Wyoming Is Using Medicaid to Treat Air Ambulances Like a Public Utility

Wyoming, the reddest of Republican states and a bastion of free enterprise, thinks it may have found a way to end crippling air ambulance bills that can top $100,000 per flight.

Wyoming, the reddest of Republican states and a bastion of free enterprise, thinks it may have found a way to end crippling air ambulance bills that can top $100,000 per flight. Shutterstock

 

Connecting state and local government leaders

Other states dealing with the high air ambulance costs have tried to rein in the industry but have continually run up against the Airline Deregulation Act.

This article originally appeared on Kaiser Health News.

Wyoming, the reddest of Republican states and a bastion of free enterprise, thinks it may have found a way to end crippling air ambulance bills that can top $100,000 per flight.

The state’s unexpected solution? Undercut the free market by using Medicaid to treat air ambulances like a public utility.

The issue has come to a head in Wyoming, where rugged terrain and long distances between hospitals forces reliance on these ambulance flights. Costs for such emergency transports have been soaring, with some patients facing massive unexpected bills as the free-flying air ambulance industry expands with cash from profit-seeking private-equity investors.

Other states dealing with the same dynamic have tried to rein in the industry but have continually run up against the Airline Deregulation Act, a federal law that preempts states from regulating any part of the air industry.

So, Wyoming officials are instead seeking federal approval to funnel all medical air transportation in the state through Medicaid, a joint federal-state program for residents with lower incomes. The state officials plan to submit their proposal in late September to Medicaid’s parent agency, the Centers for Medicare & Medicaid Services; the plan will still face significant hurdles there.

If successful, however, the Wyoming approach could be a model for the nation, protecting patients in need of a lifesaving service from being devastated by a life-altering debt.

“The free market has sort of broken down. It’s not really working effectively to balance cost against access,” said Franz Fuchs, a policy analyst for the Wyoming Department of Health. “Patients and consumers really can’t make informed decisions and vote with their dollars on price and quality.”

Freewheeling Free-Market System

The air ambulance industry has grown steadily in the U.S. from about 1,100 aircraft in 2007 to more than 1,400 in 2018. During that same time, the fleet in Wyoming has grown from three aircraft to 14. State officials said an oversupply of helicopters and planes is driving up prices because air bases have high fixed overhead costs. Fuchs said companies must pay for aircraft, staffing and technology such as night-vision goggles and flight simulators, incurring 85% of their total costs before they fly a single patient.

But with the supply of aircraft outpacing demand, each air ambulance is flying fewer patients. Nationally, air ambulances have gone from an average of 688 flights per aircraft in 1990, as reported by Bloomberg, to 352 in 2016. So, companies have raised their prices to cover their fixed costs and to seek healthy returns for their investors.

2017 report from the federal Government Accountability Office notes that the three largest air ambulance operators are for-profit companies with a growing private equity investment. “The presence of private equity in the air ambulance industry,” the report said, “indicates that investors see profit opportunities in the industry.”

While precise data on air ambulance costs is sparse, a 2017 industry report said air ambulance companies spend an average of $11,000 per flight. In Wyoming, Medicare pays an average of $6,000 per flight, and Medicaid pays even less. So air ambulance companies shift the remaining costs — and then some — to patients who have private insurance or are paying out-of-pocket.

As that cost-shifting increases, insurers and air ambulance companies haven’t been able to agree on in-network rates. So the services are left out of insurance plans. When a consumer needs a flight, it’s billed as an out-of-network service. Air ambulance companies then can charge whatever they want. If the insurer pays part of the bill, the air ambulance company can still bill the patient for the rest — a practice known as balance billing.

“We have a system that allows providers to set their own prices,” said Dr. Kevin Schulman, a Stanford University professor of medicine and economics. “In a world where there are no price constraints, there’s no reason to limit capacity, and that’s exactly what we’re seeing.”

Nationally, the average helicopter bill has now reached $40,000, according to a 2019 GAO report, more than twice what it was in 2010. State officials say Wyoming patients have received bills as high as $130,000.

Because consumers don’t know what an air ambulance flight will cost them — and because their medical condition may be an emergency — they can’t choose to go with a lower-cost alternative, either another air ambulance company or a ground ambulance.

A Different Way of Doing Things

Wyoming officials propose to reduce the number of air ambulance bases and strategically locate them to even out access. The state would then seek bids from air ambulance companies to operate those bases at a fixed yearly cost, under a sort of Netflix model. It’s a regulated monopoly approach similar to the way public utilities are run.

