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$25 Here, $25 There and Soon It Adds Up to Real Money

posted by Bob Lawless

We have two $25 bills from our pediatrician for administering eye exams to our children. These exams were part of an annual checkup to see if the children needed to see an optometrist. Now we're in the endless circle of insurance doom. The health insurer (HealthLink) won't pay because they claim their insurance doesn't cover routine eye exams. The vision insurer (EyeMed) covers routine eye exams, but they won't pay because they say an eye exam administered as part of an annual medical checkup is not a routine eye exam. My wife spent an hour on the phone today trying to get this straightened out. The emphasis is on the word "trying." We will eventually prevail, and on a related note, see my upcoming post on optimism bias.

How much do these companies earn by taking aggressive positions with the expectation the consumer will just give up over a small dollar amount? It's only $50 to us, but when the companies take thousands of aggressive positions with thousands of customers, it adds up to real money for them. How much of the medical debt problem stems from problems such as these, with consumers not informed enough to fight unauthorized hospital bills or aggressive insurance companies? Even someone armed with the right information may not have the time to fight if they are working two jobs just to keep hearth and home together.


Bob, I share your concern. I'm reviewing EOB's stemming from my six-year-old daughter's 18-day hospital stay in October. Lucky for me my questions/concerns are being addressed by our outstanding HR staff and outside benefits broker (once I figure out what my questions/concerns should be -- not so easy). And I have new appreciation for struggles faced by uninsured (underinsured) folks who suffer a medical crisis (even a routine one at that) and why so many seek refuge in the arms of the bankruptcy code.

This sounds to me like an example of a company inflating consumer transaction costs for its own benefit, something I wrote about in my article, Towards a New Model of Consumer Protection: The Problem of Inflated Transaction Costs, 47 William & Mary L. Rev. 1635 (2006) available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=648052. incidentally, I have heard of HMO's doing the same kind of thing to doctors as well.

Nice article, Jeff. However, you argue that rebates are entirely a way for companies to offer the illusion of lowering prices while not actually doing so. While this is certainly the major cause of the prevalence of rebate offers, do you think that a substantial minority of customers might be deliberately seeking out rebate offers in order to accomplish a fee-free cash advance from their credit? The $1000 paid for the computer is off the credit card, the $300 rebate that comes later is cash and can actually, unlike the credit card, pay rent.

Just a thought, nothing serious.

This sounds like a primary care provider aggressively billing to the consumer's detriment. I won't often side with a payor, but in this instance it sounds as though the provider chose to unbundle a very limited eye check into a separate item.

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