A simple solution to ending ‘surprise’ medical bills: bundled payments

Imagine buying a plane ticket, but the fare only covers your seat, the fuel, the gate attendant, and the peanuts. You have to pay the pilot separately. You are sitting on the plane and, unbeknownst to you, the pilot scheduled to fly your plane is delayed and a pilot from another airline takes over. Because that pilot costs more than the regular pilot, you now have to pay an extra $500. And you only find out weeks later when you get the bill.

It sounds like a preposterous scenario. Yet this is the absurd reality in health care and the epidemic of surprise medical bills.

Patients usually do everything right. They choose an emergency department, a hospital, or an obstetrician in their health plan’s network. Yet they often receive care at some point from an emergency room doctor, anesthesiologist, or other clinician who is an “out of network” provider. Weeks later, a bill arrives asking for the difference between what the health plan covers and the doctor’s actual fee. Patients rightfully feel blindsided and infuriated.

These surprise bills help fuel Americans’ frustration with health care costs.

Politicians from both sides of the aisle recognize the problem. More than 20 states have passed laws to protect patients from this kind of “out-of-network” bill. A bipartisan group of senators recently introduced a measure called the Protecting Patients from Surprise Medical Bills Act. These efforts aim to limit how much a patient must pay out-of-network doctors, specify how much the insurer has to pay out-of-network doctors, or both. Others have argued for different interventions. Writing this week in STAT, Drs. R. Bruce Williams and Geraldine B. McGinty called on insurance regulators to do more to certify “network adequacy.”

Such efforts will certainly help. But they are workarounds that fail to address the root of the problem. They also add to the regulatory and administrative burden of an already bloated system and create opportunities for physicians to game the system by dropping out networks so they can be paid more. Some groups of physicians are already playing such games.

A better strategy is to address the problem at the source. Just as it is silly to pay a pilot a separate fee, it is also silly to pay physicians separately from what we pay for the nurses, bandages, X-rays, and the rest of the workers and work of the health care team. Here’s an idea: Combine the payments to the physicians and the payment for the rest of the care into a single payment. This approach is neither new nor radical. The Reagan and Bush administrations proposed combining or bundling select physician and facility payments several decades ago, but ran into stiff opposition from physicians. Things are different now: The epidemic of surprise bills has increased the impetus for change.

Congress could help eliminate surprise bills by passing legislation mandating that Medicare combine physician payments with other payments. Medicare is the 800-pound gorilla in health care and a trend setter for reform. When Medicare makes changes, private insurers quickly follow suit.

A single payment for care will decrease paperwork and increase price transparency. Equally important, it will protect patients from the often catastrophic financial damage of surprise bills. It is the right thing to do for more reasons than one.

Ateev Mehrotra, M.D., is an associate professor of health care policy and medicine at Harvard Medical School and a hospitalist at Beth Israel Deaconess Medical Center in Boston. Vivian Ho, Ph.D., is chair in health economics at the Baker Institute for Public Policy, director of the Center for Health and Biosciences, and professor of economics, all at Rice University, and professor of medicine at Baylor College of Medicine.