I believe there is an issue in states where state legislatures have passed “balance billing” or “surprise medical bill” regulations. I believe that we need to consider aggressively challenging the legality of those laws and regulations.
Constitutional Arguments of the Violation of 5th and 14th Amendments
I believe that there is significant case law that laws and regulations which allow insurers and government payers to pay less then fair market value constitutes a “taking.” The Takings Clause is a provision of 5th Amendment that prohibits the federal government from taking property for public use without “just compensation.” American courts have interpreted “just compensation” to mean “fair market value.” The Due Process Clause of the 14th Amendment extends the 5th Amendment to include actions by state and local governments which bar state governments from depriving people of their property without due process of law. The “taking” is not the lack of compensation for services but rather the lack of “just compensation.” The issue here is that the laws and regulations are rate setting without a methodology or Public Utilities Commission to decide what constitutes fair payment or “just compensation.”
Certain types of takings cases present interpretive questions. It is clear that when the government physically seizes property (as for a highway or a park, for example) that it will have to pay “just compensation.” It is also clear that serious, sustained physical invasions of property (as in the case of low overflying aircraft, for example) require payment of compensation equal to the difference between the market value before and after the invasion. The Courts have had a difficult time finding a test to determine when a regulation becomes a taking. There is “no set formula” and that courts “must look to the particular circumstances of the case.” The SCOTUS has identified some relevant factors to consider: the economic impact of the regulation, the degree to which the regulation interferes with investor-backed expectations, and the character of the government action.
In 2013 there were two SCOTUS rulings that strengthened this argument that government regulations can constitute a taking. [i] Several courts, including the California Supreme Court in the Prospect case, have repeatedly stated that Medicare (or even a percentage of Medicare) should not be held as a standard for non-contracted commercial services. If the government compels you to care for patients and the patients (or their insurance company) does not pay fairly, then the government is responsible for that payment. This was found to be the case in Kelo vs City of New London.[ii] In this case, the city was attempting to bolster its economy and forced the land owners to sell their property to a private development company.
The Argument for making Emergency Medicine a “Public Utility” and “Rate Setting”
Public utilities, typically, are businesses that have a “de facto” monopoly or natural monopoly for the services they provide within a particular jurisdiction. Because there are limited hospitals, emergency physicians have a natural monopoly on emergency physician services. Many different classes of business have been classified as public utilities. Public Utlitity providers are legally required to go through a rate-setting process in order to determine their allowable charges. Prominent public utilities must utilize ratemaking to set rates include railroads, energy, and telecommunicaitons In the United States, where many industries classified as public utilities are either private businesses or publically traded companies, ratemaking generally must be determined by a state regulatory body, most often a public utilities commission in an administrative law format. There are specific rules for determining who is on a public utilities commission. One significant determination of whether something is a public utility involves a test as to whether someone can refuse services to anyone. EMTALA clearly removes the ability of hospitals and emergency physicians to refuse service. Insurance companies should then also have a requirement to have to pay for our services.
Ratemaking is political because the product or service must be determined to be a social necessity and rates must be fair across different classes of consumers. Although it can be said that all regulations are a combination of politics and economics, ratemaking is frequently more technical. Ratemaking has five functions:
- Capital attraction;
- Reasonable pricing;
- Incentive to be efficient;
- Demand control or consumer rationing
- Income transfer.
To be constitutional, a rate cannot be so low as to be considered a “taking”. Most state statutes further require rates to be just, reasonable, and non-discriminatory.
Although utilities are regulated industries, they are typically privately owned and must therefore attract private capital. Government regulators must assure private companies a fair revenue so that they can continue to stay in business and attract investors. This creates competing aims of capital attraction and fair prices for customers. Utility companies are therefore allowed to charge “reasonable rates,” which are generally regarded as rates that allow utilities to encourage people to invest in utility stocks and bonds at the same rate of return they would in comparable non-regulated industries.
So should our mantra be “emergency medicine is an essential public service.”
The Additional Argument of the 13th Amendment(Indentured Servitude)
Recently, there has been several threats by NCAA college football athletes who were allegedly paid less than their fair market value and adds further support to reconsider also invoking the 13th Amendment (indentured servitude).
