3 Steps to Take the Surprise Out of Surprise Medical Bills

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Surprise medical bills are a source of frustration for many
Americans. Patients who schedule medical care from network physicians or at
network hospitals sometimes receive bills from doctors outside the network such
as anesthesiologists, radiologists, or pathologists.

Or a patient may be transported to a nearby emergency
department, only to learn that the hospital was not in her insurance company’s
network.

In cases like these, patients are saddled with bills that can
be very high, potentially running into tens or even hundreds
of thousands of dollars

In a new paper,
coauthor Brian Blase and I propose a market-based solution to such surprise
medical bills. This proposal, if implemented, will equip consumers with the information
they need to so they can make more informed health care decisions.

Our proposal requires insurers and providers to supply accurate and timely information about networks and prices. It segments the surprise billing problem into four distinct categories, depending on the network status of the facility and whether the medical services are emergency or nonemergency.

  In Network Out of Network
Non-emergency care Disclosure (up front price information) and penalties on false and misleading information about network status. For scheduled care, facilities and providers would be required to provide a good faith estimate. Penalties would be established on insurers who represent facilities, and on facilities that represent themselves, as being in-network when they permit balance billing for services delivered at that facility.

Disclosure (up front price information). For scheduled care,
facilities and providers would be required to provide a good faith estimate.
Facilities and providers cannot balance bill patients after delivering nonemergency
services unless they provided them with good faith estimates of balance
billed amounts before providing the services.
Emergency care Penalties on false and misleading information about network status. Penalties would be established on insurers who represent facilities, and on facilities who represent themselves, as being in-network when they permit balance billing for services delivered at that facility.   Prohibit balance billing and require reasonable reimbursement. Facilities and providers could not balance bill for any emergency services, as defined in EMTALA. Insurers would be required to provide facilities and providers with reasonable reimbursement for such services, as defined in existing regulations (45 CFR 147.138(b)(3)(i)).

Note: Balance billed amounts refer to what the provider
bills the patient, minus what the insurer pays.

Here are the three major elements of our recommendations:

1. Price disclosure. Unlike virtually every other
service in the economy, consumers don’t know the prices of scheduled,
nonemergency care until long after receiving it. The government does not need
to mandate price disclosure in other areas of the economy that function
efficiently. But efficiency is not a key feature of health care markets, which
are beset by excessive third-party payment and price opacity.

Congress should correct this problem by requiring providers
to supply a good faith estimate of the cost of scheduled medical care before it
occurs, unless the patient affirmatively declines an estimate. Providers that
refuse to supply an estimate before providing care could not “balance bill” (i.e.,
charge a patient an amount above what the insurer pays the provider) afterward.

  1. Penalties on insurers and providers for supplying
    false and misleading information about a facility’s network status.
    Consumers
    typically seek network physicians and hospitals to avoid high out-of-network
    bills. They rely on representations about network status from their insurance
    company and from the hospital itself.

What their insurer and hospital often don’t tell patients is
that other doctors who might participate in their care are notpart of
their insurer’s network. Patients learn that only weeks or months later, when
the bill from the non-network physician arrives.

Congress should protect consumers against false and
misleading information. It should establish penalties for insurers that
represent a facility as being in-network, and a facility that presents itself
as being in-network, if doctors balance-bill for services they provide at that
facility.

To be considered a network facility, the insurer, the
facility, and the doctors who practice there would have to negotiate
arrangements that protect patients against surprise bills. Hospitals that permit
surprise bills could not be represented as network hospitals without penalty.

3. Ban balance billing at non-network emergency departments. Accurate information about a hospital’s network status and price transparency don’t help the patient who is suffering severe chest pains or being transported in an ambulance. Such patients generally will go or be taken to the nearest emergency room. Broad consensus exists in Congress and among the public that patients in those circumstances should not face large bills for out-of-network care.

Consistent with that consensus, we propose that Congress ban
surprise billing in these limited circumstances and require insurers to pay,
and providers to accept, reimbursement rates spelled out in existing federal
regulations
.

Those regulations, which already govern insurance company
payments to non-network providers of emergency care, require insurers to pay
providers the greatest of: a) the Medicare rate; b) the median network rate; or
c) the amount an insurer generally pays non-network providers.

The alternatives—such
as doing nothing and arbitration
—are worse, and accurate information about
network status and prices are of no value in this unique circumstance.

These recommendations should, to the extent possible, be
implemented in a way that preserves the ability of states to adopt policies
that best serve their residents.

This proposal offers a better path for Congress, which
currently seems headed in a very different and counterproductive direction. Although
they differ in some respects, the House and Senate proposals
rely on sweeping
and unnecessary
federal price regulation, rather than market-based
alternatives, to eliminate balance billing. Both would force doctors and
insurers who have not contracted with each other to accept rates set in
contracts they haven’t signed.  

The principal appeal of rate-setting is that the
Congressional Budget Office believes it will produce budgetary savings–savings
that Congress plans to spend to fund government programs. While budget savings
are great, they should not drive Congress to impose rates outside government
programs.

Our proposal guarantees no more surprises without resorting
to heavy-handed measures. If consumers go to an in-network facility, they can’t
be balance-billed. And they will receive good faith estimates for scheduled
care.  

Congress should solve the balance-billing problem by giving
patients more control over their medical care with accurate information about
medical prices.