“You don’t have local privatized fire departments springing up and putting out fires and billing people,” Fuchs said. “The town plans for a few fire stations, decides where they should be strategically, and they pay for that fire coverage capacity.”

Medicaid would cover all the air ambulance flights in Wyoming and then recoup those costs by billing patients’ insurance plans for those flights. A patient’s out-of-pocket costs would be capped at 2% of the person’s income or $5,000, whichever is less, so patients could easily figure out how much they would owe. Officials estimate they could lower private insurers’ average cost per flight from $36,000 to $22,000 under their plan.

State Rep. Eric Barlow, who co-sponsored the legislation, recognizes the irony of a GOP-controlled, right-leaning legislature taking steps to circumvent market forces. But the Republican said that sometimes government needs to make sure its citizens are not being abused.

“There were certainly some folks with reservations,” he said. “But folks were also hearing from their constituents about these incredible bills.”

Industry Pushback

Air ambulance companies have opposed the plan. They say the surprise-billing problem could be eliminated if Medicare and Medicaid covered the cost of flights and the companies wouldn’t have to shift costs to other patients. They question whether the state truly has an oversupply of aircraft and warn that reducing the number of bases would increase response times and cut access to the lifesaving service.

Richard Mincer, an attorney who represents the for-profit Air Medical Group Holdings in Wyoming, said that while 4,000 patients are flown by air ambulance each year in the state, it’s not clear how many more people have needed flights when no aircraft was available.

“How many of these 4,000 people a year are you willing to tell, ‘Sorry, we decided as a legislature you’re going to have to take ground ambulance?’” Mincer said during a June hearing on the proposal.

But Wyoming officials say it indeed might be more appropriate for some patients to take ground ambulances. The vast majority of air ambulance flights in the state, the state officials say, are transfers from one hospital to another, rather than on-scene trauma responses. The officials say they’ve also heard of patients being flown for nonemergency reasons such as a broken wrist or impending gallbladder surgery.

Air ambulance providers say such decisions are out of their control: They fly when a doctor or a first responder calls.

But those companies have ways of drumming up business. Air ambulance companies heavily market memberships that cover a patient’s out-of-pocket costs, eliminating any disincentive for the patient to fly. Companies also build relationships with doctors and hospitals that can influence the decision to fly a patient. Some have been reported to deliver pizzas to hospitals by helicopter to introduce themselves.

Mincer, the Air Medical Group Holdings attorney, said the headline-grabbing large air ambulance bills don’t reflect what patients end up paying directly. The average out-of-pocket cost for an air ambulance flight, he said, is about $300.

The industry also has tried to shift blame onto insurance plans, which the transporters say refuse to pay their fair share for air ambulance flights and refuse to negotiate in-network rates.

Doug Flanders, director of communications and government affairs for the medical transport company Air Methods, said the Wyoming plan “does nothing to compel Wyoming’s health insurers to include emergency air medical services as part of their in-network coverage.”

The Profit Model

Other critics of the status quo maintain that air ambulance companies don’t want to change, because the industry has seen investments from Wall Street hedge funds that rely on the balance-billing business model to maximize profits.

“It’s the same people who have bought out all the emergency room practices, who’ve bought out all the anesthesiology practices,” said James Gelfand, senior vice president of health policy for the ERISA Industry Committee, a trade group representing large employers. “They have a business strategy of finding medical providers who have all the leverage, taking them out of network and essentially putting a gun to the patient’s head.”

The Association of Air Medical Services counters that the industry is not as lucrative as it’s made out to be, pointing to the recent bankruptcy of PHI Inc., the nation’s third-largest air ambulance provider.

Meanwhile, Blue Cross Blue Shield of Wyoming is supportive of the state’s proposal and looks forward to further discussion about the details if approved, according to Wendy Curran, a vice president at the health insurance firm. “We are on record,” Curran said, “as supporting any effort at the state level to address the tremendous financial impacts to our [Wyoming] members when air ambulance service is provided by an out-of-network provider.”

The Wyoming proposal also has been well received by employers, who like the ability to buy into the program at a fixed cost for their employees, providing a predictable annual cost for air ambulance services.

“It is one of the first times we’ve actually seen a proposal where the cost of health care might actually go down,” said Anne Ladd, CEO of the Wyoming Business Coalition on Health.

The real challenge, said Fuchs, will be convincing federal officials to go along with it.

Markian Hawryluk is the senior Colorado correspondent for KHN, based in Denver.

NEXT STORY: Federal Watchdog Sounds Alarm Over New York Nursing Homes

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.