Podcast Episode Transcript: Never pay the first bill: Investigating the high cost of health care

With L. Gordon Moore, MD

Gordon Moore: Welcome to 3M’s Inside Angle podcast. This is your host, Gordon Moore. With me today is Marshall Allen. He has investigated the health care industry for 15 years, including a decade at ProPublica and he spent a decade as an editor of the Craig Newmark Graduate School in Journalism at the City University of New York. His work has been honored with many journalism awards, including some of the top business reporting honors, the Harvard Kennedy School’s 2011 Goldsmith Prize for Investigative Reporting and coming in as a finalist for the Pulitzer Prize for local reporting.

Before he was in journalism, Allen spent five years in fulltime ministry, including three years in Nairobi, Kenya. He has a Master’s Degree in Theology.

The reason we’re talking today, is because Mr. Allen has investigated why we spend so much for health care, why we’re paying so much for health care and we get so little in return. He is the author of “Never Pay the First Bill: and Other Ways to Fight the Healthcare System and Win,” which is set to publish June 22 with Penguin Random House.

He’s also the founder of Allen Health Academy, which produces a curriculum of short on-demand videos to equip and empower employees to navigate the health care system. Welcome, Mr. Allen.

Marshall Allen: Thank you, so much, Gordon.

Gordon: You know, this is a very intriguing topic to me. It’s very hot; there’s been a lot of buzz around surprised billing and I wonder if that’s what spurred your interest.

Marshall: It is an extremely provocative tropic, I think especially for your audience, which I appreciate is probably mostly people who are really familiar with the system and looking at it from the inside.

We have a system here that, in a functional way on the financial side, I would argue is predatory toward the American public. I know that’s a provocative word and I’m intending to be provocative, because I want to get people’s attention. We have come to accept something that I don’t think we should be accepting, and that is the high cost of health care.

Your audience probably knows the statistics very well, but we spend about twice as much per person on health care than the citizens of any other developed nation and we still have, say, 30 million uninsured, say, 50 million underinsured, and a lot of people—one in six people—have medical debt in collections. And we are paying much more than we should be, when you look at all of the waste; all of the inefficiency; all of the overcharging; all of the price gouging that’s baked into the system.

We need to weed that stuff out and the public needs to be getting a fair deal instead of getting what they’ve been getting, which is a raw deal.

Gordon: Tell me more of what you mean by “raw deal.”

Marshall: As an investigative journalist, I examine the health care system from the point of view of the patient. I’m not covering it like a business journalist looking at hospital returns or mergers and acquisitions or something like that. Every story I’ve ever done has been looking, from the perspective of the individual person who has to navigate the system. The system is not designed in a way that is putting their interests first. That’s on the quality side and that’s also on the financial side.

I believe that the profiteering in the system and the business schemes that are designed to frankly exploit people’s sickness for money. I think they’ve metastasized to a point that they’ve become like a cancer on the American people. Unfortunately, our politicians have not been able to correct this. Obviously, the health care industry has not been able to correct this. The incentives are to keep making more money and to keep making people pay more and get less.

And so, my argument in this book is that we need to, as individuals and as employers, defend ourselves from the system that is preying on us or we might even need to go on offense in some cases and take the fight to the system and change the way we interact with the system. Because the system has betrayed our trust for so many years—decades, now—that we can’t trust that the health care system is going to work this out in our favor. It’s been proven over and over again that that’s not going to happen.

Gordon: You’re making me feel squeamish, because here I am, I’m part of the system. I’m a clinician; I’m not practicing any more, but I help work on how it is we understand information coming through the code stream. But in your book, you have point examples of how this goes wrong in ways that are kind of eye opening, but sadly not all that surprising, given all the literature around surprise billing. Give me an example of the wrongs that you see in the system.

Marshall: The sad thing about it is, the people within the system all know that this is true. People would see this all around them. Everybody understands that the system is completely corrupted and a total mess and that the American people are not getting their fair deal. This is not something that’s new information.

The new information that I’m bringing to the table is what to do about it as an individual patient or what employers can do about it. Let me give you an example.

