Issues & Insights

Surprise! Those Gov’t Fixes To Surprise Medical Bills Have Serious Side Effects

Health.mil

Whatever one thinks of this season’s Impeachment hearings, you can bet they will succeed in drawing eyes from other important policy issues. In fact, given the low odds of something being done in the Senate – distraction might be the main goal of the impeachment proceedings that Speaker Pelosi and Chairman Schiff are orchestrating.

One such issue is the continuing campaign against what has been called “surprise medical billing” where insured patients can face unexpectedly high charges when a member of a medical team that treats them is not in their insurer’s network.

This is most likely to happen in a medical emergency situation where hospitals and treatment centers fill in the gaps created by narrowed provider networks with out of network specialists.  The resultant bill to the patient for these services can be extraordinarily high.

Clearly something should be done, right? But should that be a government top down sledgehammer solution, or should we allow the markets to function? 

Surprisingly, doing nothing is actually moderately working. Though when a surprise bill does occur, they are onerous, they really happen very rarely and in only a small number of hospitals. In fact, of all the emergency department visits that occur, it’s estimated that an out-of-network bill appears in about 1% of cases.

But, the problem does exist and the rarity hasn’t stopped further meddling by legislative bodies who are trying to make the case for their next election. 

At the state level, California and New York have tried to tackle this issue with mixed success, and their approaches couldn’t be more different.

In California, a brute force price fixing scheme, like what is currently working its way through Congress, went into effect in the summer of 2017. Under this arrangement, certain specialists like anesthesiologists, radiologists and pathologists have seen double-digit reimbursement cuts. Further, there is evidence of terminations and threats to terminate physician contracts with insurers with the sole intent to negotiate lower contracted rates. 

A result of this could very well lead to diminished patient care. If not disincentivizing current practitioners, it could also lead to doctoral students choosing more lucrative specialties which has the potential for creating shortages, or in some circumstances, no care at all when a patient needs it the most. This take it or leave it approach is not only harmful but also completely unnecessary.

Sadly, the California law most closely matches the legislation draft that has come out of the Democratic House. And, it should be concerning to politicians that same academics that are supporting a price setting solution for Surprise Medical Billing, like Loren Adler of Brookings, are the same ones that are taking money from insurance company investors and expanding Obamacare

In contrast, the New York plan, which dramatically reduced out-of-network billing by 34%, did so by adopting independent dispute resolution, or arbitration. This system leaves the patient with in-network obligations while the out-of-network providers work out a deal between themselves and the insurance companies.

Since implementation, this has resulted in no increases in premiums and has generally resulted in satisfied parties, favoring neither side. Nationally, this model has support among GOP members, notably top Republican on the House Ways and Means Committee Rep. Kevin Brady (R-Texas), as well as Representatives  Larry Buschon (R-Indiana) and the co-chair of the GOP Doctors Caucus, Phil Roe (R-Tenn.).

In an ideal world, neither of these options would be necessary. Purer market forces prevent this from happening in fields like auto repair, in hospitality like hotels and restaurants, and in dentistry for example.

But Obamacare threw a monkey wrench into an imperfect but functioning insurance marketplace and left a mess in its wake. Given the composition of Congress, a federal solution would be incapable of restoring what a thriving healthcare system needs the most: among them, price transparency, the elimination of competitive barriers and consumer empowerment through vehicles like health savings accounts.

Before a legislative environment emerges that makes serious market-based reforms the prevailing option, it would be best for all for Congress to slow at least slow down, or even let the states take the lead.

Bad policy enacted at the federal level ensures that the ill effects are felt nationwide, whereas states like New York could come up with reasonable interim fixes that leaves their share of the population held harmless.

Peter Russo is a Republican political consultant and strategist

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4 comments

  • In my experience, all medical billing is “surprise” because they never give you even a ballpark estimate of costs (unless you make a stink).
    Many bankruptcies occur because of medical expense. Most folks in the throes of a medical issue aren’t given any idea as to the cost -and they are so panic-stricken they forget to ask “how much” and “is this the only solution”. For example, oncologists NEVER tell you about any therapies that are not Big Pharma solutions, using the excuse that there have been no double-blind logitudinal studies. They never tell you the chemo drugs have not had them either, but because of the control Big Pharma has over the FDA, the lie is universally accepted.

  • In a true free market approach to health care, there would be less “surprise bills,” since you would be able to discuss prices before you receive your care. If products were sold on Amazon without prices listed, who, in their right mind, would buy them? No one, and that’s the problem with third-party paying systems.

  • It’s not just emergency. Every complex hospital visit and some outpatient visits show up with bills from doctors I have never heard of who did things I had no idea anybody was going to do, and for which I was given no choice. You bet it’s cutting fees to doctors. This is nothing more than highway robbery. This article is totally biased.

  • “Surprise medical bill” is a misnomer. It is actually “surprise insurance denial”. We all pay too dollar for healthcare “insurance” to the tune of up to $1000/person/month, and expect it to cover our healthcare expenses. Unfortunately they are profit machines and do their best to avoid covering our healthcare expenses.
    As far as I’m concerned, my doctor should make more than my electrician or plumber, but he doesn’t…

  • [print-me target="#post-%ID%"]

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