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Congress wants to stop surprise medical bills. But they have one big problem left to solve.

The big obstacle standing in the way of legislation to stop surprise medical bills, explained.

Senators Patty Murray of Washington state and Lamar Alexander of Tennessee.
Sens. Patty Murray (D-WA) and Lamar Alexander (R-TN) are working on legislation to stop surprise medical bills.
Tom Williams/CQ Roll Call
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

President Trump and Democrats want to fix an important health care problem, but lawmakers still have one very difficult question to figure out before they can move forward.

Congress suddenly has a bunch of bills to stop surprise medical bills, which can leave even some insured people with tens of thousands of dollars in medical bills for a simple trip to the emergency room, but how much providers actually get — and by what means — is still a very open question.

Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA), the top Republican and Democrat on the Senate health committee, introduced a health care costs bill on Thursday but it did not come up with a way for out-of-network health care providers to get paid by health insurers. Instead, it offers three options for determining those payments, and they will decide later which one to actually include in the final version. It’s a pretty big hole left to fill in otherwise quite ambitious legislation.

Provider payments are the thorniest issue to figure out for any plan to prevent surprise medical bills. It affects the bottom lines for doctors, hospitals, and insurers, so they care a lot about those provisions and lobby hard on them. Different House and Senate bills would set up different systems for how those payments would be determined.

Trump has pledged to sign a bill blocking surprise medical bills. For now, the lawmakers working on surprise billing sound diplomatic about the differences between their plans. But solving the provider payments issue is a substantial hurdle to doing something.

“My No. 1 goal is clear: Let’s protect patients by ending surprise medical bills. The path to achieving this goal has multiple roads,” Walden told Vox. “I believe it’s fair to base the compensation mechanism off of private-market rates and that any solution should not raise federal health care costs. This is one solution. Arbitration is another.”

Congress’s plan to stop patients from facing surprise bills, explained

The Alexander-Murray proposal joins several others that have already been introduced: a recently released House bill from Reps. Frank Pallone (D-NJ) and Greg Walden (R-OR); another Senate bill by Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH) released last week; yet another House proposal from Rep. Raul Ruiz (D-CA) and Phil Roe (R-TN) that came out on Thursday. Rep. Lloyd Doggett (D-TX) also introduced a bill back in January. Congress really is serious about doing something on surprise bills.

Broadly speaking, the various House and Senate bills to prevent surprise medical bills would have the same consequences for patients: They would be obligated to pay only in-network costs for out-of-network emergency care.

Under the proposal legislation, if somebody ends up in the emergency room or they get surgery, and the facility or one of their providers is not in their health insurer’s network, they can’t be asked to pay the full cost for their medical care. The practice known as balance billing — when a provider bills a patient the balance between what the patient’s insurer paid for a service and the price the provider wants to charge for that service — is prohibited.

The legislation from Alexander and Murray dictates that patients can’t be charged extra money for any emergency care, ancillary care (anesthesia, radiology, etc.), or diagnostic care they receive from an out-of-network provider. They can only be billed for whatever co-pays, co-insurance or other cost-sharing they would have been required to pay for an in-network provider under their health insurance plan. If somebody is moved from the emergency room to a general hospital setting, they must be notified in advance about any potential out-of-network care and its costs. They must also be informed of the in-network options available to them.

The new Alexander-Murray bill also includes a bunch of other provisions beyond surprise billing to reduce health care costs for patients. Given the Tennessee senator’s pending retirement, he might be trying to group together some other cost-controlling provisions into an omnibus health care costs package, using the popularity of doing something about surprise billing as an incentive. Some of the other provisions in the Senate bill include:

  • preventing “parking” of generic drug applications that delays other drugs entering the market;
  • prohibiting “pay-for-delay” payments between brand-name and generic drug manufacturers;
  • requiring insurers to provide timely information on provider networks to their patients;
  • new federal grants for maternal mortality and integrated pregnancy care.

Surprise bills seem like the surest bet for action at the moment. But there is one other big piece to this puzzle.

The fight over provider payments in lieu of surprise billing, explained

If a patient’s bill will be limited to what it would be for an in-network provider, but the health care provider and insurance company don’t have a preexisting contract, then Congress has to come up with some way to figure out how much the insurer pays the provider for the out-of-network care. That is the real money at stake in this legislation, so the lobbyists for the health insurers and the doctors care a lot about these provisions.

