The Case of the Surprise Medical Bill

When it comes to health care in the United States, consumers have been forced to play detective.

Take the case of prescription drug prices. To understand the price of a prescription drug, Americans must weigh copays, list prices and rebates and question physicians, family members and pharmacists on the best course of action.

While skyrocketing drug prices have been in the spotlight of late, it is not the only mystery in health care. The phenomenon of “surprise billing” can be just as vexing.

Surprise billing, also referred to as balance billing, is a term used to describe charges that arise when an insured individual inadvertently receives care from an out-of-network provider. Consider an example offered by Senate Health, Education, Labor and Pensions Committee ranking member Patty Murray on behalf of her constituent, LeeAnn Tiede.

Before LeeAnn recently underwent a breast cancer procedure, she researched the status of her hospital and surgeon, to ensure that these entities were covered under her insurance network. Like many Americans, LeeAnn has insurance and likes to keep costs low by sticking to in-network providers. Much to LeeAnn’s surprise, weeks after her surgery, she received an astronomical bill from the hospital related to the procedure. How could this happen?

According to the director of the Harvard Global Health Institute, Dr. Ashish Jha, surprise billing is said to occur one in every seven times a patient goes to the emergency room.

After further investigation, Murray noted that LeeAnn discovered that while her hospital and her surgeon, as she double-checked, were both in-network, the anesthesiologist that treated her was not.

Like other health care misfortunes, complexity appears to be at the root of the problem. The issue that arises is that provider and ancillary services are often disconnected; one provider’s network status is not synonymous with another despite all contributing to a single procedure.

Paired with the complexity that characterizes the health care system is its lack of transparency. There is no one place where network and charge status are easily accessible. Consumers understand the need to be more knowledgeable — particularly with the prevalence of high deductible plans and health savings accounts — and even have the desire and take the steps to do so, but fall short due to system limitations.

States are aware of this issue and have proven that they are willing to take on the case.

Legislators in Virginia, New Hampshire and Washington have drafted bills to protect patients from surprise billing through different avenues. One proposal prohibits an out-of-network provider from charging an individual who is insured through a health benefit plan an amount for “ancillary services” (e.g., anesthesiologist) greater than what the insurance carrier would be obligated to pay for the insured; the Virginia House bill (H.R. 1584: Balance Billing) will continue to be considered by the Committee on Commerce and Labor during the 2019 session, with the recommendation to convene a workgroup this summer. It is unlikely to pass the House or Senate this year. Another prevents consumers from being held responsible for unexpected out-of-network bills if they are treated at an in-network medical facility; New Jersey legislators are working to pass a similar law.

Back in 2016, America’s Health Insurance Plans advised hospitals to ensure that their hospital-based doctors contract with the same health plans as the hospitals. States appear to be tackling surprise billing through this type of structural approach. In that same year, the American Hospital Association supported legislation that would structure a mediation process between insurers and physicians to address out-of-network bills.

While the AHA approach, modeled by National Association of Insurance Commissioners legislation, protects the patient from directly receiving the bill, it fails to prevent the occurrence of surprise bills.

Meanwhile, the Centers for Medicare and Medicaid Services is trying to get at the root of the issue through policy. In its Medicare Hospital Inpatient Prospective Payment System and Long Term Acute Care Hospital Prospective Payment System 2019 proposal, CMS stated it will require hospitals to publish a public, online list of standard charges. This list would be in a machine-readable format and updated annually beginning Jan. 1, 2019.

To build upon this initiative, in the 2019 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment Systems proposal, CMS issued a request for information on price transparency. Specifically, CMS is seeking input denoting the relevant data elements to include in a standard list of charges. This includes feedback on how to define “standard charges.”

In addition, CMS poses if patients should be informed of their out-of-pocket costs for a service before it is furnished, how much Medicare will pay for a particular service from a provider, and how Medigap coverage could affect a patient’s out-of-pocket costs. Through the RFI, CMS is looking to empower patients with information that will be beneficial to the true patient experience.

Although the fine details of the strategies may differ, each of these proposals aim to achieve the same goal. They attempt to protect patients from being deceived into paying rates for health care as if they are uninsured, when they are actually covered.

While patient protection is the obvious end goal, overall, there needs to be greater transparency in health care. If patients were provided with all of the necessary information before undergoing a medical procedure, surprise billings would likely not occur. Dismantling the complexity of health care through increased transparency is a solution to surprise billing — and on that note, maybe other health care difficulties.

Case closed.


Ipsita Smolinski is managing director of Capitol Street, where she advises clients on national health care policy and emerging trends, and Allison Vickers, also of Capitol Street, is a rising senior at Colgate University, where she studies neuroscience and public health.

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