Milan Korcok explores the treacherous world of unexpected, unaffordable medical bills, and looks at what can be done to tackle these problems

For cost containment entities working in America’s tumultuous healthcare marketplace, finding the true cost of specific medical goods or services can be likened to a shell game, or ‘thimblerig’, as it has been known for several centuries: keep your eyes on the moving cups, place your bets and hope for the best. Not the most scientific way of settling on a fair price for an emergency gall bladder removal or cardiac catheterisation – but in the arcane machinations of managed care, ‘fair’ is in the eye of the beholder. How else can one explain a surgeon billing US$48,983 for a total hip replacement in New Jersey for which the federal Medicare programme would have paid $1,543; or an outpatient office visit valued by Medicare at $152 being billed in Massachusetts at $6,205? (Data from Americans’ Health Insurance Plans (AHIP)). Bizarre? Unexplainable? Certainly. But not uncommon, and especially treacherous for foreign patients who, though insured for travel to the US, are unaware that some horrendous surprise bill for services received in an emergency room full of unfamiliar faces may follow them home a couple of weeks or months later.

For cost containment entities working in America’s tumultuous healthcare marketplace, finding the true cost of specific medical goods or services can be likened to a shell game

No benchmarks

Most Americans covered by private insurance, or even government-administered plans such as Medicare, are aware that there are limitations to their benefits, that they are subject to deductibles and co-payments and that their choice of healthcare providers is also limited – some more than others. They understand that in the world of managed care, going out-of-network may cost them more than what their insurer is prepared to pay. But do they know how much more? According to research published in the Journal of the American Medical Association in 2017, anaesthesiologists, emergency physicians, pathologists and radiologists (hospital-based specialists) charge more than four times, on average, what Medicare – the federally administered programme for the elderly and disabled – pays for similar services. This often leaves privately insured consumers stuck with ‘surprise’ medical bills that are much higher than they anticipated.  Private insurers often use the rates Medicare pays hospitals and physicians only as benchmarks – usually supplementing them by 25 per cent or more – or a lot more – when negotiating reimbursements with hospitals and other provider networks, although providers have traditionally claimed that Medicare does not cover their costs, just as Medicare beneficiaries may have substantial deficits to cover if they count only on that unadorned programme for their healthcare. What comes as an even bigger surprise is that this can happen even to patients attending hospitals in their own network. And it’s happening more and more often. A 2018 survey by the University of Chicago’s National Opinion Research Center (NORC) revealed that 57 per cent of American adults have been surprised by medical bills they thought were covered by their insurance. And in 2017, the Federal Trade Commission reported that one-fifth of emergency room admissions triggered ‘surprise’ bills.

Hidden extras

Emergency rooms are busy places, with a lot of white coats rushing by, many of them worn by physicians who are neither hospital employees nor participants in the patient’s insurance plan. And it’s happening also beyond emergency rooms – in operating suites and non-emergency areas of the hospital. It seems that many physicians listed on invoices never come face-to-face with their patients. And for insurers and the cost containment specialists interceding on their behalf, this is where the mystery of those mega-bills gets really murky. In one case reported by the New York Times, an insured patient undergoing herniated disc surgery was unaware that one of his assisting surgeons, whom he didn’t recognise and had never met, billed him $117,000 for his work as an ‘assistant’ to the in-network surgeon who did the actual surgery. There was no problem with the patient’s primary surgeon who was ‘in-network’ and who did accept the negotiated fee that he was contracted for ($6,000). But his professional colleague would not relent. Fortunately for the patient, his insurer, Anthem Blue Cross Blue Shield, ultimately paid out, even though they said it was not their responsibility. The patient ended up paying only his $3,000 deductible. 

… it would, for the first time, give cost containment entities real, tangible figures to work with in negotiating fees with hospitals and doctors in any given geographic area at any given time

The Kaiser Family Foundation, a politically non-aligned think-tank covering health affairs, noted in 2016 that charges from out-of-network providers impacted one-third of non-elderly adults struggling with medical bills, and seven out of 10 individuals with unaffordable out-of-network medical bills didn’t know that the healthcare provider who treated them was not in their plan’s network. It revealed further, that not only were most of these surprise bills from anesthesiologists, radiologists, pathologists, and surgical assistants, but in some cases from entire departments in hospitals operated by subcontractors who didn’t participate in the same network as the hospital, such as emergency room staff and laboratory workers.