I believe the right strategy would be to employ several legal experts and economists to look at whether this situation has allowed the states and insurers to “take” from emergency physicians. We should have several constitutional attorneys and economists look at the potential of this case.
History of Constitutional Arguments against EMTALA
Some people may argue that EMTALA has been challenged in the past with no success and this is wasted effort. Whereas it is true that EMTALA was challenged and lost on all arguments in the early 1990s there was different economics in place and the legal arguments where done under different legal strategies. Those cases were often tried on the philosophy that EMTALA constituted indentured servitude and applied to the hospitals and only to the physicians that voluntarily chose to work in those hospitals. Several things have changed since that time. First, physicians and emergency physicians could get hospital and insurance company privileges in virtually any specialty without regard to their specific training. For example, family practice could work in the Emergency Department and Emergency trained physicians could work in general practice/family practice. In 2015,it is unlikely that emergency medicine physicians could gain credentials from hospitals or insurance companies in any specialty other than emergency medicine or urgent care. Furthermore, when EMTALA has challenged before, there were no bans on “balance billing” and the only rate setting was for Medicare and Medicaid.
The other question is when does rate setting become an anti-trust issue. States have enacted rate setting for hospitals since the 1970’s. This discussion requires commissions to enact rates that are appropriate to make sure that costs are covered. This was not meant to apply to physicians and there is no commission that reviews appropriate rates. [iii] In actual support, in the absence of a commission, one can argue that Fair Health is an appropriate rate setting entity.
With all strategies there are risks. If we fail, state and federal agencies may be harder on us. But I think this is unlikely as we already bare a tremendous burden.
I believe that if we can argue this successfully, states that pass regulations may be liable for the underpayment by insurers as well as likely the underpayment from market prices for what Medicaid rates are paying physicians.
California was very careful in its initial balance billing ban for HMO products to emphasize that this was not all commercial patients and they were not “rate-setting.” However, because of the recent press on “surprise” medical bills and the expansion of the ACA, this has now become defacto rate setting with all patients rates being determined by CMS (Medicare), DHS (Medicaid or Medi-Cal), the insurance companies (Commercially insured patients), and the uninsured (by state law regulating maximum charges to the uninsured.)
The complexities of the ACA that now require everyone to have insurance and levies fines for those that do not have insurance and compels the emergency department is still further evidence of the “taking” nature of the bans and the responsibility and potentially liability of the Federal government to pay fairly for emergency physician services..
I believe there is potential in this argument and it should dissuade States from implementing these regulations.
[i] In Koontz v. St. Johns River Water Management District, 570 U.S. ___, No. 11-1447, slip op. (June 25, 2013), the Court ruled for the first time that the rigorous “nexus” and “rough proportionality” requirements, previously applicable only where a land owner is forced to transfer a property right to government, also applies to a government demand that an applicant pay money or spend money before the government would grant a land use permit. Coupled with the Court’s decision earlier this month in Horne v. Department of Agriculture, which allowed for the possibility of a taking resulting from a government business regulation, this case signals a major expansion of Takings Clause limitations on government regulation.
[iii] Health Care: Antitrust Enforcement Under Maryland’s Hospital All-Payer
System (Letter Report, 04/27/94, GAO/HEHS-94-81).
One issue being raised in the debate over health care reform is how antitrust law should be applied to health care providers. Federal and state antitrust law seeks to prevent price fixing and predatory pricing and to ensure access to and quality of goods and services for consumers.
Since 1974, Maryland has operated a rate-setting program that sets how much hospitals can charge for their services. Also, health care facilities operating in Maryland must obtain a certificate of need if they wish to change the type of services they provide or to make major capital expenditures. Because Maryland regulates hospital prices similar to the way in which public utilities are regulated, state antitrust concerns about hospital pricing are not an issue, and Planning Commission-approved mergers and joint actions by hospitals are exempt from the state’s antitrust law. Also, to the extent that the state actively regulates hospitals, federal antitrust enforcement concerning such regulated activities may not be relevant under the Supreme Court’s state action immunity doctrine. Other concerns about anticompetitive conduct and its possible harmful effect on the public may still be relevant and covered by federal or state antitrust law.