The Department of Health and Human Service (HHS) has released its 25-page “HHS Secretary’s Report on: Addressing Surprise Medical Billing,” which was required under Executive Order 13877.  The July 29, 2020 report tells Congress to get something done on the issue but does not determine or recommend what kind of legislation should be passed.  

One of the leading issues being addressed in Congress just prior to being besieged by the coronavirus was surprise billing, sometimes called balance billing.  A surprise bill occurs when a patient has a medical procedure at his or her insurer’s in-network facility, like an emergency room visit or for an inpatient planned procedure, and weeks later receive a bill from an out-of-network provider that can sometimes cost thousands of dollars.

Resolving surprise billing has bipartisan support, but there are at least two solutions being offered in Congress, which has led to an impasse to date in moving anything to a vote on the floor of the House or Senate.  Sponsors of legislation that would use one or both of these solutions to surprise medical billing jumped on the HHS report by issuing a joint press release on July 29, suggesting that they viewed the report as supporting their bills.  They claimed that they had “agreed on a transparent, market-based solution that will lower patients’ premiums and will not interfere with strong protections states already have in place.”  They also said their legislation was fair would “protect patients” and is “fair to providers and insurers.”

One proposed solution described in the press release is rate-setting, which would have the government set a rate based on the average price, or a benchmark, for a service in the local geographical area.  Citizens Against Government Waste (CAGW) argues this is a price control that will lead to shortages.  This solution would be particularly harmful in areas where healthcare professionals are already scarce and makes even less sense to enact now during the pandemic.

The other proposal is independent dispute resolution (IDR) or arbitration.  This would require the insurer and the healthcare provider to make an offer on an appropriate payment and an arbitrator would decide which one is reasonable.  But CAGW contends the arbitrator will look at the average rates in the area to help decide, which is simply a price control delayed.

Generally, rate-setting is favored by insurers and IDR is favored by hospitals, physicians, and other healthcare professionals.  The HHS report provides information on where and when this type of billing occurs.  After examining data from large insurers, HHS found that nationally 18 percent of emergency visits and 16 percent of hospital in-patient stays resulted in a surprise bill from an out-of-network provider.  These results will vary by state.  For example, for emergency care, Texas has the highest emergency surprise billing rate at 38 percent, while the lowest was in Minnesota at 3 percent.

For scheduled in-network inpatient procedures nationwide, according to 2017 large employer data, 16 percent of in-network admissions resulted in at least one out-of-network charge.  Here too, the rate varies by state, with New York having the highest at 33 percent, followed by Texas at 27 percent, and Florida at 24 percent.  The lowest are Minnesota, Nebraska, and South Dakota with 2 percent.

The HHS report notes that out-of-network billing increases when hospitals rely on third-party staffing to fill personnel needs.  They are most often used to staff emergency rooms, and provide special services like anesthesiology, gastroenterology, urology, and orthopedics.

The report provides interesting background information on the various regulations and temporary provisions implemented for the pandemic, EOs that have been applied by the Trump administration, congressional activity on addressing surprise billing, and data.  The report asks Congress to “enact legislation to protect patients from surprise bills” but it provides no decision on which course to take, rate-setting, IDR, or any other idea.

That may be because rate-setting and IDR have provided questionable results, which are noted in the report’s appendix.  California’s 2017 law, which uses rate-setting, “requires fully insured plans to pay out-of-network physicians working at in-network hospitals the greater of the insurer’s local average contracted rate or 125 percent of the Medicare rate, and has an independent dispute resolution (IDR) process for resolving differences.”  The report notes many stakeholders are divided on the results, with the California Medical Association claiming the law has led to narrow provider networks, less choice for consumers, and increased patient complaints.  America’s Health Insurance Plans, a trade association, reports essentially the opposite.  Other studies have been done but have dubious results due to incomplete data and others claim the payments are too low and the IDR process is administratively slow and expensive.

New York’s IDR law, implemented in 2015 and often cited as a model for the federal government to follow, has supposedly dropped out-of-network billing by 34 percent and saved consumers $400,000,000 in emergency room bills.  The state report also found that “13 percent of IDR decisions for all health services (not just emergency services) over that time period were in favor of the health plan, 48 percent in favor of the provider, and 39 percent [were split between] both parties.”

As noted, New York still has the highest percent of out-of-network charges for in-network care at 33 percent. Looking at the administration’s source for inpatient care, Peterson-KFF Health System Tracker, but for emergency room services instead, visits that include an out-of-network event in New York is at 28 percent, the nation’s third highest.  

In addition, a November 2019 NPR report found that New York’s arbitration model has led to higher healthcare costs because arbitrators routinely decide on dollar amounts above 80 percent of typical costs charged by providers.

CAGW agrees that surprise billing is a problem and supports the administration’s major principles:

• Patients receiving emergency care should not be forced to shoulder extra costs billed by a care provider but not covered by their insurer;
• Patients receiving scheduled care should have information about whether providers are in or out of their network and what costs they may face;
• Patients should not receive surprise bills from out-of-network providers they did not choose; and,
• Federal healthcare expenditures should not increase.

CAGW believes this issue should be solved in the states because they face different problems.  A one-size-fits all federal solution could be very damaging to their citizens accessing care, especially in rural areas.  As of April 2020, 29 states have acted on surprise billing.  The remaining states should be allowed how to address any problems they have.

If there must be a federal solution, CAGW believes that rate-setting and binding arbitration are not the answers.  Both end up relying on price controls, which distort markets, raises costs, and lead to shortages.

CAGW prefers a different route that would require truth-in-advertising and enforcement through applicable laws and regulations.  This proposal is laid out in “A Targeted Approach to Surprise Medical Billing” by Doug Badger and Brian Blase at the Galen Institute.  Because insurers advertise that a healthcare facility is in their network, and that facility, like a hospital, will claim it is within the insurer’s network, then when an insured patient patronizes an in-network facility, and does not specifically request an out-of-network provider, that patient should not receive a surprise bill.   If the patient does receive a bill from an out-of-network provider, then penalties would be established for both the insurer and hospital for false advertising.  This would also apply to any emergency care provided at an in-work facility by an out-of-network provider. 

CAGW believes that the insurer would work out an agreement in advance with the hospital to avoid balance billing problems and the healthcare facility would reach an agreement or have a contract with their out-of-network provider to avoid any fines. 

Sometimes a patient must utilize emergency care at an out-of-network facility and in such cases, one solution would be to prohibit balance billing and a reasonable reimbursement would be provided based on existing federal regulations.

While we understand the Trump administration’s continuing concern over surprise billing, we continue to urge Congress to reject more big-government, heavy-handed Washington control to solve this problem.