COVID-19

Even Republicans Want to Outlaw Surprise Medical Billing

By BOB HERTZ

On  April 3, the Secretary of Health and Human Services, Alex Azar, announced that the federal government would pick up the tab for testing and treating all uninsured Americans for COVID-19.

Azar specifically promised that:

a) hospitals would be paid the same prices they receive for Medicare patients; and

b) hospitals which accept the funds would be barred from sending any additional bills to patients.

Did anyone notice the last detail?  This is a Republican, who is promising to protect the vulnerable.

In the coming months, thousands of COVID-19 patients will be routed through a convoluted web of providers. At various points in their treatment. they will be susceptible to receiving out-of-network care — and the staggering bills that often follow.

COVID-19 patients will rarely have the luxury to choose a network hospital, or lab, or specialist. Often, they will need to be treated at any facility that is still open.

Hospitals will be forced to an all-hands-on-deck approach. Patients may have to stay for weeks, needing labor-intensive staffing and anything but a check in-check out mentality.

A patient can do everything right and still face substantial surprise bills. Take someone who fears that he may have contracted COVID-19. After self-quarantining for a week, he develops severe shortness of breath. His wife rushes him to the nearest in-network emergency room. But he’s actually seen by an out-of-network doctor — who may soon send a hefty bill for the visit. If he needs to visit an out-of-network urgent care center, emergency room, or drive-up testing site, he could face additional out-of-pocket costs. Federal law does not prohibit these providers from balance billing.

Matters get worse if his local in-network hospital is approaching capacity, and he must be sent to a hospital across town with spare beds. If the second hospital is outside his insurance network, he could potentially receive a second surprise bill. A third could come from the ambulance that transfers him — it too might not be in-network, and no one will think to check during a crisis. He could get a fourth surprise bill if his coronavirus tests are sent to an out-of-network lab. And so on.

Usually his insurer will refuse to cover the extra costs, and many of the providers will refuse to negotiate. The bills will go to collection. 

Months later, after media exposure or perhaps a class-action lawsuit, his bill might be dismissed. But that will be too late for his credit score to recover, and it may cause him financial headaches for years.  

Surprise bills are particularly reprehensible during this pandemic, when frightened consumers are forced to either seek health care services or risk transmitting a potentially deadly disease.   

This is an issue that only Washington can fix. Some states have taken steps to protect some of their residents from surprise bills– but this is far from universal. Besides, states are prevented by law from regulating large employer self-funded health plans. If Congress doesn’t act on this, nobody can.

(However. Gov. Ned Lamont of Connecticut did recently announce a superb executive order…)

Here is what we must demand:

During an epidemic, all hospitals and all doctors have to be available without extra charges. Providers cannot be allowed to bill for more than the patient’s network fee schedule allows.

For example, if a patient’s Aetna policy pays $4,000 a day for ICU care at a network hospital, then the charge will also be $4,000 if the patient must use a different non-network facility.

Needless to say, all doctors who practice in a network facility can only bill at network rates. This will regulate the conduct of physicians—especially the ones patients don’t choose themselves. Not coincidentally, surprise bills come far more often from ER doctors, anesthesiologists, radiologists, and pathologists than from cardiologists or internists..

Support for this kind of patient protection is non-partisan. In fact, the conservative Heritage Foundation, has proposed the following laws:

  •  First, Congress should require healthcare providers to supply a good-faith estimate of the cost of scheduled medical care before it occurs, unless the patient declines an estimate. Providers that refuse to supply an estimate before providing care should not be able to “balance bill” afterward.
  •  Second, Congress should protect consumers against false and misleading information by establishing penalties for any insurer that falsely represents a facility as being in-network, and for any facility that presents itself as being in-network if doctors balance-bill for services they provide at that facility.
  • Third, Congress should use existing regulations to ban balance billing for non-network emergency care.

In these limited, emergency situations, Congress should require insurers to pay, and providers to accept, reimbursement rates spelled out in existing federal regulations.

Actually, we came close to having reform last fall. As described by Daniel Block in the April-May-June issue of Washington Monthly, House and Senate committees announced a deal to at least limit surprise bills on December 8. The insurance industry endorsed it. So did consumer advocates. The White House quickly signaled support and pushed for its inclusion in a must-pass December 20 spending package.

But over the next 48 hours, hospitals and doctors’ groups came out against the proposal. In the Senate, Minority Leader Chuck Schumer reportedly signaled that he was uncomfortable pushing forward with the bill. Richard Neal and Kevin Brady, the top Democrat and Republican on the powerful House Ways and Means Committee, put out their own surprise billing proposal. It was a classic legislative maneuver designed to derail progress.