The Alexander-Murray bill punts on this question; they instead lay out three options and plan to pick one after soliciting feedback from the interested parties representing health insurers, doctors, and patients. The three options are:

  1. Guaranteeing to patients and insurers that all individual providers at an in-network facility will also be considered in-network. That prevents patients from getting hit with a bill from a specific out-of-network doctor when they went to an in-network hospital. Providers can either join the network voluntarily or they can bill insurers through the in-network facility. For any remaining out-of-network care, insurers and providers have 30 days to agree on a price; otherwise, the median price in the area for that service will be used.
  2. Allowing arbitration for bills above $750. For bills less than that amount, the health insurer will just pay the average price in the area. For bills above the threshold, either side could request that a third-party arbitrator review best final offers from both the provider and the insurer. The arbiter will then pick the best one in a binding decision.
  3. Mandating that the health insurer pay the out-of-network provider whatever the median in-network price is in that geographic area. Just setting the price the insurer will pay the provider is maybe the cleanest solution from a policy perspective. It guarantees the price will simply be whatever the insurer has already negotiated with other providers in the same region for the same service.

Doctors and health plans really prefer some kind of arbitration. They want to have the opportunity to appeal and seek a better price, rather than being wholly bound by what is effectively a government-set price. Cassidy and Hassan, who have been working on a surprise bills proposal for a year, certainly found that to be true while they drafted their plan. The Cassidy-Hassan bill would allow for arbitration, with the median in-network price acting as the default payment if neither side seeks arbitration within 30 days.

“I continue to believe that the bipartisan STOP Surprise Medical Bills Act – given its support from stakeholders on all sides of this issue – is the most viable option to become law and end the absurd practice of surprise medical bills,” Hassan told Vox in a statement. “Every day, patients continue to receive these outrageous bills in the mail, and I will keep working with my colleagues on both sides of the aisle to pass bipartisan legislation without delay.”

Some experts believe having a regulated price or network matching, rather than allowing for arbitration, is better policy because arbitration could end up leading to higher prices than the other two options, mitigating the cost-saving potential for these plans. The House bill from Pallone and Walden notably goes with price-setting. The White House has signaled it would prefer something other than arbitration as well.

But the politics are trickier: Doctors, hospitals and insurers could mobilize against such a bill, whereas they have sounded supportive of the provisions in the legislation from Cassidy and Hassan that allow for arbitration within certain limits.

“The pure payment standard approach tied to median in-network rates ... would much more clearly reduce health care costs, as the median rate for specialties most commonly involved in surprise billing is notably below the mean,” said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy. “The price-setting approach is pretty clearly preferable to arbitration from a policy perspective, but it’s certainly possible that the politics are easier on arbitration.”

It could be that highly regulated arbitration — like Option No. 2 in the Alexander and Murray legislation — becomes the middle ground to clear this policy obstacle. New York, when passing its own surprise medical billing plan, took such an approach, and the new plan from Ruiz and Roe is modeled on that state’s law.

But for now, Congress is leaving this space blank, as demonstrated by the unusual Option A, B, or C in the Alexander-Murray bill.

Congress really does want to fix surprise medical bills

The safest bet is always against health care legislation passing Congress, especially in a time of divided government. But surprise medical bills might be the exception.

Alexander and Murray lead the Senate’s foremost health care committee, and Pallone and Walden are the top members of a powerful House panel. To have the top Democrat and Republican on those committees co-sponsoring these bills denotes a real intention to pass something — if they can first resolve this dispute over payments and arbitration.

Surprise bills are really only a symptom of the underlying disease plaguing American health care — exorbitantly high and irrationally set prices — but they are a particularly egregious example, as they can leave even patients who have insurance with medical bills that total tens of thousands of dollars. Vox’s Sarah Kliff summarized her findings after collecting ER bills for a year like this:

Patients find themselves in a vulnerable position during these encounters with the health care system. The result is often high — and unpredictable — bills. Hospitals are not transparent about the cost of their services, their prices vary wildly from one ER to another, and it’s hard to tell which doctors are covered by insurance (even if the hospital itself is covered). In many cases, patients can’t be certain what they owe until they receive a bill in the mail, sometimes weeks or months later.

States like California and New York are acting on their own to crack down on surprise bills, but Congress looks insistent on taking action nationwide. These new bills are a hopeful sign that the days of patients ending up in the emergency room with not only a broken arm but also a huge bill might be numbered.

Li Zhou contributed to this report.