Surprise Billing Overview

Millions of Americans have received surprise medical bills in the mail weeks, or even months, after receiving emergency services at in-network facilities. Policymakers correctly sense that they must act to prevent this pressing issue. But, some lawmakers insist on using federal fiat to impose rate-setting on America’s medical providers. 

The Taxpayers Protection Alliance (TPA) has highlighted the many issues with this approach, and has proposed an alternative, market-based system that would keep taxpayer and consumer costs low and predictable. On this page, taxpayers and consumers can learn all about the issue of surprise billing, and read about the various “solutions” being proposed by our elected representatives.

Surprise Billing Frequently Asked Questions (FAQs)

1. When and why do patients typically receive surprise bills?

In some cases, patients find themselves in situations where they are unable to receive in-network care. Even if they are able to attend an in-network medical facility, some members of their care team (e.g. anesthesiologists, emergency room physicians) may not accept the patient’s medical insurance. In these situations, care providers may bill patients for expenses that cannot be recovered from insurers. This is a pervasive problem: according to a 2018 National Opinion Research Center survey, 57 percent of American adults have received a “surprise bill.” 

2. How has government intervention in healthcare impacted surprise billing?

As the government has increased its involvement in the healthcare sector, insurance networks have steadily narrowed. Due to federal requirements imposed under the Affordable Care Act (ACA), less insurance premium income was required to cover far more services that many patients did not necessarily want or need, such as maternity benefits and smoking cessation. As a result, insurance reimbursement offerings to physicians grew less attractive, and many providers could not afford to accept many health care plans. This has resulted in health plans that cover fewer physicians and increased the likelihood of doctors being out-of-network even at an in-network facility. 

3. Will current federal price-fixing (rate-setting) proposals in Congress protect consumers from surprise billing?

No.

Government price-fixing, as seen in the Alexander-Murray (S.1895) and Pallone-Walden (H.R. 3630) bills under consideration in Congress, would empower bureaucrats to sharply curtail payments overnight using arbitrary “averages” of in-network rates of “similar” procedures. But as anyone in the medical profession realizes, even similar professions and procedures can attract significantly different pay scales. If bureaucrats and/or political appointees use these easily-manipulatable metrics to keep physician payments below market rates, access to care will suffer as a result. This would be a particularly large problem in rural America, where hospitals are always struggling to recruit qualified personnel. 

4. Won’t government price-fixing reduce costs for taxpayers?

No.

The Congressional Budget Office has released estimates of various surprise-billing related proposals and found that price-fixing legislation (i.e. S.1895, the Lower Health Care Costs Act) would increase federal revenues by $26 billion over the next ten years. In turn, this revenue is used in S.1895 to increase spending on a variety of healthcare programs. But as healthcare policy expert Dr. John Goodman points out, the CBO’s estimate is inadequate and fails to account for numerous factors. In fact, it’s likely that price-fixing would create net costs for taxpayers. Dr. Goodman notes, “Because they have less take-home pay, doctors will pay lower taxes [as a result of price-fixing]. And here is the bottom line: doctors are in a higher tax bracket than the average employee. That means that the government revenue gain from taxpaying employees will be offset by an even greater revenue loss from taxpaying doctors.”

5. How have states dealt with the issue of surprise billing?

In 2015, New York policymakers declared that enough was enough, and there was a dire need for reform to curb the practice of surprise billing. The end result was the establishment of a “baseball-style” arbitration system which shields patients from paying more than median in-network rates. Physicians and health providers then submit competing claims for how much physicians should be compensated for the service in question. After these parties submit their claims to an online portal, a third-party determines proper compensation via precedent and state guidance. The system has seen considerable success in New York; a 2017 study by Yale University scholars found, “the New York law reduced out-of-network billing by 34 percent and lowered in-network emergency physician payments by 9 percent.”

6. Can reforms on the federal level can keep surprise billing at bay? 

Federal policymakers can replicate New York’s reforms, establishing arbitration as a national mechanism for physicians and plan providers to resolve surprise billing issues. Using independent dispute resolution (IDR) would significantly reduce out-of-network rates across America, as insurers and providers negotiate via repeated interactions rather than refusing to cooperate and passing the problem along to patients. Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH), as well as Congressmen Phil Roe (R-TN) and Raul Ruiz (D-CA), have partnered on this issue and introduced promising legislation that would use arbitration instead of federal rate-setting to keep patients protected from surprise billing. 

7. Can wider healthcare reforms prevent issues such as surprise billing?

While solutions such as IDR can keep surprise billing at bay for millions of patients, a broader array of comprehensive reforms is needed to ensure that consumers receive quality medical care at an affordable price. In addition, reforms must address the root issue – the narrowing of networks caused by government overregulation and exacerbated by the Affordable Care Act. More competition is sorely needed across the healthcare sector as current mandates and regulations protect current insurers against upstart competitors offering simpler plans at a lower price. In addition, certificate-of-need laws prevent hospitals from expanding services and hiring more personnel. Congress should focus on removing barriers to choice and competition and allowing tax-free dollars to be used for the purchase of individual insurance rather than just employer-sponsored plans. 

Letters to Congress

  • Eight conservative free-market groups penned a letter to Senate Majority Leader Mitch McConnell encouraging him to work toward solutions for surprise medical billing that increases the power of patients, not the federal government.

  • TPA wrote to members of the Senate urging them to vote NO on the “Lower Health Care Costs Act,” released by the Senate HELP subcommittee.

  • TPA wrote to members of Senate HELP subcommittee urging them to reject legislation that proposes the expansion of government in the healthcare system through government-set rates.

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