How not to fix surprise ambulance bills
How we pay for ambulance service, as with virtually everything else in health care, is messed up.
When you need a car ride, you can call a taxi or use a ride-sharing service. You know exactly what you’ll be charged, and other consumers’ ratings help you choose a quality service.
When you need an ambulance, you call 911 and hope for the best. You have no idea who will show up or how much it will cost.
The difference is that we have no competitive market in ambulance services. The service is usually contracted or provided by your local government.
As a consumer, you have zero control over the cost of an ambulance ride (and the medical services provided along the way). Rates are negotiated by local governments and insurers.
Most ambulance rides are covered by Medicare (older individuals consume more ambulance services). The New Hampshire Insurance Department doesn’t have exact data but reported last month a municipal ambulance provider’s estimate of who pays for ambulance services: Medicaid 12.54%, Medicare 64.33%, commercial insurance 19.05%, TRICARE 0.43%, Veterans Administration 1.72%, and workers compensation 0.43%.
Medicare’s reimbursement rates are famously low and don’t come close to covering the actual costs of service. So providers are encouraged to bill private parties (individuals or insurers) at higher rates than they might if Medicare covered the cost of its patients’ services.
If the ambulance that arrives at your door is in network with your insurer, lucky for you. But that isn’t always the case. When it’s out of network, you might be stuck with a bill for the difference between the insurance payment and the ambulance company’s billed rate.
This is believed to be a big problem. But the Insurance Department reports that it received only 30 complaints statewide about such bills in the past two years. It’s a problem, but probably not as big as is commonly believed.
If you were to fix this, how would you do it?
Legislators have tried for years to answer this question. It’s tricky because of the market distortions mentioned above. If people had individual ambulance insurance (like travel insurance), that would help. If ambulance providers competed like Uber and Lyft do, that would help. But those options can’t simply be mandated. So what do you do?
This year’s attempted fix is Senate Bill 407. As amended by the Senate, SB 407 sets a price floor, a very high one.
When insurers do not have a negotiated agreement with an ambulance service provider, the bill would require insurers to pay the lowest of three options:
- The rate negotiated between the ambulance service provider and the local government;
- The rate of the provider’s billed charges;
- The Medicare reimbursement rate multiplied by 325%.
Can you spot the potential problem?
Medicare rates are low, as we mentioned. But 325% of the Medicare rate is very high. The Insurance Department testified in the House Commerce Committee that insurers typically pay less than 200% of the Medicare rate.
SB 407 would set 325% of the Medicare payment as one of three acceptable reimbursement rates, then tell ambulance service providers that they can get paid this very high sum only if they don’t negotiate or bill a lower one.
What do you think will happen if this price regulation becomes law?
SB 407 creates an obvious and powerful incentive for ambulance service providers to raise their prices. Doing otherwise would leave money on the table.
The bill also would encourage providers to negotiate for higher in-network rates and refuse to join the networks if they don’t get that higher rate. Why accept a lower in-network payment if you can get a higher, state-mandated payment if you stay out of network?
Surely legislators can find a way to address this issue that won’t drive up rates, insurance costs and local taxes.
Last month we wrote about the problem of lawmakers trying to settle policy disagreements by picking a random number and writing it into law. SB 407 is another example of this form of bad policymaking.