Let’s just talk about up coding or, frankly, flat out fraud. The big insurance carriers that employer sponsored plans are trusting to manage their health plan and protect their money, especially a self-funded plan, from fraudulent billing or from up coding. They’re not doing their jobs in a meaningful way. The insurance carriers have proven themselves to be more loyal to the doctors and the hospitals in their networks than they are to the employers’ whose funds they’re managing when they administer those health plans.

I’ve documented this in many cases. I’ve talked to fraud investigators, who work for the big carriers; I’ve talked to more than a dozen of them. I’ve talked to state insurance regulators across the country, who tell me this is true. I’ve talked to district attorneys on the ground who prosecute health care fraud. They get almost no referrals coming out of the SIUs, the special investigative units for the big insurance carriers.

That’s because the insurance carriers, it’s not profitable for them to enforce fraud. Really, they’re just passing the cost on to the employer or the employee, anyway. And so, they’re doing very little to police this problem of fraud and that’s why—I have eight chapters in the book devoted to what employees and individuals can do. I have three chapters devoted to what employers can do.

I think employers have a huge role to play here in being more assertive. So, when it comes to fraud and up coding, I recommend that every employer sponsored health plan bring in an independent vendor. There’s a lot of these vendors out there that do claims analysis.

Don’t expect that that big insurance carrier that you have administering your health plan is actually policing fraud in a meaningful way, because what needs to happen when somebody identifies fraud, they actually have to contest those bills. They have to refuse to pay those bills. Ideally, review them before they get paid. You see that not happening in many, many health plans across the country. In fact, only the more progressive health plans have that built into the process, where they’re reviewing the claims; they’re looking for outliers, especially high claims or even a suspiciously high volume of smaller claims.

The big insurance carriers often let that stuff go. They auto-adjudicate everything; they pay 95 percent of the bills automatically, without really scrutinizing them. That’s just one example, but there are a lot of them that I could point to.

Ultimately, the patient and the employer is paying it and really, when the employer pays for it, even then, it’s coming out of that employee compensation—that pool of money dedicated to compensation. So, this is also holding down wages for the American people, because so much of their compensation is being syphoned away into the health care system unjustifiably.

Gordon: Let me go back just to the denials and audit stuff, because I think the lived experience of people that I interact with is that they see that happening. But I also hear you saying that that may happen in some ways, but we’re missing the big picture and we’re not doing it in a substantive way to change the fundamentals that end up in this messed up system. Help me unpack it is happening, but it’s not substantive.

Marshall: It’s definitely happening; right? But I would call this—the category I would put this in is spinning their wheels. Contesting claims; denying claims; making people fill out claims properly, things like that.

I’m talking about how many health care practitioners or others have been prosecuted for fraud at the initiation of one of the big insurance carriers by that carrier identifying the fraud, referring the case to the district attorneys or the state attorney general’s office, and then participating in that investigation to bring that person to a criminal conviction.

I’ll give you an example. I had done some stories about this and had been so astonished by how little actual—I’m talking enforcement, by criminal penalty, for people stealing money from our health care systems. We wouldn’t let someone walk into our house and take our money out of our wallets or out of our purses. We wouldn’t let someone take it out of our bank account, but somehow, up coding has become so common.

I see up coding almost in every bill I’ve reviewed for patients. I see they’ve coded something a level three, a level four, or a level five office visit or emergency room exam when it was absolutely fit the category of a level one. Extremely simple and it doesn’t meet the criteria for using that code, and yet it’s been paid at that level and the insurance carrier just says, “Yup, we paid it at that level.” And you’re like, “Well, why did you pay it at that level?

I decided I was going to try to actually track down how often do insurance carriers actually refer cases to prosecutors and then, help bring someone to justice. What I found was, I decided I would focus on California, which is obviously, a huge state and it’s very well known for having a lot of fraud.

In California, the Medicaid Fraud Control Unit is extremely active, hundreds of cases a year; convictions; getting money repaid on behalf of the state Medicaid plan. Every fraud investigator I’ve talked to says, “Fraud is probably more common in the commercial plans, because there’s so much more money at stake and there’s so much less enforcement on behalf of the big insurance carriers.”