It succeeded. Congress did nothing. The December 20 deadline came and went.

Again in March, with the huge CARES Act being formed, surprise billing could have been stopped.

But the day before the CARES vote, word spread among lawmakers and lobbyists: Despite an active push, surprise billing reform language had not made it into the final version of the Act.

“Let’s be clear about what is happening,” Jon Walker of The Intercept has tweeted. “Democrats pretend they want to improve healthcare and when they have a chance they take the side of wealthy for-profit companies with the most ghoulish business practices imaginable.”

Actually, acccording to some legal scholars,  we should not even need new legislation. Surprise billing is already illegal, they claim, and states’ attorneys generals could be invalidating those bills right now.

A superb summary appeared in the American Journal of Managed CareApril 2017 – 

Our key motivation is that mutual assent is at the core of commercial transactions. Chargemaster and out-of-network prices, in contrast, are prices that neither patients nor payers accepted in advance nor are they prices to which payers would ever assent.  Instead, the law entitles providers, as one court ruled, to “the average amount that [the provider] would have accepted as full payment from third-party payers such as private insurers and federal healthcare programs.” The law therefore entitles providers to collect no more than prevailing negotiated market prices for any OON services.

Providers have no legal authority to collect charges that exceed market prices for OON services, and thus neither patients nor payers are under any obligation to pay such chargemaster prices. Consistent efforts to enforce this interpretation of contract law would go far in addressing abuses. Moreover, judges, public law enforcement officials, and private attorneys can use this interpretation to combat abusive or harassing efforts that providers pursue to collect such charges. And, perhaps most important, payers that form narrow provider networks can be confident that they will not have to pay extortive prices if their insureds require emergency OON care.                

Billing patients for prices that they did not agree to—prices that no one would ever agree to—and then demanding payment, often through collection services, is abusive.

We reviewed contract law and examined the law’s handling of cases where prices have not been specified in advance, which are the controlling authority to guide courts in disputes over surprise and out of network billing problems, and found that providers have no real legal authority to collect inflated bills, Courts are divided in their rulings on this issue, not because they disagree with our legal analysis, but because they don’t understand how medical bills really work.

We urge state attorneys general to challenge provider claims for charges on behalf of vulnerable patients.  Patients and their attorneys can also challenge these claims directly, without waiting for delayed and cumbersome legislations or regulations. Courts can also support judges administratively to help them reach a reasonable and uniform definition of ’market price’ for their jurisdiction that would end these practices immediately.

For more details, see:

Battling the Chargemaster: A Simple Remedy to Balance Billing for Unavoidable Out-of-Network Care. Barak D. Richman, JD, PhD; Nick Kitzman, JD; Arnold Milstein, MD, MPH; and Kevin A. Schulman, MD

Conclusion

Surprise billing is generally not a problem with Medicare or Medicaid.

But for others under age 65, we need new regulations which must be non-negotiable. State health departments must be empowered to cancel overcharges, which will still occur despite regulations.

If we can establish reforms now, in a time of crisis, the new laws have a chance to be permanent when the crisis is over. For now, we must:

  • Immediately ban providers from sending balance bills for out-of-network health care services related to the coronavirus.
  • Require insurers to make a payment for these services on a timely basis and limit the patient’s responsibility to in-network cost-sharing or no cost-sharing to the extent that is required under other emergency provisions. In addition, plans would apply in-network deductibles and maximum out-of-pocket limits to health care services related to the coronavirus.
  • Create a payment standard, based on Medicare rates, to specify the amount owed by the insurer to the out-of-network provider.

Bob Hertz is a retired insurance broker. He learned about health care from Uwe Reinhardt, Joseph White, Dr. Robert Evans, and George Halvorson a fellow Minnesotan.

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18 replies »

  1. Bob, While I don’t know the answer to that question, I note that back in the 1970’s and 1980’s, list prices for reasonable. For example, when I had a surgical procedure in 1976 at a NYC hospital, which has long since closed, a semi-private room was billed at $150 per day. In a suburban community hospital about 10 miles from my house, a semi-private room was billed at $75 per day. Now both are in the thousands while the Consumer Price Index is up, at most, five times from the mid-1970’s to the present day.

    The same steep price increases also happened in higher education. I note that both sectors have very heavy public sector involvement as a provider, a payer, or a lender. I know of no other sector of the private economy that behaved this way with respect to pricing.

  2. I can readily understand why providers would want high initial bills. I can understand why insurers can live with such a system. What baffles me is the statement that the government requires chargemaster billing, if in fact it does.

