What is Cash Pay?
Typically, when you get medical care, the doctor or practice will start a complicated billing chain that goes from them to your insurance, back to the practice and then to you. Along the way things like deductible, co-pays, and co-insurance are factored in. In fact, most of the parties involved will have no idea what the final financial obligations will be to patient and insurance. This whole process generally takes months, and is an enormous cause of the surge in healthcare costs.
Cash pay is when you pay for medical care on the spot, like you would for a candy bar from the gas station. Many hospitals, practices, and doctors are willing to accept a reduced fee if the patient pays with cash, because the money comes through immediately, and no time-consuming paperwork and multi-party adjustment is involved.
So How Do I Know When to Pay Cash?
Some procedures are more prone than others to have a cheaper cash fee, if the practice/facility accepts cash payment at all. Diagnostic procedures, such as CAT scans, x-rays, and ultrasounds are good ones to ask about before you submit a claim through insurance. Lab work, certain prescription drugs, out-patient surgeries, and therapeutic services like physical therapy can also be significantly cheaper when you pay with cash.
What to do:
- Ask if you have the option to pay in cash before the procedure.
- Call your insurance company. They often have negotiated rates with providers and facilities, and will be able to tell you what you will pay through insurance, and what you will pay with cash.
- Compare the cash price you received versus the price through insurance.
- If you do pay with cash, used tax-advantaged dollars, such as HSA funds.
There are certain scenarios where it is a no-brainer to pay with cash. For one, if you don’t have health insurance, you’ll have to pay with cash. Still negotiate the price beforehand, however, as prices can still fluctuate. You’ll find many facilities and doctors accept a wide range of fees.
If you’re on a high deductible health insurance plan, cash pay can be an excellent choice. Say, for example, you’re a healthy, young individual with a $3,000 deductible. Chances are you won’t hit that deductible most years. That means the cheaper you can get care, the better. About half of Americans have a high deductible health plan.
This can be especially wise if you’re near the end of the year, and are not close to hitting your deductible.
In other cases, you might have health needs not covered by your insurance, so don’t even bother running the claim through insurance. Just pay cash.