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Why Medical Bills Are a Leading Cause of Bankruptcy

Updated: Aug 18, 2023

Often, these little life surprises come when you are at your most vulnerable... such as in emergency situations or when your doctor/facility used out-of-network providers (according to a national study from Johns Hopkins University). For example, you may be treated in an in-network emergency room but that does not mean the doctors treating you are in your network. The opposite can also happen: your physician is in network but you are receiving treatment at an out of network facility. How would you ever know that?

400,000 Doctors Canvassed The study suggests that because you do not select the doctors, you do not know ahead of time if they take your insurance. This shocks those who receive bills for hundreds or even thousands of dollars, months after the treatment, from providers unbeknownst to them!

400,000 doctors were canvassed across the US to rank the difference between the amount Medicare reimburses doctors for treatments and the amount charged to patients covered by other insurance, with no coverage at all or out of network treatment.

Medicare fee schedules were used as a baseline because insurance companies use those fees as a beginning point when calculating patient reimbursement out of network. The typical physician charges about 2.5 times the amount Medicare pays. However, the highest markups came from doctors not selected by the patient.

What Doctors Charge The typical anesthesiologist, emergency physician, pathologist, neurosurgeon, ambulance, and radiologist charge at least four times the Medicare reimbursement (with anesthesiologists charging six times the amount on average).

The lowest markups are used by physicians that people usually see the most. These include general practice doctors, immunologists, dermatologists, psychiatrists, family practitioners and allergists. Their charge up is less than twice the Medicare rates. Regional differences were also noted. For example, doctors in Alaska and Wisconsin markup patient costs at about twice the rate of physicians in Hawaii and Michigan.

It is Getting Worse As the healthcare system becomes more complicated, insurance companies may reduce reimbursement rates for contracted physicians (and facilities), which may cause doctors (and facilities) to opt out of the insurance network upon contract expiration. So, the doctor (and facility) who was in your network is now out of network. This means patients are left holding a larger balance. Sadly, medical bills are a leading cause of bankruptcy.

As of Spring 2016, 23 states were working towards or already have consumer protections in place. Check your state's Department of Insurance website for additional information.

Steps You Can Take The best hedge against an unexpected medical bill balance is prevention and advocating for yourself by taking action before a bill ends up with a collection agency.

  1. Research, plan and prepare prior to an emergency situation.

  2. For non-emergency care, confirm treatment will be rendered by in network providers.

  3. When providing your insurance information, always refer to your plan by its full name. The majority of big insurers have sub plans that may or may not include providers in network.

  4. Maintain a communications documentation log.

  5. Ask for the names of the providers (or facilities) that will be involved in your care. Check with your insurance and the providers themselves to determine if they are in network vs. covered by your insurance.

  6. Check your state's insurance regulation information to determine what consumer protections are in place against unexpected medical bill balances.

  7. Your insurance may state you don't owe a balance; however, if a contract does not exist between your insurance and the provider, you may still owe the balance (if no state laws apply).

  8. If you find you owe the balance you may be able to negotiate with the provider to reduce the balance. Understand what the procedure's average cost is in your area.

  9. If your insurance is through your employer, speak with your human resources department.

  10. Verify the provider truly is not in your insurance network.

MBCR understands the challenges in receiving a medical bill and successfully resolving a health insurance claim issue. Learn more at

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