COVID-19 is unraveling the issue of surprise billing in America

Back in December, Congress failed to reach an agreement on “surprise billing” legislation. A surprise bill is when patients get an out-of-network bill from a provider at an in-network facility.

Lawmakers couldn’t decide if an arbitration model — where billing disagreements would be sent to a third-party review board — or if a benchmark model — where payments would be based on a set benchmark price — was best.

Now in the era of Covid, this failure is coming home to roost.

Federal law requires private health plans to cover all Covid-19 testing. But because there is no set benchmark price labs can charge whatever they want as long as they list it publicly. Most labs charge around $100 for a Covid-19 test, some unscrupulous labs are charging as much $2,315 for the same test.

Patients, of course, will ultimately bear the cost through higher premiums. Furthermore, the failure to ban surprise bills means that out-of-network labs can balance bill the patient on top of the fee they charge their health plan. Balance billing is when an out-of-network lab or hospital first bills insurance but because there is no agreed upon price, then balance bills any remaining balance the insurer refuses to pay back to the patient.

Labs aren’t the only ones inflating costs to exploit the Covid-19 emergency. Some hospitals are billing patients hundreds of thousands of dollars for treating the disease, even though hospitals that take federal bailout dollars are supposed to be barred from balance billing patients. This is because even if the hospital takes federal funding, if the doctors that work there are out-of-network, they (or their staffing companies) can send surprise bills to patients.

But there are some policy levers that could help:

Bar billing above what Medicare pays. Medicare initially was paying $50 per Covid test. But because supply was lagging, it upped its reimbursement to $100 to encourage more testing. It seems to have worked — supply for Covid tests is roughly aligned with demand. Congress should limit all labs that take Medicare payments from billing private insurers above the rates set by Medicare.

Ban surprise Medical bills. Congress could resume negotiations over a comprehensive package to ban surprise medical bills. My preferred approach is a benchmark price for out-of-network services tied to Medicare prices. Tying the benchmark to in-network prices or median charges has perverse incentives to increase in-network prices. Is it politically difficult? Yes. But it’s necessary to both protect patients and to stop the exponential growth of health care costs in the U.S.

Consider a global budget. Hospitals do have a revenue problem. That’s mainly because many stopped doing lucrative “elective” procedures to concentrate on handling the surge of Covid-19 patients. But hospitals that have a “global” budget are better positioned to weather the Covid storm. A global budget is a fixed amount of money all payers in a region agree to pay hospitals to deliver care to a defined population. All Maryland hospitals, for example, and more recently rural hospitals in Pennsylvania, use global budgets to pay for medical care. This model eliminates incentives for hospitals to jack up prices for Covid-19 services to compensate for the loss of normal revenue. A recent analysis in JAMA outlines why these hospitals will be better positioned to bounce back from Covid-related economic hardship. While moving to a global budget will be difficult, it makes more sense now than ever and policymakers should not let the moment pass.

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