A Surprise in the Congressional Stimulus Package?

A proposed fix for surprise medical bills may end up on the cutting-room floor as negotiations over the multitrillion-dollar economic stimulus package wrap up on Capitol Hill.

Last week, Sen. Lamar Alexander, R-Tenn., and Rep. Frank Pallone, D-N.J., were trying to get their plan, which would essentially cap bills from out-of-network providers at lower in-network rates, included in the package. Healthcare providers and their allies pushed back; they've been championing an alternative measure that would deputize an arbitrator to settle billing disputes between insurers and out-of-network doctors.

The former approach benefits insurers; the latter is better for doctors. Neither prioritizes the interests of patients.

Congress should change that by implanting three reforms that would make the healthcare market more transparent. First, lawmakers can forbid hospitals from saying they're in an insurer's network if any of the doctors who practice there send surprise bills. Second, they can penalize insurers for failing to keep their provider network registries up to date, if nominally "in-network" providers churn out surprise bills. And third, they can ban providers from sending surprise bills for emergency care.

Patients are typically "surprised" by medical bills they receive from providers they thought were in their insurance network. These providers bill for the difference between what a patient's insurance policy pays for out-of-network care and what the provider charges out-of-network patients.

These balance bills are most egregious in emergencies, when patients don't have the ability to seek care at an in-network provider. One in five emergency room visits is out-of-network. Just over half of all ambulance trips lead to surprise bills.

Even patients who fastidiously seek out care at in-network hospitals can receive surprise bills. More than 42 percent of inpatient admissions result in a surprise bill, according to a study published in JAMA.

Those bills can be expensive. The average is around $600, but charges can reach thousands of dollars. One North Carolina man received a bill for over $28,000 after rushing to the ER with acute appendicitis, even though his insurance plan capped out-of-pocket expenses at $6,350. A 26-year-old woman in Texas received a $94,000 bill for out-of-network monitoring that took place during surgery at an in-network hospital.

Insurers and healthcare providers are fighting a proxy war by supporting competing pieces of legislation. Patients, of course, are collateral damage.

The Alexander-Pallone plan would let insurers reimburse providers based on the median in-network rate for a service in a geographic area. Insurers favor this "benchmarking" approach because it would give them more leverage in negotiations with providers. They can insist providers accept cut-rate payments if they want to join their network. If providers refuse, they can still rest easy knowing they'll never have to pay more than the median in-network rate.

As a result, insurance networks would shrink. Patients would have a harder time finding a doctor who would accept their insurance -- and thus might struggle to access care.

Under the arbitration approach championed by healthcare providers, an independent arbiter would review what an out-of-network doctor thinks he should be paid, what the insurer thinks it should have to pay, and then set a legally binding payment amount.

In states that have implemented arbitration, like New York, doctors have made more money. Those higher paydays for doctors translate into higher premiums for consumers.

Arbitration is also expensive. A report from the Congressional Budget Office found that arbitration would add $1 billion in administrative costs to the nation's healthcare system.

Transparency and truth-in-advertising can eliminate surprise bills. If insurers face fines for labelling facilities with doctors that issue surprise bills as in-network, they'll be more careful about keeping their network directories up to date. Similarly, "in-network" hospitals will be more diligent about whom they employ if they have to pay up when their doctors balance-bill patients.

Finally, in emergencies, patients' needs are all that matters. That's why banning surprise billing altogether in emergencies is just common sense.

Reports are already emerging that some patients who have been tested for the coronavirus or treated for COVID-19 have received surprise medical bills. This transparent, patient-centered approach can put a quick end to the practice, without compromising access to care.

Surprise medical bills still need a fix. When Congress revisits the issue, it must remember to put patients first.

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.