The authors of this newsletter have followed, and occasionally written about, various state and federal legislative efforts to reign in and address the problem of balance bills, or as the legislators incorrectly name them, “surprise medical bills.” Incorrectly named because in many cases the bills are anticipated by the patient, albeit unknown in amount. “A 2018 Kaiser Family Foundation poll [for example] found that 67 percent of people worry that they won’t be able to afford a surprise medical bill — more than fear being unable to pay for prescription drugs, health insurance premiums or deductibles, or for staples such as food, rent, mortgage and gas.”[1] Patients and their health plans know the patients will be billed for uncovered medical expenses, but few self-funded health plans are doing anything about it.
A Peterson-Kaiser article entitled “An examination of surprise medical bills and proposals to protect consumers from them” found that for people in large employer plans, 18% of all emergency visits and 16% of in-network hospital stays had at least one out-of-network charge associated with the care in 2017.[2]
In the absence of a market-driven solution, state and federal legislators have introduced numerous pieces of legislation intended to protect patients from surprise medical bills. Unfortunately, the legislative solutions proposed will only drive up the costs of health care, ultimately at the expense of U.S. citizens.
“Although market failure is widespread, current health care proposals in the House and Senate solely focus on reducing surprise billing by capping out-of-network prices charged for select services by physicians practicing at in-network facilities. While undoubtedly an important problem on the forefront of many patients’ minds surprise bills represent only a small portion of the pricing problem. According to our analysis of 2016 data from three large national health insurers (insuring almost 43 million people), about 8.8 percent of these carriers’ spending on health care professionals for those younger than age 65 was for out- of-network care, of which less than two-fifths (3.2 percent of total professional spending) was associated with surprise billing. Of this spending on surprise bills, 58.2 percent was due to prices above national service-specific, in-network median prices. In other words, if all surprise billing above the national median in-network price would have instead occurred at the in-network median, these insurers would have saved about 1.9 percent of total spending on health care professionals. In considering either the narrow problem of surprise out-of-network billing or the broader set of market failures, the question should not be if the government should intervene, but how.”[3]
As noted in our December 2019 Newsletter, “As 2019 draws to a close, and despite a flurry of activity throughout the year, the House and Senate have been unable to reach agreement with respect to balance billing. Members of the House and Senate introduced a myriad of bills all targeting ‘surprise medical billing.’ They held hearings and negotiations. They spoke repeatedly about the evils of surprise medical billing and the desire to fix it. However, it is nearly the end of 2019 and legislators still cannot agree on how to handle disputes between the providers and insurers (arbitration or benchmarking), among other key terms of any surprise billing legislation.”
Arbitration or benchmarking? A Hobson’s choice from the perspective of health care costs. More than 40 years of litigation experience have taught me that arbitrations can be won if there is a meritorious defense on the issue of liability, but if arbitrators are only assessing damages, a compromise award most often occurs. Say 40-60% of the amount sought on average. So what can we anticipate if patients are excused from liability, but self-funded plans and providers are compelled to arbitrate how much should be paid toward a balance bill? Plans will not regularly avoid payments to the providers, nor will the providers regularly recover their chargemaster. Something in between. 40-60% is as good a guess as any.
What can we expect if surprise or balance bills are benchmarked? The usual and customary rate in the community? A multiple of the Medicare allowed rate? Again, not zero, nor the chargemaster, but some amount in between.
The patient would avoid immediate liability for the surprise or balance bill, but ultimately the patient or employer, or both, absorb the ever-increasing costs of health care.
The battle with a provider seeking to recover on a surprise or balance bill can be fought by one of three constituencies: insurers, self-funded plans or patients. Our experience in defending these bills has made is abundantly clear that the patient is the one in the best position to defeat the claim of the provider. Vastly superior. Unlike insurers and plans, the patient is not a party to any agreements or prohibitions. The patient has a constitutional right to a trial, a trial by a jury. Frankly, a hospital is no match for a well-represented patient.
aequum by Koehler Fitzgerald has been defending balance bills for almost five years. It maintains a database which permits us to track and aggregate the actual results for every claim that has been referred to us. Over that entire period of time, across all 50 states, we have defended more than 7,000 claims asserted by more than 1,500 providers. The claims have been referred to us by more than 130 self-funded plans. So what has been the result? aequum has generated a savings of 99.1% off disputed charges for those self-funded plans. Conversely, it has cost only 0.9% of the disputed amount to resolve all of those claims. These results have been achieved in large measure because we represent the patient as our legal client.
What are the take-aways from this performance? First, there is little to no merit to the balance bill claims. Second, if properly represented, the patient will almost always prevail, except on rare occasions. Third, removing the patient from the fray, and imposing either benchmarks or arbitration, would almost certainly yield much more unfavorable and costly results.
I believe the current legislative efforts are misguided. There is a need for legislative reform, but what is needed is not a mechanism for resolving balance bills. Patients need protection from adverse credit reporting while a balance bill dispute is pending. While the incidence of a balance bill ever being reported to the credit bureaus is incredibly low (only 2.4% of our clients have reported a derogatory mark), legislative protection would eliminate patients’ concern and allow them to fully exercise their legal rights to defend balance bills. We have proposed a bill to accomplish this goal to the Ohio legislature where it languishes.
As a securities lawyer for most of my career, I would be remiss if I failed to say that past performance is no guarantee of future results. But you make your own assessment. What is the best approach?
_________________________________________________________________________
[1] AARP, “A Survival Guide to Surprise Medical Bills,” https://www.aarp.org/money/credit-loans-debt/info-2019/surprise-medical-bills.html.
[2] The full text of the Peterson-Kaiser article may be found at: https://www.healthsystemtracker.org/brief/an-examination-of-surprise-medical-bills-and-proposals-to-protect-consumers-from-them/#.
[3] “The Case For Market-Based Price Caps,” Michael E. Chernew, Maximillian J. Pany, and Richard G. Frank, Health Affairs, September 3, 2019.