President Trump signed an executive order on September 24 protecting Americans with pre-existing conditions. Although Trump does not support the Affordable Care Act (ACA), he does support one of its goals. That goal is barring discrimination by health plans against Americans who may have chronic health conditions that make them higher risks. The president’s executive order was short on details. However, he should support protections that existed prior to the ACA. Before the ACA Americans who maintained continuous coverage (no uninsured spells greater than 62 days) could not be denied coverage or charged more due to health status. Requiring continuous coverage is what prevents people from waiting to enroll until after they have already become ill. ACA plans have such high premiums because too many people waited to enroll until after they needed costly care.
President Trump has also announced his desire for Congress to ban surprise medical bills. The president gave Congress until January 1 to act before his Administration begins looking for an administrative solution. Congress has stalled on passing legislation mostly due to the heavy lobbying by the physician groups who profit from balance billing, the industry term for surprise medical bills.
About half of states have some sort of protection against surprise medical bills. Yet, state laws do not protect enrollees in large, self-funded employer plans. Too often when Americans visit an emergency room or require a hospital stay, they are treated by out-of-network physicians who patients could not avoid. In the weeks that follow unexpected medical bills arrive in the mail with much higher cost-sharing.
Recently a Colorado appeals court overturned a jury decision that had found a woman did not owe a $229,112 surprise medical bill after her surgery was more complicated than expected. She had been quoted a surgical estimate for about $57,600, with $1,337 as her share of the cost. Complications increased the bill to nearly $304,000, a difference that could only be attributed to price-gouging. When her surgery did not go as planned, the hospital charged “list prices” from its inflated chargemaster. Chargemaster prices are several times what health plans generally pay.
The judge writing the majority opinion basically said the woman should have been more diligent. She should have known that the (out-of-network) hospital could charge its inflated chargemaster prices if everything did not go according to plan. Furthermore, the judges indicated hospitals should not have to defend sky-high list prices in court or litigate to collect them every time a patient gets caught off guard. That view is at odds with other legal opinions.
Duke University Law professor Barak Richman, Stanford economist Arnold Milstein and several colleagues have argued that contract law should be sufficient to protect patients from price gouging they never agreed to. Under contract law, the standard for enforceable contracts is a “meeting of the minds,” also known as mutual assent. What that means is each party to a contract must fully understand what each other is agreeing to or the contract is unenforceable. The Colorado appeals court seemingly ignored this, apparently believing surprise billing and price-gouging are customary practices in health care and consumers should expect it. Yet, Professor Richman and his colleagues make a compelling argument. How can there be mutual assent when hospitals are unable to provide an accurate cost-estimate? How can there be a meeting of the minds when a hospital price estimate is one-fifth of the final bill? Moreover, hospitals are routinely unable to provide patients with the network affiliation of the ancillary physicians who work there and afford patients little choice over their own care. Doctors and hospitals dislike prior authorization but that is just about the only way most patients can estimate their cost-sharing prior to care.
President Trump and Members of Congress should work to put patients back in the driver’s seat. The solution to many of the problems in health care is consumer sovereignty. Start by requiring mutual assent before an enforceable contract is created. That is: provide prospective patients with assurances that physicians are in-network or quote transparent fees if not. Provide reasonable cost estimates and disclose any additional charges in advance in the event complications occur. Furthermore, grant patients control over who treats them and the power to decline service providers whose prices or network status is opaque. Once patients have the power to say no, their medical providers will either compete for their patronage or suffer a decline in business.