a bit annoyed with the simple fact that “paperless” doesn’t mean “without paper.” There is still a lot of paper involved in the process. With many providers it doesn’t even mean less paper. But I am more deeply troubled by the huge inefficiency of the system. I know that with the costs of paper, envelopes, mail and especially the costs of people to operate the computers, it cost the provider way more than $30 to collect the fee from me. I don’t know what portion of medical costs is wrapped up in the inefficiencies of the billing and payment system, but I know it is a lot. Our local hospital, for example, sends statements from Denver, which means that they have contracted with an independent business just for the process of billing and collections. Those services are not inexpensive.

It is virtually impossible to determine how much this inefficiency costs consumers in part because there is no one in the system who can explain the amounts that are billed. It appears that initial statements are simply huge numbers created in order to make income from receiving a partial payment. As valuable as my wife’s trip to the hospital was, it probably never had a fair market value of over $100,000 which was the number for just the hospitalization that appeared on the first statement. The process doesn’t begin with real numbers, just fantasy numbers. No one can say why that number was chosen, as opposed to one that might vary as much as 50 or 60 percent. I’m guessing that the hospital spends more than 10% of its operating budget on the costs of negotiation and billing. That would be more than $10,000 on a single hospitalization. It is, of course, only a guess because there is no one who actually knows the real numbers. Hospitals don’t operate in the arena of real numbers.

So we have a very thick file of paper to document our encounters with the medical providers. Thank goodness we’ve gone paperless. I can’t imagine what it would be like if we weren’t using their “paperless” electronic billing system. We’d need a separate filing cabinet just for two weeks over the end of September.

Copyright (c) 2019 by Ted E. Huffman. I wrote this. If you would like to share it, please direct your friends to my web site. If you'd like permission to copy, please send me an email. Thanks!