Legislators looking for their own niche

Inevitably, the scope and frequency of these mysterious billings caught the attention of legislators, first at the state level, and more recently federal politicians angling for pole position in the 2020 presidential election year healthcare debate, which has already started out to be acrimonious.  In 2015, New York state enacted its Emergency Medical Services and Surprise Bills law to address growing complaints about out-of-network billing abuses. Several states had already enacted some provisions to protect their residents from unknown or unauthorised medical billing circumstances, but not as comprehensively as New York, which limits patients’ costs for unexpected bills to what they would normally owe in-network. And to fortify their muscle in enforcing the law, they went to America’s national pastime – baseball arbitration – to find the mechanism to do it. More on this later. In the run-up to the law, New York’s Department of Financial Services (DFS) reported that of 2,000 complaints involving surprise medical bills, the average out-of-network emergency bill was $7,006 – of which insurers paid an average of $4,228, leaving consumers on the hook for ‘$3,778 for an emergency in which they had no choice’. The DFS also reported that out-of-network assisting surgeons called in without the patients’ knowledge billed $13,914 on average – of which insurers paid an average of $1,794; and surprise bills by out-of-network radiologists averaged $5,406, of which insurers paid an average of $2,497.

This makes employer-sponsored insurance by far the single largest form of health coverage in the country

To date, about one-quarter of all states have enacted some form of surprise medical bill law – some more, some less muscular than New York’s, but it’s noteworthy that these state laws only apply to plans that are state-regulated and that still leaves out the pool of large employer-sponsored self-insured plans that cover most working American adults and their families. They come under federal regulation. According to Kaiser Family Foundation, 94 per cent of employers with 5,000 or more workers self-insure, and 156 million people are covered by employer-sponsored plans. This makes employer-sponsored insurance by far the single largest form of health coverage in the country, followed by Medicaid, with 74 million.

Cut out insurers? 

This may explain why when Senator Kamala Harris of California, a front runner so far in the growing gaggle of 2020 presidential candidates, blurted out that she would eliminate all private insurance from America’s healthcare system in favour of full-bore government financed cover, other Democrats rushed to explain that she didn’t really mean what she said, and within hours of issuing that pronouncement, Senator Harris herself explained that her thoughts were misconstrued. It turns out that health insurers are among the biggest contributors to Democratic candidates – and election season is here. Nonetheless, the issue of erratic medical billing has caught fire with federal-level legislators and with President Trump who announced in January his intention to stop ‘surprise’ medical billing. Already, several ‘surprise’ bills have been launched in the Senate, some of them bipartisan – true rarities in this fractious Congress. The ‘No More Surprise Medical Bills Act of 2018’ gained national attention at President Trump’s State of the Union address in February when its sponsor, Senator Maggie Hansen, brought along guest Donna Beckman, who had recently received a ‘surprise bill’ for $1,648 from an out-of-network doctor who visited her for five minutes to see how she was doing after a quick visit to the Emergency Room. 

To date, about one-quarter of all states have enacted some form of surprise medical bill law

Hassan’s bill would prohibit hospitals and doctors from charging out-of-network fees and would require hospitals and doctors to give patients verbal and written consent at least 24 hours ahead of time if any services were to be out-of-network. And if timely consent was not obtained, the provider could charge no more than for similar services performed by an in-network hospital or doctor.

Take me out to the ball game

The bill also requires that if the final tab remains contended, it’s time to go out to the ballpark and settle the difference the way millionaire baseball players settle their salary demands with their billionaire team owners. It’s called Baseball Arbitration and it has become a staple in America’s business world. In the simplest explanation possible, each party in the dispute (it could be a physician vs a patient, or an insurer vs a hospital, or some variant) submits a final monetary offer to an arbitrator with knowledge about ‘the game’ – the presumption being that each is incentivised to make a reasonable offer as the arbitrator is unlikely to choose an unrealistic one. The arbitrator considers all the variables in the argument and makes a binding decision on the monetary issue alone – final, no modifications, no conciliations, negotiations or appeals. And most importantly, no lengthy and costly court cases. Significantly, under Hassan’s bill, the arbitrator would be instructed to be guided by actual Medicare, as well as negotiated network rates, and disregard the inflated hospital retail ‘chargemaster’ fees when determining their final decisions. All hospitals have confidential chargemasters hidden away that list the retail price for every item and service in their inventory of goods and services (like the $7 Tylenol tablets), which they use as ‘starting points’ in their negotiations with insurers and other payers. But even then, nobody but the most innocent novice pays retail. Furthermore, a companion bill also introduced in the Senate would allow states to restrict their arbitrator to choose between only three options in their rate setting – 125 per cent of the Medicare fee-for-service rates set by CMMS (supplemented by some rural area add-ons), 80 per cent of the usual and customary rates (UCR), based on community area charges, or the insurer’s in-network contracted rates. This takes a lot of wiggle room out of negotiators’ options when hammering out contracts or negotiating settlements of charges already submitted – for both parties. If this were actually enacted (and that’s a long-haul view) it would, for the first time, give cost containment entities real, tangible figures to work with in negotiating fees with hospitals and doctors in any given geographic area at any given time: a golden chalice for cost containment professionals (in the US and abroad) who have been thimblerigged in America’s healthcare arena for many years. It would also give Medicare rate setters big leverage in setting fees that are actually applicable to the ‘real world’ of America’s unreal healthcare cost structure. But then, this is only the beginning of the 2020 election marathon.