Cashless versus Reimbursable Hospitalization: Which is better?

There is a belief among some that hospitals may misuse the cashless hospitalization facility offered by medical insurance policies. As a result, they suggest paying out of pocket and then seeking reimbursement through the policy. This raises the question: is it more prudent to utilize the cashless hospitalization facility or pay upfront and seek reimbursement later?

Note: Cashless is a privilege and not a right. A cashless application can be denied at any time. We would then have to apply for reimbursement. So a robust, liquid emergency fund that is much fatter than the usual six months’ expenses is essential.

What is the definition of misuse? It involves trying to reach the maximum insurance coverage without a valid reason. This can include excessive testing, an extended stay in the ICU, or recommending an expensive room. Although someone else may be covering the costs, the patient and their caregivers still face the burden of these unnecessary expenses.

I have witnessed this happen and heard stories from hospital staff – I have spent several days (weeks actually) in a hospital (mostly as a patient attender). Hence, the staff get friendly with familiar faces.

All insurance policies are susceptible to these practices, not just corporate group policies. Nevertheless, the physician in charge ultimately decides the costs of hospitalization, and insurers generally place confidence in them – based on my own observations (some claims that would ordinarily be excluded under the policy were approved due to the doctor’s reporting). A disparity between the insurer’s projected cost for a procedure and the final bill may result in difficulties during the claim process. Therefore, seeking treatment at a preferred network hospital (such as the GIPSA network for PSU insurers) is advisable.

For a young earner, there is no choice. They may not have enough net worth to cover a foreseen/unforeseen hospitalization expense and, therefore, will have to opt for the cashless facility. This discussion applies only to those who do not mind spending anywhere up to a few Lakhs for hospitalization and claim it via reimbursement.

If I have a liquid net worth of 50 lakhs or more, on the face of it does not look difficult to pay the above amount and claim it later. However, cashless offers some conveniences (as well as drawbacks) that one could consider.

I have processed three cashless and three reimbursement claims so far, and if I can control certain aspects of the hospitalization, I would prefer cashless.

In the case of emergencies, we do not have control over the two elements – the hospital admitted to and the treating doctor. If these two are unknowns, paying and claiming later is probably better (if possible). However, be warned that if you go to a network hospital and do not take cashless, the insurer can question and investigate why you did not opt for cashless!

One of the key lessons from interacting with the medical community is the importance of having a family physician. She/he could refer us to a specialist in the case of planned hospitalization. A referral reduces the chances of cashless misuse.

Pros of cashless

All we need while getting admitted is the policy number or the TPA ID. The insurance dept of the hospital will take the trouble of getting consent forms signed by the treating doctor and inform the insurer within the prescribed time.

Once the cashless application is accepted, the onus of arranging continuous cash for treatment disappears. We still need cash to pay non-medical expenses (10-35% of the total bill) while getting discharged.

There is no need to run around for medicines at ungodly hours. Unlike a reimbursement claim, the nurses will arrange medicines from the pharmacy, and we need not/should not get them. This is a big help. Especially if the attender is not worldly-wise. Also, an employed person can safely leave a paid attender to tend to the patient during office hours.

Cons of Cashless

Getting discharged can be a pain. The discharge summary should be sent to the insurer for approval. This can cause delays, and there may be trouble in getting the full amount approved. Again the preferred network matters here.

Even if the initial request for cashless is approved, the final settlement may not be done, and the insurer may ask us to reimburse later. So this might mean trying to arrange a lot of money quickly to get the patient discharged. Therefore one cannot rest easy unless the final approval is in place.

Cons of reimbursement claims

One must be aware of reimbursement rules! The hospital must be intimated upon admission, and there is a time limit (~15 days) within which the claim documents with bills have to be sent.

The paperwork for extended hospital stays can be a pain. So if filling a bunch of forms and collating hospital reports disagrees with you,  stick to cashless.

We recommend opting for cashless whenever possible. However, do not be overconfident about this and not have enough cash to pay the full hospital bill, just in case!

In summary, cashless or reimbursement, whichever you choose, always ensure there is plenty of cash in hand! And if you opt to reimburse or if cashless is denied, be ready for a lot of paperwork.

Read more

1. Select the right health insurance policy with these free resources.
2. Things to do AFTER you buy a health insurance policy