Medical debt and surprise medical bills justly get a lot of attention as public concerns.  About 31 million Americans borrowed money to pay for health care in 2024, accumulating $74 billion in medical debt. A majority of Americans are very concerned (28%) or concerned (30%) that a major health event could lead to personal medical debt.  A June 2024 poll found that a third of Americans either received themselves (18%), or know someone who received (17%), received an unexpected medical bill of $1,000 or more. 

 A 2021 NPR article is a good example of the prevailing conventional wisdom on advice for persons concerned about problem medical bills: request an itemized bill; check if the provider participates in one’s insurance network; check for double billing; negotiate with the billing provider directly. Only the last suggestion, negotiate with the provider, even begins to address the biggest reason why a medical bill can be a problem to the point that it puts a patient at risk of going into medical debt.

This is because conventional wisdom misunderstands the nature of what makes most problem medical bills problematic in the first place. Medical bills are problematic for two main reasons. (1) The prices charged on the bill are unreasonably high. (2) There was not a shared understanding between the provider and patient on how much the provider would bill the patient, and how much the patient would pay. Whether it is a bill charging prices far more than the patient reasonably expected or can afford, or a surprise bill that the patient never expected to receive at all, these two reasons are why most medical bills are problems. 

Prices for medical services are ridiculously high.  Hospital prices increased more than 220% between 2000 and 2022.  Physician prices increased 130% over the same period.  Hospital and medical service price surges far outpaced overall inflation and hourly wage increases.  Studies conclude that higher health care prices are the driving force behind increases in overall U.S. health care spending, and also explain why the U.S. spends significantly more than other do countries on health care.

Based on hospitals’ own reports filed with the Centers for Medicare and Medicaid Services, the average hospital sets its billed charges at roughly 4 times its costs.  Many hospitals set their charges at 10 or more times their costs. That means that for every $100 in actual cost for a hospital to provide services, the average hospital charges $400, and many hospitals price that $100 service at $1,000 and above.  These markups on charges are egregious by most standards.  It is not hard to understand why it is a problem for a bill to charge $5,000 for a service that costs the hospital $500 or $1,000 to provide.  Even when insurance plans negotiate network discounts with hospitals, the prices still average 2.5 times actual costs, and can be many multiples above that depending on the provider and insurance plan.  With or without insurance, patients find medical bill prices to be a fundamental problem.

These high prices on medical bills are compounded by the failure of providers to disclose these prices clearly, and to reach agreement with patients prior to services to pay these prices.  A fundamental requirement in contract law is a “meeting of the minds,” meaning all parties to a contract must assent to the same terms for a contract to be valid.  With most problem medical bills there was no meeting of the minds between a patient and provider because the patient did not assent to the prices charged under the medical bill.  Yet, the provider issued the medical bill as if the patient is obligated to pay prices to which the patient did not agree.

This confluence of egregious prices and lack of an agreement on such prices between the provider and patient is one of the most important and overlooked reasons a patient should challenge a problem medical bill, especially a problem medical bill that puts the patient at risk of incurring medical debt.  Unless a dispute argues that the medical bill should be withdrawn entirely (e.g. the patient did not receive the billed services), challenging the level of prices on the bill is usually going to yield the biggest reduction on that bill.  

To demonstrate the advantage of basing a medical bill dispute on high prices, rather than on expunging erroneously billed line items, consider this analogy of a problem bill at a grocery store.  A customer planned to purchase from the grocery store a shopping cart full of bread loaves.  The grocery clerk rings up 12 loaves at $50 each, for a total bill of $600, which the customer considers to be a problem grocery bill.  The customer can dispute the bill by finding erroneously billed line item services.  Double checking the receipt (i.e. the itemized bill) to find that only 10 loaves were in the cart, not 12, would reduce the bill to $500, a $100 savings.  Alternatively, the customer can dispute the bill because he does not believe $50 per loaf is a reasonable price, and that he never agreed to pay such price.  The customer argues that $6 per loaf is reasonable, and he would pay $6 per loaf to end the dispute.  Even with the clerk ringing up 12 loaves instead of 10, adopting a $6 price reduces the total bill to $72, a $428 savings versus 10 loaves at $50 each.  If the customer solely focused on removing the number of overstated loaves from the bill, he saves 17% off the bill, compared to 71% savings by focusing only on reducing the high price.  The lesson here is that challenging egregiously high prices routinely saves more than trying to identify and remove erroneously billed line items or quantities.  

Medicare prices or a hospital’s estimated cost to render a service are two benchmarks that patients can reference to decide what they think is a fair price to settle a medical bill dispute.  The patient should try to be fair in his own arguments in disputing a medical bill, but just as hospitals and physicians unilaterally determine their billed charges, a patient has the same prerogative to determine what he thinks is fair for him to pay.  If the provider and patient did not have an advance, clear understanding on what prices would be paid, the dispute of the medical bill means the provider and patient can agree on prices to settle the dispute.  In this way, the patient makes the heart of most problem medical bills, failure to have an advance, shared understanding on prices, a key feature of his medical bill dispute. This gives the patient the best chance for a meaningful reduction in the bill as an outcome of the dispute.

There can be many reasons to dispute a problem medical bill, but don’t overlook or shy away from confronting a bill’s potentially excessive prices.  Remembering that “It’s the prices, stupid,” makes patients smarter consumers.