The Best American Magazine Writing 2014

by The American Society of Magazine Editors

  As 2013 began, Recchi was being treated back in Ohio because he could not pay MD Anderson for more than his initial treatment. As for the $13,702-a-dose Rituxan, it turns out that Biogen Idec’s partner Genentech has a charity-access program that Recchi’s Ohio doctor told him about that enabled him to get those treatments free. “MD Anderson never said a word to us about the Genentech program,” says Stephanie Recchi. “They just took our money up front.”

  Genentech spokeswoman Charlotte Arnold would not disclose how much free Rituxan had been dispensed to patients like Recchi in the past year, saying only that Genentech has “donated $2.85 billion in free medicine to uninsured patients in the U.S.” since 1985. That seems like a lot until the numbers are broken down. Arnold says the $2.85 billion is based on what the drug maker sells the product for, not what it costs Genentech to make. On the basis of Genentech’s historic costs and revenue since 1985, that would make the cost of these donations less than 1 percent of Genentech’s sales—not something likely to take the sizzle out of CEO Severin’s Investor Day.

  Nonetheless, the company provided more financial support than MD Anderson did to Recchi, whose wife reports that he “is doing great. He’s in remission.”

  Penne of MD Anderson stressed that the hospital provides its own financial aid to patients but that the state legislature restricts the assistance to Texas residents. She also said MD Anderson “makes every attempt” to inform patients of drug-company charity programs and that fifty of the hospital’s 24,000 inpatients and outpatients, one of whom was from outside Texas, received charitable aid for Rituxan treatments in 2012.

  3. 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 eleven 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, twelve days in the critical unit at $7,315 a day, and one day in a standard room (all of which totaled $120,116 over fifteen 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 percent 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 percent of the revenue it bills for. That’s an average 82 percent discount, compared with an average discount of about 65 percent 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 percent 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 twenty-eight 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 cut
s 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.”2

  $132,303: The Lab-Test Cash Machine

  As 2012 began, a couple I’ll call Rebecca and Scott S., both in their fifties, seemed to have carved out a comfortable semiretirement in a suburb near Dallas. Scott had successfully sold his small industrial business and was working part time advising other industrial companies. Rebecca was running a small marketing company. On March 4, Scott started having trouble breathing. By dinnertime he was gasping violently as Rebecca raced him to the emergency room at the University of Texas Southwestern Medical Center. Both Rebecca and her husband thought he was about to die, Rebecca recalls. It was not the time to think about the bills that were going to change their lives if Scott survived, and certainly not the time to imagine, much less worry about, the piles of charges for daily routine lab tests that would be incurred by any patient in the middle of a long hospital stay. Scott was in the hospital for thirty-two days before his pneumonia was brought under control. Rebecca recalls that “on about the fourth or fifth day, I was sitting around the hospital and bored, so I went down to the business office just to check that they had all the insurance information.” She remembered that there was, she says, “some kind of limit on it.”

  “Even by then, the bill was over $80,000,” she recalls. “I couldn’t believe it.”

  The woman in the business office matter-of-factly gave Rebecca more bad news: Her insurance policy, from a company called Assurant Health, had an annual payout limit of $200,000. Because of some prior claims Assurant had processed, the S.’s were well on their way to exceeding the limit. Just the room-and-board charge at Southwestern was $2,293 a day. And that was before all the real charges were added. When Scott checked out, his 161-page bill was $474,064. Scott and Rebecca were told they owed $402,955 after the payment from their insurance policy was deducted. The top billing categories were $73,376 for Scott’s room; $94,799 for “RESP SERVICES,” which mostly meant supplying Scott with oxygen and testing his breathing and included multiple charges per day of $134 for supervising oxygen inhalation, for which Medicare would have paid $17.94; and $108,663 for “SPECIAL DRUGS,” which included mostly not-so-special drugs such as “SODIUM CHLORIDE .9%.” That’s a standard saline solution probably used intravenously in this case to maintain Scott’s water and salt levels. (It is also used to wet contact lenses.) You can buy a liter of the hospital version (bagged for intravenous use) online for $5.16. Scott was charged $84 to $134 for dozens of these saline solutions.