I called the district attorneys in the 10 largest counties in the State of California. Those are the counties that cover about 80 percent of the population of the state. We’re talking tens of millions of people are covered in these plans that would identify fraud that would lead to these attorneys. I talked to the district attorneys and the state about how many cases they were getting referred to them by the insurance carriers for prosecution for a two-year time period.

What I found was, in those 10 counties, those district attorneys who prosecute fraud, they laughed actually. When I said, “Hey, how often are insurance carriers referring cases to you for criminal prosecution?” They actually laughed, several of them. They were like, “They never refer cases to us. They’re not helping us prosecute these cases.”

“Okay, count up how many referrals you actually got in a two-year time period,” the number was 22—less than one case a month was referred on average from an insurance carrier, to a district attorney’s office, for criminal fraud investigation and enforcement, in that two-year period, for almost the entire State of California.

It’s just not happening and I called every state department of insurance. Again, working at ProPublica, I love that we have time to do these investigations, because it’s quite a lot of work to contact every department of insurance for all 50 states. In all the states, the regulators require the commercial insurance carriers to refer suspected cases of fraud to the State Department of Insurance so that it can be investigated.

Well, so I thought, “This is a way to check; right? This would be public information about the number of times these types of referrals have been made.” In the property and casualty world, they’re making hundreds of referrals. In the auto world of insurance, they’re making thousands of referrals a year. In the commercial insurance world, the number is in a lot of cases, the single digits.

I called the State of Minnesota. I remember talking to a guy named Michael Marvin, who’s the head of criminal enforcement for the State of Minnesota’s Department of Insurance. In one of the years, he got two referrals, total, from all the insurance companies, covering all the commercial plans in Minnesota. Two referrals. How is that possible?

He said, “Of course the insurance companies are violating the law, here. Of course, they’re not referring cases to us.” And why? Well, when I’ve talked to the insiders in the insurance industry, they say, “Well, it’s too expensive. It’s expensive to pursue a doctor or a hospital, these white collar criminals.” In some cases, are difficult to police, because they’re going to lawyer up; they’re going to bring in attorneys; they’re going to fight tooth and nail, because they could maybe have their license at stake, if it’s something like that.

And so, the insurance companies would rather just let them go quietly; deny a payment; cut them off; take them out of their networks, but they’re not actually bringing about the enforcement that this type of crime deserves. And the people are paying for it. The public is paying for it.

This is just one example like, again, you can’t even get a good estimate of how much fraud there is, but all the experts I talk to put it at about 10 percent of the total spend. You’re looking at, say, $300 to $400 billion a year being stolen from our health care system, because of fraud and almost nothing being done about it. That’s just in the commercial world.

Gordon: In your book, you give some examples that really light that up. You talked about a woman who brought her child into the emergency department and was billed for a physical exam that never happened.

Marshall: That’s right. That’s commonplace. What the insurance company will say is, “Well, it says it in the medical record, so it must be true.” And you have the patients, themselves, saying that this thing didn’t happen. These things just get completely ignored. I talk to patients every day, who are disputing bills that are unfair; saying things were coded that never even happened, and the insurance carrier consistently sides with the hospital or the doctor, because their loyalty is to them.

In the book, I talk about who is the real customer in this relationship? And as individuals and employers, we sadly need to understand that we think that we’re the customer. They say, “The customer is always right,” in the United States and so, if you get the wrong order when you go to a restaurant or it’s not cooked the way you like, you send it back, you don’t pay for it, and they redo it for you.

You would think the same thing would be true in health care, because we’re the ones paying for it; we’re the ones undergoing the care, but sadly, the customer for, let’s say, a hospital or for a doctor or for an insurance company or for a PBM or for a pharmaceutical company, they view each other as their customers. They’re all doing business with one another to get the maximum cut they can get of our money.

