Most of us take great pains to ensure in advance that the doctors and hospitals we use are in network by our insurance plan. We assume that, when we go to an in-network hospital, that everyone who sees us, from the emergency room doctor to the radiologist who reads our X-rays, is also in network.
Unfortunately, this commonsense assumption could lead to a nasty surprise in the mailbox a few weeks or months later.
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Some players in the health care system are exploiting what are effectively loopholes in the way doctors and hospitals bill for services. These problems aren’t subject to the usual market forces of transparency and competition because they proliferate primarily in areas where consumers and insurers have little visibility and even less choice — in the emergency room and on the operating table.
In these instances, private firms contract with hospitals to run their emergency departments, rendering them out of network and thus not subject to the negotiated rates obtained by private insurers for their customers. A patient in the emergency department then receives a bill that is often orders of magnitude and thousands of dollars greater than what he or she would have paid based on market-driven, in-network rates. The insurer covers the in-network cost, and the ED contractor “balance bills” the patient for the rest.
The same scenario plays out in other medical areas such as anesthesia, where the hospital and surgeon may be in network but not the anesthesiologist. The phenomenon is called “surprise billing.”
Conservatives have long called for reforms that would help make health care more like every other industry, where buyers have access to price and quality information, and sellers compete fiercely for their business. President Donald Trump’s recent executive order would seek to provide this information for patients and other purchasers of care by requiring public posting of prices for health care services. While we await the market corrections of the president’s initiative, we can’t accept counterfeit capitalist arguments for surprise billing, disguised in the language of free marketeers.
The truth is that these practices give aid and comfort to those calling for the government to take over health care, as if the way to fix a frustrating and bureaucratic system at some local hospitals is to hand it over to a frustrating and bureaucratic federal system in Washington, D.C.
While most policymakers agree that we must end “surprise billing,” the bad news is that the hospitals and physicians who benefit from surprise billing are lobbying for a federally established “arbitration” process to resolve the dispute. The reason? Arbitration would involve a mediator who fixes the price, based on the sky-high, secret rates that some doctors are currently enjoying.
This is why most conservatives and business groups, along with the Trump administration, reject federally mandated arbitration outright. Some conservatives, however, have argued that any attempt to rein in price-gouging in these situations constitutes government price controls and moves us closer to a single-payer health care system.
That’s nonsense. In fact, if we fail to appropriately address issues such as surprise billing — which is a failure of the market made possible only by hiding price and network status information from consumers — then we give single-payer advocates an effective talking point against the private system.
Those engaged in this shady business model are breaking the sacred trust that should exist between doctors and patients, all in order to charge privately insured people almost six times what Medicare pays, far more than the median rate for all physicians of 2.5 times the Medicare rate. They can pull this off because patients oftentimes have no choice about who their ER doctor, radiologist, pathologist or anesthesiologist is. The doctors who have an ongoing relationship with patients aren’t the ones who behave this way.
There are a number of different ideas on how to correct these market distortions, several of which include basing payment on existing local in-network, market-based rates. A number of employer groups, including the Small Business & Entrepreneurship Council, have encouraged the use of a benchmark rate based on the average of local in-network, market-based rates.
As advocates of free markets and members of the business community, we can debate which of these proposals is more appropriate, but if we enshrine current rates with an arbitration scheme, or if we fail to advance solutions on surprise billing, we only play into the hands of single-payer advocates. It’s time to end secret pricing and save our health care market from the corrupt practice of surprise billing once and for all.
Karen Kerrigan is president and CEO of the Small Business & Entrepreneurship Council. Katy Talento is a health care consultant who formerly served as the top health policy adviser to President Donald J. Trump on the Domestic Policy Council.
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