The following editorial appears on Bloomberg Opinion.
Outrage can be a powerful motivator. Tale after tale of people hamstrung by astronomical medical bills they didn't see coming have put lawmakers from both parties on a joint mission to repair the problem.
In the U.S., the phenomenon of surprise medical bills isn't new, but it's been getting some overdue attention. It arises from the way in which health insurers restrict their coverage to specific doctors, hospitals and other care providers. To minimize out-of-pocket charges, people need to stay "in network." But very often, they're treated by an anesthesiologist, ambulance company, emergency-room doctor, laboratory or other provider not tied to their insurer — and only find out later. Their so-called balance bills from out-of-network providers can run into the tens of thousands of dollars.
The closer you look, the more scandalous this becomes. For many emergency room doctors, the practice is evidently an intentional strategy: Stay outside insurer networks, and bill patients directly at extraordinary rates. One in five emergency room visits in the U.S. are estimated to include care from an out-of-network doctor, whose rates average more than two and half times those of their in-network counterparts.
Many state legislatures have been trying to clamp down, though only a handful have so far passed laws that are as strong as they should be. In Congress, a bipartisan push is underway to solve aspects of the problem that state laws can't reach. Both efforts are needed, and should be pursued with two goals in mind: Protect patients, and enable the market to set fair prices for necessary out-of-network treatment.
Half of the states now technically prohibit balance billing and/or make patients' insurance companies cover the charges (beyond agreed co-payments). But many of these state laws limit protection to emergency care or to patients whose insurance provides no out-of-network coverage at all. They should instead shield patients from all unforeseen out-of-network charges, requiring their insurers to pay. (A person's deliberate choice to see a doctor out of network wouldn't count.)
Some states also fail to grapple with the question of how big the out-of-network charge should be. If insurers are made to pay artificially inflated prices, they'll pass the cost on via premiums — and clinicians will still be encouraged to avoid insurance networks. The states that have effective surprise-billing laws deal with this in two ways. One is through benchmarking — that is, by setting the charge at some (moderate) multiple of what Medicare pays, for example, or of the median charge in the region. The other is through arbitration.
Either way can work — though unfortunately not for all kinds of insurers. States lack authority over the 60 percent of employer-provided plans that are self-funded. Congress would need to protect people with this kind of insurance, shielding patients from balance billing and perhaps allowing states to set fair charges.
Another approach, advanced by economists if not yet politicians, would require hospitals to bundle their emergency, surgical and other services into one charge agreed with insurers. It would then be the hospital's responsibility to see that all the doctors and providers involved go along with the negotiated rate, ensuring that patients visiting in-network hospitals are never hit with out-of-network bills.
That would come as relief to the majority of Americans who have already received surprise medical bills, and to those — meaning almost everybody — who worry they're at risk. Among the many things wrong with America's complex and expensive health-care system, this might be the most outrageous. Fixing it is relatively straightforward. Lawmakers ought to act, and soon.