Sadly, as the paying customers, we have lost our customer status and that’s just a fact of the way this system has been set up. And so, in my book, I’m showing individuals, “Once you know this, then don’t be surprised when your insurance company takes the side of the hospital, even though what’s been billed to the insurance and billed to you didn’t actually happen. Don’t be surprised; don’t expect the insurance company to be on your side, because, frankly, they’re not. In the way it actually plays out, they’re not. They’re more loyal to the hospital and the doctors in their network than they are to the patients who are getting the care.”

Gordon: I think that’s part of what is shocking to me, as I see that. I had always thought that the insurance carrier would say, “Oh, wait.” The whole point of an EOB is for the person who received the services to look at it and say, “Wait a minute. I didn’t get that.” And then, I thought that should kick off the very logical response on the health plan’s part to say, “Oh, excuse me. We’re not going to pay for that and let’s look for a pattern and see if it’s abuse.”

It sounds, from that chapter in your book, the mom of that child was a nurse and a nurse practitioner. She knew exactly what an exam was. She knew what these things meant and she had to fight tooth and nail to get her carrier to turn that around.

Marshall: She had to fight tooth and nail and the carrier never actually turned it around. At the end, the hospital waived the bill. It was her portion of the bill, but the hospital still received the amount of money that the insurance carrier paid out. And that’s pretty typical. I’ve seen cases of just outrageous price gouging, where in the end, they might waive the portion that the patient owes, but the health plan is still billed and the health plan still pays for it.

What I’m trying to do is reframe these conversations so that we no longer have this facade where we pretend like, “Oh, someone’s here to help you.” No, sadly, we need to realize that we might be on our own. The politicians aren’t going to save us; the health care insiders or the insurance company or whomever we think maybe manages our health plan has conflicts of interest that cause them not to advocate for us.

We actually need to be equipped and empowered to fight back on our own. What I show in the book is that when you fight back on your own, you can win. The win might be a partial victory, where your portion of the bill gets waived, but your plan still pays it. Every battle is going to work out in different ways. Sometimes you win; sometimes you lose, but you have nothing to lose by fighting.

There are tactics that we can take as individual patients to protect ourselves. It’s sad that I even have to write this book, because we do have to have like a defensive posture against the financial side of our health care system. Like you pointed out, this woman is a nurse. In fact, a lot of the examples in my book—and I did this on purpose—are doctors and nurses and actuaries and other insiders in the industry, who are getting abused by their own industry.

Even the insiders, who know how things work, become victims of it, too. That’s why it’s so—lately, I’ve been comparing it to the COVID-19 pandemic. The pandemic is this wild thing that we all have been living through together. We’re all sharing this experience, where we’re all of a sudden working from home and trying to educate our kids via remote learning and not seeing friends and having loved ones die and pass away. It’s this collective trauma that we’ve all been experiencing.

That’s a similar comparison to us suffering these high prices of health care –unjustifiably high. The only reason they’re this high is because the industry creates more schemes to take more money than they should. It’s not right.

Another way I try and reframe this is that this is not a policy problem; this is not somebody needs to create a health care program to change the way value-based payment or whatever. This is at the fundamental root of it, a moral problem. We have a moral problem with American health care and I think the root of it is that we have decided that it’s okay to exploit people’s sickness for money. That’s exactly how our health care system operates. Yeah, there are good people in the system, but the paycheck that they’re receiving, in many cases, is based on deceiving patients to get more money from them than they should.

If this was some other consumer transaction like buying a car or buying a flat screen television or going on vacation or something that’s discretionary or something that’s elective or optional or a luxury purchase, charging more for the same thing is not quite as big a deal. But when you’re talking about people who, the only thing they’ve done is gotten sick or they’ve taken their kid to the emergency room or they’ve been stricken with cancer, they don’t have a choice about whether or not to engage with the system. They are at a particularly vulnerable point, where they can’t make a decision about whether or not to engage with the system.

In that case, when you’re exploiting vulnerable people like that for profit—and I’m not talking about making any money. I’m really talking about greed and profiteering. When you’re profiteering off of people because of their sickness and their vulnerability, that is immoral. That is wrong.

