An Honors in the Discipline Project
Doctor's Orders: Why surprise medical bills are inevitable for patients and how legislators are working to ease the pain
By Lucas Dean
Teresa Genoway and her husband Jeff were set for routine colonoscopies in November 2019 by the same doctor, but for scheduling reasons, the couple was assigned to two different facilities on different dates.
Everything went as planned and their tests both came back normal. But Teresa, 56, noticed a substantial discrepancy between the costs of their procedures: Her husband’s bill reflected an additional $1,000 out-of-network charge. While the couple’s colonoscopies took place at facilities that were covered by their insurer, Anthem Blue Cross, the specialist who administered anesthesia to Jeff, 60, was what’s called “out-of-network,” meaning the anesthesiologist fell outside of their insurer’s coverage.
“We're not going to interview the anesthesiologist as he's, you know, giving us sedation. ‘Are you in my network?’ and whatever. We had already met our in-network deductible. so, you know, there was no reason for anything,’” said Teresa Genoway, who works as a physical therapist in Orange County, California, in explaining Jeff’s surprise bill. “Why are they using an anesthesiologist that's out of our network, that we have absolutely no control over?”
This dilemma, known widely as a “surprise medical bill,” is not unique to the Genoways. In fact, in the past decade studies have shown that both the cost and frequency of surprise medical bills have steadily increased year by year. Annually, around 139 million visits are made to emergency rooms and millions of these will result in surprise out-of-network bills. The consequences of this are dire for some, with two-thirds of adults saying they are worried about being able to afford unexpected medical bills, according to a 2020 Kaiser Family Foundation analysis.
As a result, public pressure is mounting for legislators to take protective action on patients’ behalf in the form of laws that would force medical providers to shift the onus of paying out-of-network costs from the patient to insurers and providers. Thirteen states including California, New York and New Hampshire offer comprehensive protections against surprise medical bills and 15 states offer partial protections, including Massachusetts and Vermont. While legislation has been introduced in several other states, 22 are still without any protections for patients.
“Even if you pick the right hospital, [surprise medical bills] originate from which doctor is assigned to do anesthesia for a surgery, they originate from the doctor that happens to read the X-ray,” said Mark Hall, a nonresident senior fellow at the Brookings Institution, a nonprofit public policy group in Washington D.C., and one of the nation’s leading experts on the issue. “All those are things the patient has no control over. Even if they're the most diligent person in the world and have to research every twist and turn in their treatment, they can't control how these assignments are made.”
Though California has comprehensive protections, Teresa Genoway is still in the process of appealing her husband’s bill with their insurer, who has agreed to cover the majority of the cost. Genoway is now only on the hook for $200.
“I kind of know how to navigate the medical field a little bit, but your average person does not at all,” she said. “For someone to try to do that on their own, that would be a bit of a hardship I think. And then, like me being out 200 bucks is not a big deal, but for a lot of people that I know, 200 bucks would be a total hardship, you know, for something that they had no idea was even happening.”
New solutions for an old problem
Surprise medical billing is not a new phenomenon. For years, hospitals have entered into contracts with physician groups that may not accept the same health plans as the hospital. Therefore, when a hospital is seemingly in the correct network for one’s insurance plan, the medical personnel treating a patient may be connected to a different network of insurance agencies, resulting in bills not covered by insurance.
It’s difficult to pinpoint exactly when surprise medical bills became a widely recognized national dilemma, as most studies concerning the issue have been conducted in the past decade or so. However, evidence of the practice started to crop up in news reports and lawsuits as early as the turn of the century, with a steady escalation across two decades to arrive at the debate that rages today.
A study published this year by Stanford University found that in 2010, 32.3 percent of emergency department visits across the nation resulted in surprise out-of-network billing. In 2016, that number had jumped to 42.8 percent. In the same span of time, the study revealed that the average cost of these bills had increased from $220 to $628.
Source: Stanford University study published in JAMA Internal Medicine August 2019
Michelle Mello, a professor of law and medicine at Stanford University who co-authored the study, said this change is due to how hospitals are staffed. Hospitals are increasingly choosing to enter into contracts with independent physicians and groups rather than directly employing them – a move that is cost effective for the institutions, but a financial drain for patients. These independent contractors are able to set their rates higher than the hospitals’ standard rates, a monetary discrepancy that becomes the responsibility of the patient to address.
