42.9 million Americans have unpaid medical bills (copy)

An injured passenger is loaded into an ambulance. The number of patients receiving surprisingly high medical bills because they have no option but to receive services from out-of-network providers is on the rise, especially for ambulance services, emergency room treatment, anesthesiology and neonatal care.

Surprise medical bills are unacceptably on the rise. Federal and state legislation can rule out most surprise charges, but the approach with the most bipartisan support in Congress faces strong opposition from physicians groups. This opposition must not be allowed to kill the legislation. Any approach that is adopted should put the patient’s interest first, in keeping with a doctor’s promise to “do no harm.”

Surprise billing, also know in the medical profession as “balance billing,” occurs when patients are served by providers who are not part of their (or often any other) insurance plan. This most often occurs in four areas: ambulance services, emergency room treatment, anesthesiology and neonatal care.

According to a recent study by a group at Stanford University, drawing on the records of a large unnamed health insurance company, the share of emergency room patients receiving an unexpected bill not covered by their insurance rose from 32 percent to 43 percent between 2010 and 2016. For hospital inpatients the share rose from 26 percent to 42 percent. Individual bills more than doubled.

Critics of the balance billing practice note that patients often have no choice in whether they receive services from a provider who is not part of an insurance network. They say that most surprise bills come from these doctors and others who charge more than the negotiated prices paid by insurance companies to doctors who are “in network.”

Critics also have alleged that balance billing by emergency rooms has risen where physician practices have been purchased by private equity firms such as KKR and Blackstone. In one case reviewed by a Yale study, a private equity firm raised emergency room out-of-network charges an astounding 81 percent and total charges 96 percent compared to the previous owners.

When patients have no choice or are uninformed, these extraordinary charges violate any sense of equity and are a clear case of market failure justifying government intervention.

Sen. Lamar Alexander, R-Tennessee, and Sen. Patty Murray, D-Washington, the chairman and the ranking minority member of the Senate Health, Education, Labor and Pensions Committee, earlier this year introduced a bill to address surprise medical bills. It has been reported out of the committee but has yet to come to the floor. A similar bill was approved this summer by the House Energy and Commerce Committee.

The Congressional Budget Office estimates that the bills would result in $25 billion in savings over 10 years. It also has been calculated that, other things being unchanged, private health insurance costs would be reduced by 0.5 percent. But the most important effect would be patient peace of mind.

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The Senate bill would require out-of-network providers to charge no more than the median negotiated private insurance price where the service was delivered. Physicians groups have objected that this approach is equivalent to arbitrary government price controls, and say that all disputed bills should be submitted to arbitration.

It is fair to point out that the so-called “benchmark” price rule is not arbitrary, but is based on prices negotiated in the health care market by private providers and insurance companies. Submitting bills to arbitration requires setting up a new, expensive mechanism for setting prices by an individual whose decision is by definition arbitrary, and seems unlikely to result in as much relief for patients as benchmarking.

Meanwhile, states like South Carolina can address the problem themselves. South Carolinians who receive unexpected medical bills already have the legal right to challenge them. But if state law were to require all hospitals to provide an “in-network guarantee” that all providers treating insured patients also are considered in-network, the problem of surprise medical bills for hospital treatment in South Carolina would very likely disappear.