Let’s say you’re pregnant. You’ve had months to plan the delivery and pick an in-network OB-GYN practice and a convenient hospital that’s covered by your health insurance. The big day comes, you rush over to the ward, and your child is born without incident. Everyone goes home happy.
Until the bill arrives. It turns out that while you were in throes of labor, the hospital sent an out-of-network anesthesiologist to handle your epidural. Nobody told you at the time. Now he’s asking for thousands of dollars that you can’t spare.
In a sane health care system, this wouldn’t happen. But in the U.S., it can and does. Americans regularly visit doctors’ practices and hospitals that accept their insurance, only to find themselves ambushed by surprise medical bills from out-of-network physicians who somehow played a role in their treatment, as Elisabeth Rosenthal’s recent reporting in the New York Times has detailed. It happens in operating rooms and emergency rooms. And there’s not much that patients can do about it.
But can’t lawmakers do something about it?
“It’s hard,” says Jack Hoadley, a research professor at Georgetown University’s Health Policy Institute. Surprise medical bills are an old issue, yet the Affordable Care Act mostly ignored them. Just a fraction of states have passed laws to protect patients in these circumstances, according to the Kaiser Family Foundation, and some of those statutes are extremely narrow in scope.
The problem, according to Hoadley, is that it’s incredibly difficult to make insurers and health providers reach a compromise on how much out-of-network doctors should be paid. Some patient advocates hope that a new law that will soon go into effect in New York state could serve as a national model for how to strike the right balance. But just like most obviously outrageous problems in the U.S. health care system that make you pine for a life in Canada, surprise medical bills don’t have a simple solution.
To understand why surprise medical bills pose such a policy conundrum, start with some basics. Hospitals accept insurance plans for the doctors they directly employ. But most doctors are not employed by their hospitals. Instead, they’re independent contractors who are free to pick and choose which health plans they participate in. So while an orthopedic surgeon might take your Aetna PPO, the neurosurgeon or the anesthesiologist might not. When multiple doctors get pulled into a procedure or are called on to assess a patient, some may not accept the same insurance.
Plus, many emergency rooms are themselves independent contractors: Patients in need of urgent care may arrive knowing the hospital is in-network, but unaware that the ER doc they’re seeing isn’t. The health plan will pay whatever amount it sets for out-of-network providers, and the balance of the doctor’s hefty fee falls to the unlucky patient, who probably never saw the bills coming. Or, in nonemergency cases, maybe she did see the bill coming but had no way of heading it off. (My eight-months-pregnant editor has asked her insurance company, her doctor’s practice, and the hospital where she plans to give birth how she can ensure that her anesthesiologist—should she need one—will be in-network, and the collective response has taken the form of a baffled shrug.)
“It’s a pretty good bet that if you’re hospitalized or having any kind of surgery, somebody along the way who touches you or your slides or films will not be in-network,” Karen Pollitz, a senior fellow at the Kaiser Family Foundation, once told Bloomberg.
Patching up these network gaps is complicated, and the most straightforward solutions are nonstarters. For instance, we could demand that all doctors in a hospital accept the same suite of insurance plans. But hospitals fear that such a requirement would make it harder to recruit physicians, especially in parts of the country where doctors are in short supply. Another idea: We could ask hospitals themselves to make sure, whenever possible, that patients are treated by in-network doctors. But when a Texas commission considered this seemingly straightforward concept, it concluded that technological limitations and the rapid mutations of doctors’ schedules from hour to hour would make it impossible.
So what have states actually tried? Texas attempted to make information about which doctors are in- and out-of-network more transparent to consumers, which has been largely ineffective. Colorado and Maryland have passed more serious protections, which force at least some insurers to pay surprise out-of-network charges; in these cases, patients are simply billed as if they were in-network.
The big question is: How much should insurers pay? Health plans don’t want to shell out too much. Health providers don’t want to be paid too little. And as Hoadley and his Georgetown colleague Kevin Lucia wrote in a report for the California HealthCare Foundation, finding a happy medium is tricky. In Colorado the law is set up so insurance companies essentially end up paying whatever out-of-network doctors decide to bill. Since non-network physicians are guaranteed a nice payday, they have less incentive to participate in health plans, or to accept discounted fees if they do, which drives up the cost of insurance for everybody.
Maryland has the opposite issue. There, HMOs pay out-of-network doctors standardized reimbursement rates. Physicians say those rates are far too low—which might seem like a minor policy concern, unless you’re worried about doctors moving to other markets.
Because doctors and insurers are loath to compromise on payments, states have a hard time working out political solutions to protect patients. The aforementioned Texas commission, which included representatives from both health insurers and medical providers, was so contentious that its final report failed to make any recommendations. “No one wanted to be the first one to budge,” commission member Dianne Longley told me.
A law passed this year in New York, however, is giving some policy advocates hope. Much like Maryland and Colorado, it requires health plans, not patients, to cover surprise out-of-network bills. But the law, which goes into effect next year, comes with a twist: If the medical provider and insurer can’t agree on a fee, it sends them into a baseball-style arbitration, in which each side makes an offer and a mediator chooses the fee.
“One of the advantages of arbitration may be that health plans and providers get more realistic about the kinds of fees they charge to patients,” says Chuck Bell, programs director at Consumers Union, which lobbied for the bill. “We hope it will calm down the markets and get everybody to be more sensible about surprise bills.”
Why was New York able to take action where other states have not? One big factor was Gov. Andrew Cuomo, who began investigating issues surrounding insurers and payments to out-of-network doctors back when he was state attorney general, securing a $95 million settlement in one case. In 2012 the state’s Department of Financial Services also produced a long report on the problem of surprise medical bills, which helped drive attention to the issue; advocacy groups ran a grassroots campaign in which thousands of New Yorkers contacted their state legislators.
Policymakers are already taking notice of New York’s progress, Bell says—he recently hosted a conference call with 50 regulators from other states about the law. “If you put a human face on this issue, it becomes irresistible,” he says. “Politicians don’t want to say no to people who have had this experience. If we can light that fire in other parts of the country, patients can win this sort of protection.”