  Then there was the $132,303 charge for “LABORATORY,” which included hundreds of blood and urine tests ranging from $30 to $333 each, for which Medicare either pays nothing because it is part of the room fee or pays $7 to $30. Hospital spokesman Russell Rian said that neither Daniel Podolsky, Texas South-western Medical Center’s $1,244,000-a-year president, nor any other executive would be available to discuss billing practices. “The law does not allow us to talk about how we bill,” he explained. Through a friend of a friend, Rebecca found Patricia Palmer, the same billing advocate based in Salem, Va., who worked on Steve H.’s bill in Oklahoma City. Palmer—whose firm, Medical Recovery Services, now includes her two adult daughters—was a claims processor for Blue Cross Blue Shield. She got into her current business after she was stunned by the bill her local hospital sent after one of her daughters had to go to the emergency room after an accident. She says it included items like the shade attached to an examining lamp. She then began looking at bills for friends as kind of a hobby before deciding to make it a business.

  The best Palmer could do was get Texas Southwestern Medical to provide a credit that still left Scott and Rebecca owing $313,000. Palmer claimed in a detailed appeal that there were also overcharges totaling $113,000—not because the prices were too high but because the items she singled out should not have been charged for at all. These included $5,890 for all of that saline solution and $65,600 for the management of Scott’s oxygen. These items are supposed to be part of the hospital’s general room-and-services charge, she argued, so they should not be billed twice.

  In fact, Palmer—echoing a constant and convincing refrain I heard from billing advocates across the country—alleged that the hospital triple-billed for some items used in Scott’s care in the intensive-care unit. “First they charge more than $2,000 a day for the ICU, because it’s an ICU and it has all this special equipment and personnel,” she says. “Then they charge $1,000 for some kit used in the ICU to give someone a transfusion or oxygen. … And then they charge $50 or $100 for each tool or bandage or whatever that there is in the kit. That’s triple billing.” Palmer and Rebecca are still fighting, but the hospital insists that the S.’s owe the $313,000 balance. That doesn’t include what Rebecca says were “thousands” in doctors’ bills and $70,000 owed to a second hospital after Scott suffered a relapse. The only offer the hospital has made so far is to cut the bill to $200,000 if it is paid immediately, or for the full $313,000 to be paid in twenty-four monthly payments. “How am I supposed to write a check right now for $200,000?” Rebecca asks. “I have boxes full of notices from bill collectors. … We can’t apply for charity, because we’re kind of well off in terms of assets,” she adds. “We thought we were set, but now we’re p
retty much on the edge.”

  Insurance That Isn’t

  “People, especially relatively wealthy people, always think they have good insurance until they see they don’t,” says Palmer. “Most of my clients are middle- or upper-middle-class people with insurance.”

  Scott and Rebecca bought their plan from Assurant, which sells health insurance to small businesses that will pay only for limited coverage for their employees or to individuals who cannot get insurance through employers and are not eligible for Medicare or Medicaid. Assurant also sold the Recchis their plan that paid only $2,000 a day for Sean Recchi’s treatment at MD Anderson. Although the tight limits on what their policies cover are clearly spelled out in Assurant’s marketing materials and in the policy documents themselves, it seems that for its customers the appeal of having something called health insurance for a few hundred dollars a month is far more compelling than comprehending the details. “Yes, we knew there were some limits,” says Rebecca. “But when you see the limits expressed in the thousands of dollars, it looks OK, I guess. Until you have an event.”

  Millions of plans have annual payout limits, though the more typical plans purchased by employers usually set those limits at $500,000 or $750,000—which can also quickly be consumed by a catastrophic illness. For that reason, Obamacare prohibited life-time limits on any policies sold after the law passed and phases out all annual dollar limits by 2014. That will protect people like Scott and Rebecca, but it will also make everyone’s premiums dramatically higher, because insurance companies risk much more when there is no cap on their exposure.

  But Obamacare does little to attack the costs that overwhelmed Scott and Rebecca. There is nothing, for example, that addresses what may be the most surprising sinkhole—the seemingly routine blood, urine, and other laboratory tests for which Scott was charged $132,000, or more than $4,000 a day. By my estimates, about $70 billion will be spent in the United States on about 7 billion lab tests in 2013. That’s about $223 a person for sixteen tests per person. Cutting the overordering and overpricing could easily take $25 billion out of that bill. Much of that overordering involves patients like Scott S. who require prolonged hospital stays. Their tests become a routine, daily cash generator. “When you’re getting trained as a doctor,” says a physician who was involved in framing health-care policy early in the Obama administration, “you’re taught to order what’s called ‘morning labs.’ Every day you have a variety of blood tests and other tests done, not because it’s necessary but because it gives you something to talk about with the others when you go on rounds. It’s like your version of a news hook … I bet 60 percent of the labs are not necessary.”