At just 18 years old, John FitzGerald signed up to serve his country in World War II, survived being a prisoner of war after his plane was shot down over Germany in 1944, and went on to serve 40 years with the military. But at 96, the coronavirus was a foe he couldn’t beat.

He died May 10, after a 10-day stay in isolation at Riddle Hospital in Delaware County.

“They’d call us every day to give us an update, but he just got progressively worse,” his son-in-law Patrick Thompson recalled. The family knew their patriarch wasn’t invincible, “but we didn’t think it was going to be a virus.”

Months later, as the family was still grappling with a loss they hadn’t expected, they got another surprise: an explanation of benefits from FitzGerald’s health insurer that showed the hospital had charged $97,000. TRICARE, which provides health coverage for military members and veterans, had paid $15,000 of that.

“What does it mean?” Thompson, of Media, wondered. Did his father-in-law’s care really cost almost $100,000? If so, why was the hospital willing to accept just a fraction of that from TRICARE? And, most important, was it only a matter of time until someone came after the family for the remaining $82,000?

John FitzGerald enlisted in the U.S. Army Air Corps in 1942 to fight in WWII. He served in the military for 40 years. FitzGerald, of Media, died of the coronavirus at age 96 in May.
Family photo
John FitzGerald enlisted in the U.S. Army Air Corps in 1942 to fight in WWII. He served in the military for 40 years. FitzGerald, of Media, died of the coronavirus at age 96 in May.

The coronavirus pandemic has exposed major fissures in our health-care system, including the crushing — and at times seemingly arbitrary — cost of care. Price tags vary widely depending on where you seek care, and what type of insurance you have. Hospitals and doctors routinely charge prices that are magnitudes more than they expect to receive from insurance companies, though those who are uninsured, or who see a doctor who is not in their plan’s network, could be stuck with the full bill. While most people with insurance will never pay these so-called chargemaster prices, plans with high deductibles and cost-sharing make lengthy hospital stays a costly affair.

And the potentially high cost of an intensive care unit stay for COVID-19 has driven home how important it is to have insurance.

“This is America. Hospitals can charge whatever they want,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation. “COVID is the kind of thing that can come along, and quite unexpectedly you go from being healthy to needing a lot of medical care. It’s a reminder why we need protection even if most of the time we’re feeling great.”

COVID-19 highlights cost disparities

FAIR Health, a data company, estimated that hospitals charge an average of $73,300 for a COVID-19 hospital stay and that private insurers allowed about $38,221. Costs were higher for patients who were admitted to the intensive care unit or needed extensive care, such as a ventilator, and less for those with shorter hospital stays.

The price Medicare pays is likely much lower. In general, Medicare pays a fraction of what private insurers pay for health-care services because the federally run health program does not negotiate rates. Medicaid rates generally are lower still.

A study by RAND Corp., a nonprofit policy think tank, found that employer-sponsored health plans, the most common type of private health insurance in the U.S., paid hospital rates 247% times more than what Medicare would have paid.

“Medicare is a big system; it has a lot of bargaining power. I would not expect that employers would ever be able to pay the same amount as Medicare,” said Chris Whaley, a health policy researcher for RAND.

While these gaps may be most troubling in the short term to employers, the costs eventually trickle down to their employees.

“It’s not like these numbers come from a magic health-care money tree,” Whaley said. “They come out of the wages and benefits for workers.”

Already a top household expense for many, health-care and health insurance costs have become even more burdensome to consumers during the pandemic. Many people have lost coverage along with their jobs, while others may be struggling to cover premiums and copays for doctor’s visits.

In the early months of the pandemic, lawmakers were quick to establish temporary protections for patients. The federal CARES Act mandated free coronavirus tests, and the U.S. Centers for Medicare and Medicaid Services loosened regulations to allow people covered by Medicare to more freely use telemedicine to see their doctors.

Many private health insurers followed suit, and have temporarily waived cost-sharing for COVID-19 treatment.

Independence Blue Cross, the largest insurer in the Philadelphia region, said it has extended its COVID-19 policies, including waiving cost-sharing for treatment of the virus and coverage for telemedicine visits, through the end of the year.

“It is too soon to forecast specific long-term benefits for 2021, but we are regularly assessing the benefit changes to address our members’ needs,” Donna Farrell, a spokesperson for Independence Blue Cross, said in a statement.

As the pandemic stretches into the second half of the year, health-care analysts say they expect that insurers will treat COVID-19 hospitalizations like any other: covered, but still costly for many patients.

The average deductible of an employer-sponsored health plan topped $1,600 for an individual in 2019, according to the Kaiser Family Foundation, and that figure is higher for many people this year. The cost-sharing rules in many plans require people to pay a certain portion of the negotiated rate even after their deductible is met.

What’s more, patients may face surprise balance bills if they are unknowingly treated by a provider who does not have a contract with their insurance plan. Even if you go to an in-network hospital, it’s possible that you will see an anesthesiologist or emergency department doctor who does not work directly for the hospital and is not in the network. These providers are not required to accept the lower rates offered by insurance plans as full payment; if they bill patients for the remainder, that’s known as a surprise bill.

“This is a time for all of us to recognize we have baked-in weaknesses in a lot of our health plans,” Pollitz said. “These COVID stories are reminding us that those are important, too.”

Medicare prohibits balance billing, but that doesn’t mean elderly patients will necessarily escape unscathed. Traditional Medicare requires patients to pay 20% of the allowed rate, which could still be a hefty price for a complex hospital stay if you do not have a supplement plan to cover you.

COVID-19 costs also shake hospitals

Hospitals are also grappling with how to manage COVID-19 costs in the long term. The pandemic forced hospitals to spend millions for personal protective equipment while absorbing a sharp increase in costly emergency and intensive care services. At the same time, they were unable to perform the routine surgeries, scans, and other procedures that make up the bulk of their revenue.

Federal grants have helped shore up operations, but hospitals say they are still struggling to regain their footing.

Main Line Health, which includes Riddle Hospital, where FitzGerald was treated, received $112 million in federal funds for COVID-19 expenses. Medicare and TRICARE have been paying an additional 20% for COVID-19 hospital stays.

“That’s a huge boost, but it doesn’t make up in total the deficit we lose in caring for Medicare patients,” said Jack Lynch, CEO of Main Line Health.

The system posted a loss of $60 million for the fiscal year that ended in July, largely because of losing elective procedures.

Procedures and visits have nearly returned to their pre-COVID levels at Main Line Health hospitals, but emergency department visits are still down 13%. Declines in the number of stroke and heart attack patients have providers concerned that people who need care are too frightened of COVID-19 to get it.

Lynch said he understands that the discrepancies among what it costs hospitals to provide care, what they charge, and what patients pay are confusing and, at times, alarming.

“All hospitals have been working hard at being more affordable,” he said. “We’re really focused on, how do we lower the cost of care so when we get paid, the amount we get paid and what it costs is narrowed?”

In the meantime, some consumers are left scratching their heads.

Thompson said his family has not received a bill for FitzGerald’s care and don’t expect to since the explanation of benefits they received from TRICARE said he didn’t owe anything. He’s relieved but also concerned for people who required more extensive treatment or who have less generous coverage — or both.

“It’s just a shock if whatever is not covered [by insurance], if people have to make up the difference,” Thompson said. “It’s going to be staggering.”