By Eric C. Sun, MD, PhD; Michelle M. Mello, JD, PhD; Jasmin Moshfegh, MA, MSc; Laurence C. Baker, PhD
JAMA Internal Medicine, August 12, 2019
Importance: Although surprise medical bills are receiving considerable attention from lawmakers and the news media, to date there has been little systematic study of the incidence and financial consequences of out-of-network billing.
Objective: To examine out-of-network billing among privately insured patients with an inpatient admission or emergency department (ED) visit at in-network hospitals.
Design, Setting, and Participants: A retrospective analysis using data from the Clinformatics Data Mart database (Optum), which includes health insurance claims for individuals from all 50 US states receiving private health insurance from a large commercial insurer was conducted of all inpatient admissions (n = 5 457 981) and ED visits (n = 13 579 006) at in-network hospitals between January 1, 2010, and December 31, 2016. Data were collected and analyzed in March 2019.
Exposures: Receipt of a bill for care from at least 1 out-of-network physician or medical transport service associated with patient admission or ED visit.
Main Outcomes and Measures: The incidence of out-of-network billing and the potential amount of patients’ financial liability associated with out-of-network bills from the admission or visit.
Results: Of 5 457 981 inpatient admissions and 13 579 006 ED admissions between 2010 and 2016, the percentage of ED visits with an out-of-network bill increased from 32.3% to 42.8% (P < .001) during the study period, and the mean (SD) potential financial responsibility for these bills increased from $220 ($420) to $628 ($865) (P < .001; all dollar values in 2018 US$). Similarly, the percentage of inpatient admissions with an out-of-network bill increased from 26.3% to 42.0% (P < .001), and the mean (SD) potential financial responsibility increased from $804 ($2456) to $2040 ($4967) (P < .001).
Conclusions and Relevance: Out-of-network billing appears to have become common for privately insured patients even when they seek treatment at in-network hospitals. The mean amounts billed appear to be sufficiently large that they may create financial strain for a substantial proportion of patients.
From the Discussion
In a national sample of US patients with private health insurance, the incidence of out-of-network billing at in-network hospitals substantially increased between 2010 and 2016, from 32.3% to 42.8% of ED visits and from 26.3% to 42.0% of inpatient admissions. Moreover, the potential financial consequences of out-of-network billing in both settings nearly doubled during this period, and the top 10% of patients faced liabilities of more than $1000 for ED visits and more than $3000 for inpatient care. Sensitivity analyses suggested a lower incidence of unanticipated out-of-network billing for elective inpatient admissions, but showed a similar increase during the study period, with potential financial liabilities for patients that were similar to those in the main analysis. Overall, our findings suggest a growing risk to patients of incurring burdensome unexpected out-of-network bills.
By Don McCanne, M.D.
Provider networks are a tool designed by the private insurance industry to give them control over how much will be paid for health care services covered by their plans. From the patient’s perspective, a benefit of contracted networks is that the insurers can use their negotiating clout to slow the increase in premiums charged for their plans. For that the patient has the tradeoff of limiting their selection of physicians and hospitals to those on the approved provider list, or else lose the protection of fee controls negotiated by the insurers.
In an emergency situation it is inevitable that many patients will receive services from physicians who are out of network. Patients then are subject to “surprise bills” – balance billing for charges in excess of the insurers’ negotiated fees. Besides facing the possibility of receiving care from out-of-network providers in the emergency departments or when admitted for in-patient services, most emergency medical transportation is also out-of-network. This study shows that a very large percentage of patients who thought that they were well covered by their insurance plans were exposed to sometimes staggering fees for out-of-network care, creating financial hardships for many.
Imagine what would happen under a well designed single payer model of Medicare for All. There would be no segregated networks since all physicians and hospitals would be essentially “in-network.” There would be no payments for deductibles, copayments nor coinsurance. The patient would receive whatever care they needed in the emergency department or as an inpatient, and then go home after the care is rendered. There would be no surprise bills nor any other bills.
Why are there providers who are not included in the networks? In some cases it could be that they could not negotiate fees with the insurers that would be acceptable to them. But more often it is inherent in the nature of the provider network tool. Providers who agree to lower rates have the advantage of a certain amount of exclusivity – being guaranteed a larger patient population to draw from, draining patents from out-of-network providers.
In actuality, the private insurers’ payments are usually significantly higher than Medicare payments, which is then reflected in higher insurance premiums that the patient pays. So the model is not nearly as successful as they would like you to believe. Yet the Medicare model of publicly administered pricing is much more successful in containing costs.
Right now there is a debate taking place as to how patients potentially facing surprise out-of-network bills might be provided some relief. One option would be to limit surprise bills to a percentage of Medicare fees, perhaps 125 percent. But why should a physician who has not signed a contract be required to accept the conditions of the contract anyway yet without the benefit of being included on the insurers list of approved physicians? If everyone is going to have to comply with a given set of rates, then wouldn’t it be far more logical to set those rates fairly for everyone under a single payer Medicare for All program?
Another suggestion would be to establish arbitration for fee disputes, but you could imagine the additional administrative burden that this would pile on top of the existing heap of profound administrative excesses.
So not only would single payer Medicare for All be a far better fix for surprise out-of-network bills, it would fix all of the other problems with our health care financing system as well. So instead of just tweaking surprise bills, let’s go ahead and actually enact and implement a model that would be effective, efficient, equitable and affordable for everyone – single payer Medicare for All.
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