[throwaway918274]

1. I go into hospital and come out with 90k bill - I have insurance and I pay my copay of $130.

2. Insurance says "nah, we'll give you 18k"

3. Hospital goes "ok".

4. Hospital writes off as a 72k loss, which essentialy is a "tax deduction".

This is good for me, but such a perverse incentive for the hospital.

[ryanSrich]

Or. It's more like this

- $90k bill - you pay your annual $10k deductible - the remaining $80k is only covered 80% because emergency visits only have 80% co insurance - you now owe $16k, after you've already paid $10k out of pocket for the deductible

This is a real thing that happened to me recently. Not to mention I pay $1500/month for a family of 4.

Nothing, absolutely nothing about the U.S. healthcare pricing structure is good for patients.

It seems to have worked out for you because you appear to have very good insurance. Most people are like me, and have the type of insurance that should be illegal.

[nradov]

I don't know your personal situation but most consumers who obtain medical insurance through their employer or a state exchange can pick between bronze/silver/gold plans that trade off monthly premiums versus deductible/co-pay/co-insurance amounts. High deductible plans can be a great option for many consumers, especially those who are willing to take on more risk and actively shop around for non-emergency care.

[hibikir]

The trick of the current plans, which wasn't the same back in the day, is that hospital and ER costs after the fact are nor covered 100% after deductible: Most plans say 90%. So yes, we might be better off with the plan that covers less, but ultimately the problem is that we are risking far more than the deductible, as a truly catastrophic problem will go way, way past the deductible... and out of pocket maximums can be far higher than deductibles.

Most of us now have very few employer-based options, which happen to be almost always better because the employer subsidizes some. So it's not unlikely to see that the options you'd prefer are not available. High deductible, but OOP maximum very close to the deductible? Sorry, not available, go look at the secondary market for more insurance. It's a very difficult environment to make decisions on, and most people are just not all that well equipped financially to deal with it. The products have gotten way too complicated for the vast majority of people.

[vuln]

I just had ~250k$ billed to me for a surgery and a 4 day hospital stay. I walked out with only paying 2500$. Just a touch over 1% of the total cost billed. I pay ~400$ a month. I’m in the US.

[megaman821]

What is your max out of pocket that you paid $16k in a year?

[ryanSrich]

I'd have to look again, but it's right around $18k. It's like $17,950 or something like that. It's an odd number.

[missedthecue]

99% sure that's now how accounting works. A loss is when expenses are more than revenue, not when you earn less than you wanted to.

Roofing and construction contractors would be all over this if they could avoid taxes simply by negotiating down an invoice.

[m000]

If I interpret TFA coorectly, the 72k difference would probably be counted as "charity care". Which is different than a loss, but still tax deductible.

In the grand scheme of things, this causes multi-level market "malfunctions". First, hospitals are incentivized to bloat bills, making healthcare virtually unaffordable if you don't have the bargaining power of an insurance company. Worse, this ties employees to their employer who subsidizes their healthcare plan (for another tax deduction I presume), thus twisting the dynamics of the labour market in favour of the employers.

[lupire]

What happens when Microsoft "donates" $1B "worth" of its $0 cost copies of software to a school?

[colinmorelli]

This is not really what happens.

Hospitals and payers negotiate rates and contract at that rate before the service is provided. Assuming the service is not denied by the payer, the hospital knows that they'll only be reimbursed 18k from your insurance company (or at least has the data to know in advance, putting aside whether any one person could tell you what it will be). The 90k only served as a starting point for negotiation with payers and is usually obscenely high due to other regulatory and contractual reasons related to the negotiation process. Their "list rate" is shown on your bill, but was absolutely never expected to be received.

As a result, it's not a "loss" of revenue at the time of service, and isn't recognized as one.

Now, because GAAP requires revenue be recognized when realized and earned, that service became "revenue" to the hospital after service, even though they haven't been paid. They might later "write that off" (I.e. recognize a loss) if the payer ultimately denies that claim, or you refuse your responsibility (I.e. your copay). But in that case, the hospital did not, in fact, make the money.

[jdsully]

> usually obscenely high due to other regulatory and contractual reasons related to the negotiation process

Lets be real its due to greed nothing else.

[colinmorelli]

There are plenty of industries in which purely being greedy is much easier than it is in healthcare. Greed alone does not explain the depth of complexity involved in the US healthcare pricing system.

To be clear, I’m not defending the system either. It’s fundamentally broken by design. But it’s certainly not solely the greed of hospitals that got us here.

[jdsully]

Healthcare has a cartel restricting supply of new doctors, and new hospitals. Only a small number of new doctors can intern each year ensuring the relative supply decreases vs population. The same for hospitals - even if you have the money and the doctors you can't open one unless the other hospitals in the area agree one is needed and allow you to get a “Certificate of Need”.

But that wasn't enough to juice profits so pricing had to be made as opaque as possible to screw over anyone who isn't a giant insurance company ensuring the little guy without insurance who "pays his bills" pays more than 10x anyone else in the system.

I don't know of any other industry with this level of depravity and greed.

[maxerickson]

Wouldn't they reasonably be limited to writing off actual expenses rather than the made up price?

It seems hard to search on, but it doesn't really look like there are tax benefits from contractual adjustments.

[kstrauser]

That’s correct. The post you replied to has the common misunderstanding of how write offs work. They’re not a magic way to make money. They’re a way to not pay taxes on money that want actually made.

[m3kw9]

You can’t do that because then every contractor can pay zero tax if they charge 100k an hour but have them pay 100$, and you got 99k loss.

[Ekaros]

It is weird that in this case insurance company is not taxed on the 72k "profit" they made...

[codegeek]

This is not good for you in long term. This is how the insurance mafia operates and why everything is so expensive. U maybhave a so called "good" insurance but someone is paying somewhere. A 90k bill should not be a thing regardless.

[nradov]

There are certainly examples of outrageous and abusive billing practices; policy makers should do more to reign those in. But a single MRI machine can cost $3M. Weeks in an ICU can burn up hundreds of hours of staff time. It's easy to see how the bill for a complex episode of care can exceed $90K even when the provider organization isn't making a profit.

[MattGaiser]

That is a loophole every business would use if it worked that way. Why wouldn't every banana Walmart sells be $500 on their books then? Losses need to be actual losses, not profits that never materialized.

[blackhawkC17]

This actually doesn’t make sense if you run the figures. But I guess, “they just write it off!”

[stefan_]

I don't think that's GAAP compatible, that seems far too easy.