A few years ago a number of health plans were sued by state regulators and provider groups for supposedly using erroneous databases to pay out-of network claims, those claims for services rendered by a provider who has not contracted with the health plan. This was one of the dumbest supposed consumer protection moves ever (thank you Andrew Cuomo), since out-of-network charges are usually wildly inflated by providers and under almost all benefit designs, the member ends up paying much more for out-of-network services and will often be balance-billed. A new report from America’s Health Insurance plans shows just how outrageous out-of-network charges often, if not usually, are. (AHIP Report) Here are a few examples, just as a warm-up, Medicare pays $718 for a knee arthroscopy, a provider in New Jersey billed $34,366, or 48 times as much. Medicare pays $849 for a laparoscopic gall bladder removal; a provider in New York billed $44,000, or 52 times as much. Medicare pays $1522 for partial colon removal; a provider in New York billed $42,800, or 28 times as much. Now lets stipulate that Medicare may at times be a low provider, so maybe twice what it pays could somehow be justified, but 20, 30, 40, 50 times as much! Give us a break.
Looking at data from the 30 states with the highest populations (and no, we don’t mean Washington and Colorado), the analysis found a large number of examples with charges as much 5,000% to 9000% more than what Medicare pays. Yes, that is thousands of percent. There is geographic variation in how great the disparity is, with California and Texas offering a number of very high out-of-network fees, along with many states in the Northeast and Florida. And some people have the nerve to suggest that physicians are economic creatures too, and that maybe they don’t always have at least the economic best interests of their patients at heart! The obvious solution is to allow the health plans to go back to paying out-of-network claims on a “reasonable” standard and forget the “usual and customary” part, since usual and customary apparently means larceny to many physicians; and/or the states should establish a limit on out-of-network charges, perhaps no more the 2 times the Medicare allowable.