(Bloomberg Opinion) -- So many of the good health-care proposals that President-elect Joe Biden made during his campaign — to expand insurance subsidies, lower the Medicare eligibility age, create a national public insurance option — now appear difficult to achieve unless his party can, against the odds, take control of the U.S. Senate after two special elections in January. Even if Republicans hold that chamber, however, there is one important health-care policy change that should still be possible: a ban on surprise medical bills.
These infamous bills are the ones a patient receives from emergency room doctors, anesthesiologists, ambulance companies and other care providers outside the patient’s insurance network. They can come from out-of-network hospitals or from independent providers or laboratories working at an in-network hospital.
One-sixth of hospital visits are estimated to result in such a surprise charge. During the pandemic, some patients have received bills amounting to more than $1,900 for a simple Covid test. Others have recovered from a coronavirus infection only to learn they owe hundreds of thousands dollars.
In Congress, Democrats and Republicans alike have voiced outrage at this practice and called for protecting patients from it through legislation. Last year, Congress came close to reaching a deal that would have outlawed the practice. The bipartisan bill would have capped charges at a “benchmark” price tied to average regional in-network rates. But some lawmakers disagreed with the strategy and the deal fell apart. However, some of those who declined to support the deal were voted out of office in the recent election, and this brings new hope that another agreement can be reached.
By re-engaging Congress on this effort — ideally as part of Covid-relief legislation — Biden could accomplish more than a ban on surprise billing. He could broadly lower the cost of health care and insurance for all Americans.
The best way to do this is with a new strategy: Cap the prices of all out-of-network medical services. This is how Medicare works: It sets the prices it will pay doctors, hospitals and other providers for every service, and bars those providers from billing beneficiaries for the “balance” of what they might like to charge. This is true for people enrolled in standard Medicare, for those who are in Medicare Advantage managed-care plans, and for those who have supplemental insurance policies. Provider charges are capped for all seniors enrolled in the program.
This same approach could be applied to people under 65 who have private health insurance. A price schedule for out-of-network care would be set, and providers would not be allowed to bill above that amount. In network, providers and insurers would continue to negotiate rates, which could be higher or lower than the caps depending on the local health-care market.
Banning surprise medical bills in this way could lower health insurance costs by more than 5% and protect patients from astronomical surprise bills.
It would make the American health-care system more like those of Germany, the Netherlands and Switzerland, all of which involve multiple private insurers but have more uniform prices. Because commercial insurers in the U.S. pay, on average, about 2 1/2 times what Medicare pays, even generous price caps set at 200% of Medicare rates would lower costs significantly.
Health care in the U.S. is extraordinarily expensive because American doctors and hospitals charge higher prices, and also because administrative costs are greater. Capping out-of-network prices would slash administrative costs, too, because providers would no longer need to negotiate reimbursement rates with every insurance plan separately.
And price caps would lower the government’s expense for the employer coverage tax exclusion: Bring down employer health insurance costs, and the value of the tax exclusion shrinks.
This legislation would not be perfectly easy to pass — the health-care industry can be expected to push back — but it should have bipartisan appeal. Biden’s administration could bring it up soon after the inauguration by including it in the next legislative Covid relief package. It would help reduce the price of economic stimulus — and lower Americans’ health-care costs for many years to come.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Arielle Kane is the director of health care at the Progressive Policy Institute in Washington.
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