  3. If you ask foreign healthcare experts what they think about the American healthcare system, they will tell you that we have great hospitals, great doctors, great scientists, great drug research, etc. They will also tell you that they hate our financing mechanism and they hate that we don’t have universal coverage (yet). The universal coverage issue is the one most in need of fixing but there is more than one way to do that.

    The three factors I described above that make our healthcare system much more expensive than others will continue no matter what we do so I’m not holding my breath for our culture to change and I’m not holding my breath for healthcare workers to volunteer to take a huge pay cut.

  4. Good summary Peter. I think some variant of the German or Swiss system would be the best potential fit for us. The Netherlands also uses insurance companies but I’m not as familiar with the detailed workings and structure of their system.

    A couple of points to supplement your comment. First, most reputable economists will tell you that the employee also pays the share of the mandatory payroll contribution nominally paid by the employer as wages would most likely be higher by the amount of the employer contribution if it didn’t exist. Second, young and healthy people and wealthier people are allowed to opt out of the public system in Germany but if they do, they can’t get back in unless they can prove they are destitute.

    Regarding the cost disparity between the American healthcare system and those in other developed countries is due to three main factors in my opinion and two of those are cultural. The other is structural. The first is our litigious society which causes the specialty societies that develop physician practice patterns to take the litigious realty into account by incorporating more testing, especially imaging, than other countries would use. The second is that we provide much more intensive healthcare at the end of life much of which is marginally useful at best and futile at worst all at high cost. Some of it patients don’t even want but there is no living will or other guidance to inform providers and the default protocol is to do everything possible to keep the patient alive. The third is that virtually everyone who works in healthcare from doctors, nurses and techs, to executives, administrators, IT specialists and lawyers make 50%-100% more money than their counterparts in other countries. We also pay more for prescription drugs, especially specialty drugs. Administrative complexity is a minor issue at most in the scheme of things.

    We can cover the uninsured and the unemployed who lost their employer coverage for a relatively modest sum in this age of massive money printing to deal with the Coronavirus and we can get rid of surprise billing too. All sorts of things become doable in the aftermath of a crisis that were non-starters before. I don’t think Medicare for all is one of them though even if Democrats win in November. A public option probably is though it needs to compete on a level playing field with private insurers meaning it has to cover its medical claims plus administrative costs out of premium revenue..

  5. More complete understanding;

    “Publicly financed health insurance: In 2014, total health expenditure was 11.2 percent of GDP, of which 74 percent was public, mainly SHI spending (58% of total). General tax-financed federal spending on “extraneous benefits” provided by SHI, such as coverage for children, amounted to about 4.5 percent of total expenditure in 2014.2 Sickness funds are financed by compulsory contributions levied as a percentage of gross wages up to a ceiling. Coverage is universal for all legal residents. All employed citizens (and other groups such as pensioners) earning less than EUR56,250 (USD71,564) per year as of 2016 are mandatorily covered by SHI, and their nonearning dependents are covered free of charge.3 Individuals whose gross wages exceed the threshold and the previously SHI-insured self-employed can remain in the publicly financed scheme on a voluntary basis (as 75% do) or purchase substitutive PHI, which also covers civil servants. About 86 percent of the population receive their primary coverage through SHI and 11 percent through substitutive PHI. Military members, police, and other public-sector employees are covered under special programs. Visitors are not covered through German SHI. Refugees and undocumented immigrants are covered by social security in case of acute illness and pain, as well as pregnancy and childbirth.

    As of 2016, the legally set uniform contribution rate is 14.6 percent of gross wages, shared equally by the employer and employees. A previous legally fixed additional contribution rate for employees (0.9%) and supplementary per capita premiums set by sickness funds have been abolished and replaced by a supplementary income-dependent contribution rate determined individually by each sickness fund.4 In 2015, the supplementary contribution rate was, on average, 0.83 percent—that is, most of the SHI-insured paid less than previously, with rates ranging between 0 and 1.3 percent. For 2016, the average supplementary contribution rate is estimated at 1.1 percent.5

    This contribution also covers dependents (nonearning spouses and children). Earnings above EUR50,850 (USD64,994) per year (as of 2016) are exempt from contribution. The sickness funds’ contributions are centrally pooled and then reallocated to individual sickness funds using a risk-adjusted capitation formula, taking into account age, sex, and morbidity from 80 chronic and/or serious illnesses.

    Private health insurance: In 2015, 8.8 million people were covered through substitutive private health insurance.6 PHI is especially attractive for young people with a good income, as insurers may offer them contracts with more extensive ranges of services and lower premiums.