“[The hospitals] just sort of say, ‘OK, fine, you're out-of-network. You can take it up with the patient when you want to bill them that amount, but we're not paying that,’” said Mello, who has authored nearly 200 articles and book chapters on the intersection of law and health care.
Surprise medical bills are a nationwide problem, but in some states where there are no protections at all, people are much more vulnerable to receiving them. A Kaiser Family Foundation study from February 2020 found that an average of 18 percent of emergency room visits result in an out-of-network charge nationally. Meanwhile, in Texas, New Jersey and New Mexico, which did not have protections up until recently, 38 percent, 24 percent and 29 percent of visits resulted in an out-of-network charge.
Insurers wield more power in some states than others, and in some markets “the specialists have more leverage and use that to remain outside the market… to use that pressure to increase their billing,” explained Hall. “I think there's some markets in Texas where every emergency doctor and every anesthesiologist in the hospital is out of network. And certainly there are other examples where no one's out of network.”
Indeed, a 2014 report by the Center for Public Policy Priorities, an Austin-based non-profit policy institute, found that for the state’s three largest insurers – United Healthcare, Humana and Blue Cross Blue Shield – 45 percent, 56 percent and 21 percent of in-network hospitals had no in-network emergency department physicians on staff.
But around the same time, the landscape started to change. Patients and patient rights advocates started to thunderously complain about their plight, forcing legislators to listen. And act.
In 2014, New York became the first state to pass a law targeting surprise medical bills.
Called the “Emergency Services and Balance Billing Law,” the legislation went into effect in 2015 and laid the groundwork for other states. Soon after, California, Florida and Oregon followed suit.
The measures seem to be working. In 2017, researchers at Yale University showed that the legislation has had a positive impact on patients; specifically, out-of-network billing decreased by 34 percent in New York and patients were less likely to be treated by doctors outside their networks.
Furthermore, in 2019, the Department of Financial Services released a report on the impact of the legislation, determining that it had saved more than $400 million on emergency services alone. Gov. Andrew Cuomo touted the success of the bill in a press release, saying “New York has made extraordinary progress when it comes to enforcing fairness in healthcare costs. These findings show how the out-of-network law has been effective in protecting patients and making it clear to everyone that getting the care New Yorkers need is a right, not a luxury."
These same praises cannot be sung however on the overall impact on healthcare costs.
New York’s legislation provides a way for patients to avoid surprise medical bills – by forcing doctors and insurers to negotiate and pay for any costs that go above the expected rate – but does not actually regulate what doctors can charge for the services they provide. This lack of regulation has led to soaring healthcare costs in New York.
The problem stems from somewhat lax guidelines given to arbiters during the resolution process to determine what is a reasonable rate of payment. Consequently, a September 2019 Department of Financial Services report found that these decisions on average resulted in payments four times higher than the median in-network charge in the case of emergency room visits.
The impact of New York’s legislation extends beyond state boundaries, as by the end of 2018, 25 states had put into place some form of protections against surprise medical bills, and in 2019 three more states were added to that list. Many of these states only offer what healthcare experts across research institutes classify as partial protections, so many patients are still vulnerable to receiving a surprise medical bill in certain situations.
Comprehensive approach
Limited approach
Source: The Commonwealth Fund analysis of legislative protections
“I think there need to be protections in place that do not require patients to kind of individually pursue complex dispute resolution processes in order to make these things right,” said Mello about the best strategy to protect patients from surprise medical bills. “The onus shouldn't be on patients to undo a practice that is objectionable.”
Surprise, you’ve been billed
Chiedza Taruvinga went to her gynecologist for a procedure at the end of 2018. Before she went into the office, the 33-year-old Ohio Dominican University student called her insurance and the doctor’s office to confirm that the procedure would be covered.
Photo courtesy of Chiedza Taruvinga
Six months later, Taruvinga, who is studying to become a social worker, received a surprise medical bill from the gynecologist for $1,000. Despite fighting this bill for nearly a year, she is still receiving calls and letters from a collection agency to pay up.
The ramifications of the unpaid bill include damage to her credit score, which led to her being denied a credit card, and impacts to her mental health. Taruvinga also noted that while she is still insured, she is less trustworthy of the medical field and less likely to go to the doctor for fear that she will receive another surprise bill.