I’m just saying—like you mentioned in my bio my faith background. I was in fulltime ministry before I became a journalist. I have a very strong sense of right and wrong and even ProPublica, our mission statement says, “We want to use the moral force of investigative journalism to bring about change.” I like that term “moral force,” because I think these are moral problems. So, when I do an investigative story or even this book, I’m advancing a moral argument. I’m trying to say, “Look, it’s a given.” I show the schemes; I show the pitfalls; I show the problems and I’m saying, “Okay, that’s a given. This is an immoral system that’s profiteering from your suffering and your sickness.”

Now, what do we do to fight back and win and here are the things that we can do. There is a lot we can do. It can be difficult. It’s unfair that we even have to do this, but no one else is coming to our rescue. So, the employers and employees around the country need to unite together and push back and change this system.

Gordon: I find myself in strong agreement and, being part of that system, I suspect there are others, as well as you mentioned. There are people working in bad systems, who may have become inured, blind to, or hold their nose at what’s going on. However they get day to day and move through their day with this stuff, with this external push, which I think is absolutely necessary, what can folks inside do? What choices could we make? How could we begin to change this, if we’re, let’s say, part of the billing system or part of setting policy at a health plan or part of a self-funded employer setting up benefits?

Marshall: That’s a great question. I certainly appreciate your perspective, Gordon. I talk to people all the time, who are just like you. They’re in the system; they see the problems—those are the people who become my sources, frankly, and they help me do my journalism. Without those experts on the inside, I could never, ever do what I do. I really appreciate those people.

I don’t know how you’d ever quantify it, but most of the people in the system see these problems. They are good people in a bad system, as a lot of people like to say. There’s certainly bad apples and there’s certainly people who are just bad actors. But that’s, obviously, not generally the case. People do get into health care because they want to help people.

I think at the fundamental root of it, they have a moral dilemma; right? Because right now, we can’t justify this high cost of health care spending. And so, I think that there are going to be winners and losers. Right now, the winners are the health care industry and the losers are the American public.

In my book, I am arguing that the American public has been victims for long enough and now, we need to push back and actually, we’ve been paying more for less, year after year for decades. We need to be paying less and getting more. Where you see individuals and employers pushing back, they are actually achieving that. It’s an audacious goal, but it is possible for the 180 million working Americans to get a better deal on health care. I think there is major disruption coming to the health care system.

I think this entitlement, this profiteering, has gone on for so long that it’s brought about a book like mine. And there have been other books like mine; right? I think the way my book is unique is that I’m actually giving some prescriptive ideas for how to push back and win.

But when I talk about winning, on the health care system side, they’re just looking at the ledger. They’re going to have a loss when it comes to the revenue and I’m totally comfortable with that. I think that’s fair. I think disruption has come to lots of other industries in this country and it’s just now beginning to hit the health care world.

The big health care players, the giant multibillion dollar companies, I don’t think they’re too worried about it like a lot of other industries that didn’t see the disruption coming. They’re making their money the old way. They’re making their money the greed and profiteering way. They do a lot of virtue signaling to talk about how they’re healing people and helping people, kind of ignoring how they drive people into debt or bankruptcy.

I think that’s just that moral dilemma that the companies that are making money the profiteering way are going to have to deal with. Because, when it comes to actually delivering real value, it means that they’re going to have to take less money.

Again, I think that’s the trouble. They’ve shown that money is their greatest value and the solution needs to be stop taking so much money from the American public unjustifiably.

Gordon: I was just reviewing a statement of professionalism from the American Board of Family Medicine and admiring its description of something greater than me as being important. I’m not going to get the words right, but it was really very nicely written. I suspect that this is not the only statement of professionalism in any medical society. There are many that are similar.

Marshall: You are absolutely right.