    There were 42 substitutive PHI companies in April 2016 (of which 24 were for-profit) covering the two groups exempt from SHI (civil servants, whose health care costs are partly refunded by their employer, and the self-employed)7 and those who have chosen to opt out of SHI. All of the PHI-insured pay a risk-related premium, with separate premiums for dependents; risk is assessed only upon entry, and contracts are based on lifetime underwriting. Government regulates PHI to ensure that the insured do not face large premium increases as they age and are not overburdened by premiums if their income decreases.

    PHI also plays a mixed complementary and supplementary role, covering minor benefits not covered by SHI, access to better amenities, and some copayments (e.g., for dental care). The federal government determines provider fees under substitutive, complementary, and supplementary PHI through a specific fee schedule. There are no government subsidies for complementary and supplementary PHI. In 2014, all forms of PHI accounted for 8.9 percent of total health expenditure.”

    I’ll take the German system. I don’t see any government controlled system enrollees anywhere in the world clamoring for a U.S. system.

  6. In case you weren’t aware, the German healthcare system operates through INSURANCE COMPANIES called sickness funds in Germany. They compete with each other for business. Most people get health insurancem through their employer financed with payroll taxes. Retirees get insurance through Germany’s equivalent of Social Security and the unemployed have their premium paid for them by the unemployment insurance fund also paid for with payroll taxes. Children are covered through general tax revenue. The combined payroll tax for health insurance, social security, unemployment insurance and long term care insurance amounts to roundly 40% of payroll up to a middle class level wage cap. The rest of the safety net is paid for by a combination of income taxes, with a top rate moderately higher than ours, a hefty value added tax which we don’t have (yet) and property taxes. If we want to replicate the German safety net, the American middle class will have to pay about 50% of income in combined income, payroll, value-added and property taxes. Do you think they’re ready to do that?

    Separately, some experts have questioned the Coronavirus death numbers in Germany because while their deaths relative to the total number of cases are unusually low, their flu deaths are unusually high. So the Germans may be categorizing many of their Coronavirus deaths as flu deaths. I think the accounting and reporting on this subject is far from uniform across countries.

    Finally, the Italian healthcare system is closer to the “single pay” system that you advocate for us than the German system is. No thanks.

  7. Ok, Medicare for all the uninsured who choose it- oh wait, there’s the ACA which Republicans want to kill so all those uninsured can have “choices”.

    Like WE have enough capacity for covid. That’s why we need the army, the tent clinics, shortage of ventilators and PPE, testing, cancellation of elective surgery, while the moron in the White House wants us to get back to normal.

    “Over the past week Germany has begun transferring around 50 Italian patients in critical condition to hospitals all over the country. It has also taken in 63 patients from Alsace, one of the worst-hit regions in France. The country has some of the highest numbers of intensive care beds in Europe – according to 2011 data, Germany had 29.2 critical care beds per 100,000 people while Italy had 12.5.

    As Germany has so far escaped the levels of infection seen in some countries – there have been 993 deaths compared to Italy’s 12,428 – its healthcare system still has plenty of capacity.”

  8. Bob, I don’t know the answer to that question. It may have just been a crude attempt to avoid VISIBLE price discrimination. It could have something to do with insurers desire to maintain as much confidentiality as possible around their contract rates. I do know that list prices are set high by providers for two reasons. The first is to ensure that no money is left on the table . The second is that if a mega-wealthy foreigner shows up at a leading U.S. academic medical center prepared to pay full charges, the hospital wants to collect as big a payday as possible.

    When I had my ablation in late 2015 at a leading NYC academic medical center, the list price bill for six hours of operating room time plus an overnight stay in a cardiac observation unit, the list price for that care episode, excluding the doctors’ charges which were billed separately, was $220,000! Medicare paid $15,700 which was accepted as full payment. Ridiculous.

  9. So essentially you’d have government setting prices, which is what progressives originally wanted with the ACA but couldn’t get. If that happens, there’s no reason not to have a public option in the ACA since the margins disappear. This could be a good backdoor way to get to single payer. If that’s the case, so much the better.

  10. Good points, Barry.

    Just curious, do you know why CMS appears to require that the initial bills for each patient be based on chargemaster rates?

    Was this a very clumsy attempt at price transparency? Was it an attempt to motivate the public to buy health insurance? Was it a hangover from the attempts to be sure that Medicare was only being charged its “proper share” of costs?

    I know there is some economic literature on why some markets develop into “huge list prices and huge discounts”.
    But I do not know where to find such discussion.

