Congress Shouldn’t Miss the Opportunity to Sensibly Address Surprise Medical Bills

Intense lobbying pressure may dissuade Congress from addressing surprise medical bills in a way that would both protect patients and lower costs. This would be yet another victory for special interests over the public interest.  

Surprise billing occurs in two scenarios. In one, a patient goes to an in-network facility for scheduled care but receives services from an out-of-network provider, commonly an anesthesiologist, radiologist or pathologist whom they generally cannot select. A few weeks later, the patient receives an unexpected bill or bills. 

In the second scenario, a patient receives out-of-network care in an emergency — a situation where the patient had limited, if any, ability to choose the facility or provider. This appears to frequently happen at in-network hospitals that have hired emergency department staffing firms — firms that have recently received significant private equity backing and have made a business decision to separately bill patients.

As a start, accurate and upfront information about prices and networks would minimize the occurrence of surprise bills. This is the recommendation of Dr. Marty Makary, a Johns Hopkins surgeon and author of a recent book, “The Price We Pay — What Broke American Health Care and How to Fix It.”

According to Makary’s remarks at a White House surprise billing event, hospitals and providers must “get their act together to provide one honest and fair transparent bill so we can restore medicine to its mission and finally stop the erosion of the public trust that we’re seeing.” Before receiving scheduled care, patients should receive a good faith estimate, including facility, provider, imaging and drug charges and the network status of the facility and providers.

Additionally, hospitals should only be considered in network if every provider in that facility is prohibited from charging patients above what the insurer has agreed to pay (so called “balance billing). If people go to a facility advertised as in network, all services delivered there should be in network. Insurers should be penalized for chronically inaccurate network directories that mislead patients.

Of course, in emergency situations, the problem is harder as price and network disclosures will not be sufficient as patients are unable to be discerning consumers and some, through no fault of their own, will be treated at out-of-network facilities. Obamacare required insurers to limit cost sharing for out-of-network emergency services to in-network rates. But, it allowed providers to balance bill patients, potentially putting patients on the hook for whatever their insurer doesn’t pay.

There is consensus to fix this by banning balance billing in emergency situations. After the patient is protected, the core, but fraught, issue is how to ensure reasonable payments to facilities and providers for delivering out-of-network, emergency services.

One option that Congress is considering is an arbitration process. For at least three reasons, arbitration, which the White House and many policy experts have criticized, should be avoided.

First, prices tend to produce the best outcomes when they are known in advance and market-based. Arbitration involves back-end and likely quasi-government rate setting and will lead to intense interest group pressure to raise rates.

Second, arbiters may use a bad rule of thumb for resolving disagreements such as using a percentage of the arbitrary and outrageously inflated billed charges. As anyone who has examined a statement from an insurer can see, these charges are generally multiple times the payment received.

Not surprisingly, an arbitration process in New York appears to be pushing up overall spending. The Congressional Budget Office estimates this type of arbitration would likely worsen the situation — increasing payments by 5 percent and the federal deficit by “double digit billions.”

Third, arbitration carries large systemwide administrative costs, particularly given that many of these disputes — while significant for the individual patient — are relatively small for the system. Thus, arbitration will create an inefficient new bureaucracy that will almost certainly get the rate wrong.

While far from perfect, an upfront benchmark for determining reasonable payments for out-of-network, emergency services avoids many of the problems of arbitration. Congress could start by assessing the impact of the 2015 rule promulgated by the Department of Health and Human Services that referenced three methodologies for determining the reasonableness of insurers’ payments for emergency services.

The problem of surprise billing is rightly motivating Americans to demand reform. Congress should act and, for a change, serve the public interest and not the health care special interests. At a minimum, patients should know in advance the expected prices and have certainty that if they go to a facility advertised as in network, they won’t receive surprise bills. 

Brian Blase served as a special assistant to President Donald Trump at the National Economic Council focused on health care policy from January 2017 to June 2019, where he helped develop the White House’s principles for addressing surprise medical bills, and he is now president of Blase Policy Strategies — a health care research and consulting firm.

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