Gordon: I’m drawn to that and I think about the actions of individuals who, under pressure to do the right thing, will flip the switch and say, “Approve that. Get that done.” They have to be pressured to do it, but what I’m hoping is that folks listening to this, who are in that seat, may not need as much pressure in the future as it’s taken in the past to do the right thing. And we can say, “Let’s approve that. Let’s apologize for fraudulent presentation of care delivery.” And we have tools that can do this work, where we can say, again, first, “If it’s not documented, that it didn’t happen,” but let’s go back and see is there evidence that the documentation is false and that can’t stand. I think we need to work on that, as well.

Marshall: Yes, that’s right. I think you’re talking about the great heritage of American medicine; right? Dr. Marty Makary—I edited his recent book, “The Price We Pay,” which is an excellent book. I’m sure a lot of your listeners here have read his book.

Marty is a friend. I did that editing on that book for him. Marty likes to talk a lot—in fact, at the end of that book, he talks about the great heritage of American medicine that was not based on profiteering. It was not based on greed; it was based on serving.

I know a lot of people in the industry. They desire to serve the public. They desire to help people. I’m certainly not including the clinicians—the doctors, nurses, and other clinicians in this category of greedy profiteering. I’m really talking about the middle men, the hospitals, the insurance companies. Maybe hospitals are not exactly middle men, they are delivering the care. But you know what I mean. They’re not the hands on people providing the care.

I’m talking about the people that are sending the bills. The revenue cycle management folks, the insurance companies, the PBMs, all the vendors. The markups and the middle men, who are feeding on this trough of dollars that are being syphoned away from the working Americans.

I do think we need to get back to that heritage. I think that does ring true and, like you said, people in these institutions have a tremendous amount of power. I would hope that you are right. I hope that they will make changes. I hope that they will do things in a more innovative and value-based way that is actually fair for the patient. I hope that they will correct errors when they get made and hold people accountable, if they catch people doing things like fraud or rampant overbilling or up coding. Those things need to be corrected. There needs to be accountability and they actually have the power to do that.

Gordon: Marshall Allen, this has been a fascinating and challenging discussion. I like that you framed this around morality, because I think that is absolutely the right framing for this discussion.

Marshall: Thank you, Gordon. I really enjoyed being here. If anybody is interested in following my work, they can go to my website. That’s marshallallen.com and sign up for my newsletter. You can kind of keep up to date with what I’m doing with my journalism and with my health literacy education. Also, please get a copy of my book. “Never Pay the First Bill: and Other Ways to Fight the Healthcare System and Win.”

I think people on the inside might be even more interested just to see what I’m proposing as the battle plan for the public and for employers. Maybe they could meet some of those demands before the even have to engage in the fight.

Gordon: Or sadly, as a tutorial for how each of us as potential health care consumers may need to fight these battles, as well.

Marshall: That’s right. Sadly, that’s true. In fact, one of the people I feature in the book in the chapter about fraud was a doctor who actually was a pathologist who organized the admission of COVID-19 antibody tests for a free-standing emergency room in Texas.

He goes to his own facility to get an antibody test. He thinks they’ll give it to him on the house, because he has been the guy who has done the test and he knows they only cost about eight dollars. Well, he gave them his insurance information; he made some small talk with the people giving him the test, but there was no examination. He gets the test. He gets his EOB in the mail from his insurance company. His own free-standing emergency room has charged him $10,984 for this test. Even more surprising, his insurance carrier paid it 100 percent in full—no discount.

Gordon: Oh, my gosh.

Marshall: It’s an astounding example, because again, he’s a doctor. He emails me. I help him unpack exactly what happened and, in the end, at first he called the fraud department for the insurance carrier. The guy kind of shrugged at the fraud department. It was like, “Yeah, this kind of thing happens all the time,” like no big deal. He quit his job from that free-standing emergency room. It was a part-time job. He quit the job. He emailed them and said, “I’m concerned this is fraudulent. I’m very uncomfortable with this.”

He actually quit the job and went somewhere else. They ended up repaying that money after my story came out, after I questioned it. That’s often what happens, the media gets involved. But you’re right. The insiders, sadly, need my book as much as the everyday patients do.

Gordon: Marshall Allen, thank you for your time today.

Marshall: Thank you, Gordon. This has been a real treat for me.      

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