Congress appears set to do something about surprise medical bills.
Last month, the House Energy and Commerce Committee cleared a bill that would address the issue for a final floor vote. The Senate is planning to vote on a similar measure after its August recess.
No one likes to receive an unexpected bill for thousands of dollars. But Congress must make sure that its efforts to curb surprise medical bills don’t create new problems elsewhere in the health care system.
Surprise billing occurs when a patient unknowingly receives care from a healthcare provider who is not in their insurance network — and subsequently gets a bill from that provider for some amount beyond what his insurer is contractually obligated to pay.
For example, a patient may select an in-network hospital for hip surgery and expect to be treated by in-network doctors. But if the regular in-network anesthesiologist calls in sick on the day of the surgery, an out-of-network substitute may be brought in to fill in. Despite the patient’s careful planning, he could still be on the wrong end of a surprise medical bill.
Surprise bills can also arise in emergencies, when patients understandably may not be able to choose what hospital they’re rushed to.
According to a recent survey by the Kaiser Family Foundation, 4 in 10 insured adults said they had received a surprise medical bill in the past year. Another analysis of data from 2016 found that 15% of patients admitted to in-network facilities were still subject to out-of-network claims.
These bills can be quite expensive. The New York Department of Financial Services found that, on average, patients paid more than $3,700 for out-of-network emergency bills.
Congress has several ideas for addressing surprise billing. Three in particular merit further exploration.
The first aims to eliminate surprise bills altogether, by preventing insurance plans from listing a hospital as in-network if it also relies on out-of-network providers.
This “in-network guarantee” has the potential to reduce surprise billing for elective care. As long as patients do their research beforehand, they should be able to contract for exclusively in-network care.
But this policy could yield unintended consequences. If the government establishes overly restrictive rules for network participation, insurers could gain the upper hand in negotiations with hospitals. That could lead to lower payment rates for providers — and over time, make it harder for them to provide efficient, effective care.
Policymakers are also considering ways to minimize patients’ financial burdens if they’re hit with surprise bills. These ideas involve changing the way insurers and providers share the cost of out-of-network charges.
The first of these ideas is forcing insurers to reimburse out-of-network providers the median in-network rate in their geographic area for certain services, like emergency care.
This is tantamount to imposing price controls and could disrupt the market in unforeseen ways. Hospitals and doctors who currently accept less than the median in-network rate would likely push to ratchet up their reimbursements. Why stay in a network at a lower rate if they can extract a slightly higher rate by going out of network?
Those who charge more than the in-network median, meanwhile, would likely find themselves kicked out of insurers’ networks.
Further, the government could manipulate reimbursement by shrinking or enlarging the “geographic area” used to calculate the median. And the more services the government deems subject to these rules, the more the market would be distorted.
A third idea is even more troubling: using arbitration to settle payment disputes between insurers and out-of-network providers. Some lawmakers favor arbitration when surprise bills exceed a certain threshold. Others would use it to settle all out-of-network charges.
With this approach, the provider would state what they want to bill, and the insurer would state what they want to pay. The arbitrator would set a final, binding payment amount.
Arbitration is just an opaque method of imposing price controls. Doctors and insurers could each submit outlandish bids to the arbitrator. Arbiters could play favorites, ignore the particulars of each case, and rule however they wanted. All told, arbitration would add millions of dollars in unnecessary costs for all parties involved, driving waste throughout the health care system.
Republicans and Democrats appear committed to finding a solution to surprise medical billing. As they grapple with the problem, they must ensure that they don’t entangle our health care system in even more regulation and unnecessary cost.
Sally C. Pipes is president, CEO and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The False Promise of Single-Payer Health Care” (Encounter). Follow her on Twitter @sallypipes.