“I have new insurance at the moment, but I have not even used it because I don’t trust it because of the surprise billing,” said Taruvinga. “It’s made me anxious but it’s also a very dangerous situation, a very precarious situation to be in.”
According to a 2018 survey by the private New York-based health care foundation The Commonwealth Fund, when respondents were asked if they would be able to pay for a $1,000 unexpected medical bill within 30 days, 46 percent said no. Women, people of color and those with Medicare or Medicaid were more likely to say they couldn’t come up with the money.
Patients are especially vulnerable to surprise medical bills in emergency situations for two reasons: It is very common for emergency departments to enter into contracts with physician groups that could be out-of-network, and patients are less likely to vet their insurance coverage in these urgent situations.
Source: KFF Health Tracking Poll conducted August 23-28, 2018
“Someone going to a hospital in an emergency setting where they're receiving out-of-network services are not making an informed decision and not given the opportunity to make an informed decision,” said Massachusetts-based patient advocate Ailene Gerhardt, who runs Beacon Patient Solutions.
If a patient wanted to figure out which hospital workers are in and out-of-network, the multistep process of gathering such information is convoluted and time consuming. Gerhardt detailed the steps a patient would have to take:
First, the patient would have to verify that the hospital is in-network. Then, the patient would call the hospital and ask which employees are contracted from outside the hospital. They would then reach out to the independent third-party group or groups and ask if their insurance is accepted. Even with this information, the patient is at the will of the hospital in terms of coordinating which staff are assigned to them.
The good news is the patient advocacy field in Massachusetts has grown exponentially in recent years. When Gail Phillips started Phillips Healthcare Advocates in 2016, there were only a few other advocates in the state. Now there are more than 20. Yet, Phillips is astounded by the fact that patients are still left in the dark about the cost of emergency care until after they have been treated.
“Where else do we not do that? You wouldn't go buy a stove for your house without knowing how much it's gonna cost,” said Phillips with a laugh. “A lot of people, because it's so complicated, they just don't want to think about it. They bury it.”
Phillips, who has worked in the medical arena for four decades, has helped patients contest surprise medical bills with some success. In order to gain any ground in these appeals, Phillips said it is best for the patient to make pests out of themselves.
“Just like if you were in Marshalls and you opened the package and your garment was stained, you go back to Marshalls for customer service and you don't leave there until you get an answer. You ask for the manager, you keep working your way up the ladder,” said Phillips.
Source: Massachusetts Health Policy Commission 2018 report on out-of-network billing
Important to note, too, is that surprise medical bills are not exclusive to the emergency room. A 2016 study by the Health Care Cost Institute, a Washington D.C.-based non-profit that gathers data on health care, found that across medical specialties, out-of-network claims for in-patient care most commonly came from anesthesiologists, with a rate of 16.5 percent of the claims represented in their data. Primary care and other physicians had respective rates of 12.6 percent and 13.5 percent.
Furthermore, a Kaiser Family Foundation study showed that 20 percent of in-patient admissions for mental health and/or substance abuse result in out-of-network charges, while also finding that those seeking out-patient mental health services were at risk of receiving out-of-network bills as well.
Charlotte DuHamel, an assistant teacher at a preschool in Wellesley, Massachusetts, had been going to the same therapist for a few months. When she submitted her invoices to her insurer, she never received reimbursement, leaving her with bills totaling a few thousand dollars.
She called her insurer to dispute the bill, telling them that she had found the therapist on an in-network list. “Then they called back and they found out that even though the doctor was covered, the hospital where she worked was not covered,” explained DuHamel. “So I said, ‘Well, how can that be? You know, that's the only place that she works.’ And all they would say is, ‘Well, the hospital where she works isn't covered.’”
After continued back-and-forths via written communication and phone calls, DuHamel’s insurer agreed to reimburse her.
“They didn't do anything illegal, but I was thinking ... if I didn't have the patience, the time and, you know, the language skills to go through all the documentation and read what the rights were and keep calling back and back, I'm sure they would not have [covered it],” said DuHamel. “I'm sure a different person might've just given up.”