  11. Ah Peter, you make it all sound so wonderful. Everyone can see any doctor at any time with little or no wait time and owe no cash at the point of service just like in Canada and the UK. Oh wait, there are significant wait times in both of those systems for non-life threatening care like hip and knee replacements or imaging studies. All of these single payer systems control costs by restricting access. Just look at all the Covid-19 patients that France and Italy, among others were unable to treat because they didn’t have enough capacity.

    Bernie Sanders and his supporters have no idea how much healthcare utilization would increase if suddenly no cash were due from patients at the point of service. They have no idea what will happen to hospital finances if they suddenly have to accept Medicare rates from all comers even with no uncompensated care. They have no idea how many older doctors will accelerate their retirement because they don’t want to accept a huge hit to their income, especially among more highly paid specialists. They have no idea how many of our future best and brightest will decide not to go to medical school because the financial reward for all of the training required just isn’t worth it. Then they might be forced to significantly increase Medicare payment rates which could make the system as expensive or even more so than it was before. After they’ve destroyed the current private insurance system, then what?

    All single payer advocates can see is the administrative complexity of the current system which isn’t as costly as they claim. We like choices in this country because it’s part of our culture and our values. We can cover the uninsured without resorting to Medicare for all and we can end surprise bills with reasonable legislative changes that I outlined above.

  12. I have a better way. Single-pay for everyone and the same price for all like services controlled by legislation. Non of this; in/out network, charge master, uninsured/well insured, emergency/non-emergency, co-pay, deductible – it’s all BS and designed to extract the maximum dollars through a system of non-transparent conspiracy.

  13. The main issue here is billing for care that must be delivered under emergency conditions as opposed to care that can be scheduled in advance. If you show up at a hospital emergency department, any care delivered there should be considered emergency care and ditto if you are admitted to the hospital either as an inpatient or under observation status. Ambulance services are also emergency care.

    Under current regulations, as I understand them, all providers are required to bill all patients at the same price which is their list price or chargemaster rate for hospitals, Insurers then actually pay their contract rate if the provider is in network and the insured person receives an explanation of benefits form (EOB) that shows the provider’s list price, the insurers allowed amount (contract rate) and any patient responsibility due to his or her deductible, co-pay or coinsurance. If the patient is uninsured or out of network, there is no contract rate and so the patient gets stuck with having to pay the list price. Insurers may also have a non-network payment rate which is probably lower than their in-network rate in order to give providers an incentive to join a network.

    I propose two fixes to this problem. First, providers should just be able to bill in network providers at their contract rate an dispense with the list price BS. That requires a change in the regulations. More importantly, if the patient is uninsured or out of network, every hospital should have a REASONABLE default rate. For commercially insured patients and uninsured patients, the default rate could be their volume-weighted average of the hospital’s three largest in network commercial payers. For Medicare Advantage patients, it could be the Medicare rate. For patients in a managed Medicaid plan, it would be the Medicaid rate.

    Doctors who work in hospitals and refuse the join any insurance networks would have to accept the hospital’s default rate. This especially applies to radiologists, anesthesiologists, pathologists, emergency medicine doctors and assistant surgeons all of whom patients have no role in choosing.

  14. Here’s another example of Repugs wanting to protect the “vulnerable”

    Heather Cox Richardson:

    “At the end of 2019, more than 275 bills with bipartisan House support are sitting dormant on Mitch McConnell’s desk.” “These include an enormously popular bill for lowering the cost of prescription drugs.”

    “McConnell, who gets more contributions from the pharmaceutical industry than any other senator refused to take it up saying he opposes “socialist price controls”.

    McConnell is exercising veto power even Trump does not have.

  15. Thanks, Chkaloon for comments. In my view, as long as insurers pay at least as much as Medicare, I do not care if they have the power to dictate payments. The patient is legally and often physically helpless, so someone has to set limits on balance billing.

  16. Good point. Peter. It might be that Azar’s staff was allowed to stray a little bit off the reservation with the ban on balance billing by hospitals.
    However, hospitals collect less than 15% on their bills to the uninsured, and that is during good economic times. If we get to 50 million unemployed by this summer, then collections will fall even further. Might as well face up to it.

  17. “Did anyone notice the last detail? This is a Republican, who is promising to protect the vulnerable.”

    Don’t believe it, it’s not part of their nature. The same Repug-nants who want to end the ACA and return us to no protections for pre-exist.

    As well, who controls the out-of-network docs, or the docs not even in Medicare.

  18. I see how this can work in the short term during the current crisis. But in the long term, what will the point of networks be? It also shifts the balance of power heavily to the insurers. They can create an extremely narrow network with weak providers who accept very low payments, then everyone else needs to play along with that baseline. I don’t see that as a solution.

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