Indiana balance-billing law latest in fight over ‘reasonable’ charges
One of the long-standing tensions in health care finance — whether you’re talking about health insurance or managed care, for-profit or non-profit, workers’ compensation, Medicare, Tricare, automobile medical payments, Medicaid, the Children’s Health Insurance Program, and dozens of state versions thereof — is finding a way to determine the reasonableness of expenses owed for treatment.
When I was growing up in the fifties and sixties, I was a military dependent, and if there was a lot of controversy about “reasonable” compensation in the general public, I surely wasn’t aware of it. Injured parties went to emergency rooms for life-threatening injuries or diseases, and to doctors for everything else. Most everybody had insurance coverage for basic medical treatment through their employer. The welfare state had not really developed, so most able-bodied people worked.
Penicillin and other miracle drugs had been developed. We still couldn’t do much about allergies or attention-deficit disorders. The first successful lung, pancreas and liver transplants had just taken place, and in 1967, South African surgeon Christiaan Barnard replaced the diseased heart of a dentist with one from a young accident victim. (Although immunosuppressive drugs had been invented and prevented rejection, the first heart transplant recipient died of pneumonia about two and a half weeks later.)
There was polio and tuberculosis, but no AIDS, no computed tomography, magnetic resonance imaging, or positron emission tomography, no auto no-fault insurance, and not much in the way of cost-shifting from one system to another. There seemed to be little need for medical fee schedules except for the developing “cosmetic” surgery specialty.
Our examination of the modern challenges which have surfaced in financing the more miraculous medical capabilities available today will be confined to one particular legislative thrust just concluded in the state of Indiana. The Insurance Institute of Indiana has a reputation for sniffing out emerging threats to its members and, if necessary, endorsing bipartisan legislative solutions. This one should be noted by all property and casualty companies writing auto insurance, because it is doubtful that these circumstances are limited to a single state.
During the Great Depression, hospitals had trouble collecting fees owed for care, and the answer in Indiana was to give the hospitals a statutory lien, superior to all other creditors except attorneys, in settlements to resolve lawsuits. This is the reason that the current issue impacts property and casualty companies more than other types of insurance – it only applies to lawsuit settlements.
Today, instead of submitting billing to plans — which typically negotiate contracts to reduce these charges by up to 40 percent — some Indiana hospitals file liens for the full charges levied by the hospital for treatment: i.e. the sticker price that almost no one ever pays. In some cases, individual patients have been balance-billed for the difference between their plan payments and the full amount charged. This has been allowed because Indiana, like most states, has a law dictating that hospital charges are prima facie evidence of reasonable charges.
Which brings us to legislation sponsored by state Sen. Brent Steele, R-Bedford, in the current legislative session. When Indiana’s Senate Bill 5 goes into effect in a couple of weeks, these practices will no longer be lawful. The Indiana law, beginning July 1, will protect patients in that state with language that states:
A hospital lienholder is barred from seeking from the patient or the patient’s representative payment for any amount of the hospital’s charges that exceed the patient’s financial obligation to the hospital under the terms of any public or private benefits to which the patient is entitled, including the terms of any health plan contract and medical insurance. The lien must reflect credits for all payments, contractual adjustments, write-offs, and any other benefit in favor of the patient.
Oh, and by the way, the bill would also eliminate the ability of local government-owned hospitals’ emergency ambulance services to recover the charges associated with a patient’s care and transportation by means of placing a lien on a cause of action, suit, or claim accruing to the patient.
This is a difficult area, and will not be the final skirmish over reasonableness in medical charges, but it should be widely noted. Balance billing for outpatients allows some negotiation between parties and limited market pricing, because a patient has some choice about where to go. Balance billing for inpatients puts vulnerable people at risk when they have no choice about treatment, and should be resisted wherever possible.
Thanks for working on this fix, Indiana.