Photo courtesy of Charlotte DuHamel
An uncertain future
While there is bipartisan nationwide support to end surprise medical bills from the public, with nearly 80 percent of Americans in favor of such legislation, according to KFF, legislators have yet to reach an agreement on how best to deal with the issue, which means millions of Americans are still vulnerable.
“Despite the bipartisan support, you know, it can be very easy to disagree over the details. And there's been many other instances where … everyone believes the drug prices should be regulated, but we don't agree on how to go about it, or everyone agrees on net neutrality,” explained Hall, the Brookings Institution fellow.
Source: KFF Health Tracking Poll conducted April 11-16, 2020
Even within states that offer protections, many people with insurance are still at risk of receiving a surprise medical bill due to limitations on how states can regulate insurance. For this reason, Hall said state legislation has only been partially successful.
Another insurmountable issue for state-level legislation is that federal law prevents states from regulating large employers that self-insure. Large employers constitute about half the market.
Patient advocate Phillips views Medicare-for-all as the solution to end surprise medical bills. In her decades of work in the medical arena, Phillips has seen the industry grow more complex and less patient-friendly but thinks Medicare-for-all could be the catalyst for change – not just for surprise medical bills but also other necessary reforms.
“You have to get rid of the insurance companies. That's what Bernie Sanders would say. Just get rid of them all together,” said Phillips. “Be like Medicare. I'm a senior now, so I'm on Medicare. Who doesn't love Medicare? It's simple. All the doctors take it. You can go from state to state, provider to provider.”
A quick scroll through Twitter proves Phillips isn’t alone in thinking that a shift to a single-payer system would resolve the issue of surprise medical bills, but Michelle Mello disagrees with this notion.
“It wouldn't necessarily impact it because single payer is just about who is paying the bills. It doesn't really change the organization of physicians in hospitals,” explained Mello.
“It could be that that single payer decides, you know, we’re not going to balance bill people anymore, this is not a good practice. Or it could be that the single payer says, ‘well, now we've tried a lot of costs here and we have to figure out ways to economize. So, we're going to have really narrow networks and we're going to aggressively balance bills. We just don't know,” said Mello.
For now, it remains to be seen whether nationwide action will be taken to address surprise medical bills. The tumultuous and divisive political climate, along with the influence physician groups wield in the legislative process, make for an uncertain future on resolutions being reached.
Sonji Wilkes testified in June 2019 to Congress about receiving a surprise medical bill over 16 years ago. She told them how, after complications with her infant son’s circumcision that put him in the neonatal intensive care unit, Wilkes received a $50,000 bill from an out-of-network provider despite the hospital being in-network.
“My husband and I were dumbfounded,” Wilkes said to the legislators. “When you are told that your baby is bleeding and his body lacks the ability to stop and that he needs immediate specialized treatment, your first reaction isn’t, ‘Gee, I wonder if that’s in network?’” Years later they were cleared of financial responsibility through a class action lawsuit, but by then their credit rating had already been destroyed, she said.
Some healthcare advocates have lost confidence in surprise medical bill protection at the federal level, but see solutions outside of the legislative process.
Jackson Williams has worked at patient advocacy organizations for the past two decades and is the current vice president of public policy at Washington-based Dialysis Patient Citizens, a nationwide organization that fights for dialysis patients and their families.He is focused on doing away with surprise medical bills in an entirely different way.
“The angle that I've had is that I actually think that surprise medical bills are already illegal and that if businesses or consumer organizations or foundations that fund philanthropic health care activities put their heads together and put some money into it you could probably stop surprise bills without legislation,” said Williams.
He pointed to a 2011 Connecticut court case, Gianetti v. Riether, in which a doctor’s bid to sue for more payment after already being paid, as evidence that surprise medical bills generally do not hold up in court.
Williams stated that once the doctor has already gotten paid the “usual, customary and reasonable” amount and then comes back for a second bite of the apple, that is when it becomes illegal.
“There's a lot of money involved and companies that own these physician practices that have these franchises in the emergency room make a lot of money,” said Williams, who then noted that physician groups are profiting not only from insurance companies, but also the patients themselves.
“They don't want to lose that and they're spending a lot of money. They have a lot of power in Congress and it's hard to get legislation passed by two houses of Congress and signed by the president,” said Williams.
How confident is he that federal legislation will be passed anytime soon? “I am not confident at all.”