Article: A spinal surgery, a $101,000 bill, and a new law to prevent more surprises

How New York state fought surprise medical bills — and won.


When Claudia Knafo needed spine surgery in 2012, she interviewed multiple surgeons and ultimately settled on one whose website claimed to take her health insurance. She called the doctor’s office and confirmed he was in network. At an appointment before her surgery, she handed over her insurance cards to be photocopied.

Knafo’s operation was successful and her recovery smooth. But a few weeks later, she got bad news: The website was wrong and the surgeon wasn’t in network. He didn’t have any contract with her health plan.

Knafo’s health plan did mail her a check for $66,000 to cover the surgery, which she signed over to the doctor. But the surgeon charged $101,000 for the operation, so he wanted an additional $35,000 from Knafo.

Making matters worse, the insurer reached out a second time to say they’d made a mistake and had overpaid the doctor. They told Knafo she needed to get the $66,000 back from her surgeon — who had no intention of parting with the money.

“It felt like I was in the middle of a nuclear attack,” Knafo says. “I had the insurance coming after me for $66,000 and the doctor coming after me for $35,000. I was stuck in every hole in the system.”

Knafo is an outspoken New Yorker — the type of person who, when under attack, launches her own nuclear missiles back. She started telling her story to anyone who would listen: insurance regulators, consumer advocacy groups, even the state attorney general’s office.

Two years after surgery, Knafo, a professional piano player, was traveling to Albany to urge lawmakers to pass legislation to protect patients from what she went through.

They listened. In 2015, New York passed one of the strongest laws in the country to prevent surprise medical bills.

“It seems so ludicrous to be a pawn between an insurance company and a hospital,” Knafo says. “Now, it really feels like I’ve at least done something good with it.”

New York’s law — and its unique binding arbitration process — has captured the attention of legislators and health wonks across the country. Last year, New Jersey passed a law modeled on New York’s, and Congress is now eying the New York law as a promising base for national legislation.

Passing a national version of New York’s law would, in a narrow way, solve one of the most expensive problems that consumers can face in American health care: patients hit with high bills after being seen by out-of-network doctors at in-network hospitals. Republicans and Democrats are working together on the legislation in Congress.

But the law won’t address the underlying cause of the problem: America’s sky-high medical prices. Unlike in places like Canada or Europe, where you don’t hear about consumers being hit with huge surprise medical bills, America does not regulate prices.

So while Congress works to lower the cost of one type of surprise bill for patients (a goal that could very well help many Americans), insurance companies could decide to raise costs elsewhere in the system to account for any losses. And there’s no appetite in Congress to take on across-the-board health care costs.

How Major League Baseball helped New York fix surprise medical bills

New York’s surprise billing law takes inspiration from an unlikely place: professional baseball.

In Major League Baseball, newer players frequently end up in disputes with their teams over salary. Since the 1970s, when the players unionized, the league has used a unique arbitration process to settle those disputes. Both the player and the team get one chance to name an appropriate salary, and then an impartial arbiter picks one of the numbers.

This creates an incentive for both parties to choose reasonable numbers — they want the arbiter to pick their offer — so the player won’t shoot for the stars, and, likewise, the team won’t go super low.

When New York was exploring ways to tamp down on surprise medical bills, one option was this “baseball-style” arbitration: essentially forcing doctors and insurers to negotiate, with the help of a neutral arbiter.

The other was price regulation. The state government could cap the prices doctors can charge in situations where patients had little ability to pick a provider (an emergency room, for example, or an anesthesiologist they’d never actually meet). California limits surprise billing this way, capping what certain doctors can charge as a percentage of Medicare rates. A bill introduced by Sen. Bill Cassidy (R-LA) last year would do something similar nationally.

Prices dropped when New York passed a new law

New York went with the baseball-style approach. Those involved in the law’s drafting worried that price regulation would struggle to set the right number to pay doctors — that setting a rate might actually encourage some physicians to increase their prices to meet that new number.

A negotiation process, on the other hand, would force insurers and doctors to make honest guesses about what the price should be.

“In baseball arbitration, whoever is closer to reality wins,” says Jeffrey Gold, a senior vice president with the New York Hospital Association, who helped work on the law’s drafting. “I felt that was very quick and easy and would very quickly set a market rate for what was an acceptable behavior.”