As we’ve written before in this space, air ambulance charges are a growing source of surprise medical bills for consumers, and the charges can be eye-popping – five figures or more. Unfortunately, state-level efforts to limit balance billing by air ambulance companies have thus far been stymied by the Airline Deregulation Act (ADA) of 1978, which prevents states from enacting laws regulating the prices of any air carrier, including air ambulance. In 2018, the U.S. Congress considered legislation that would have given state officials the ability to regulate the more egregious billing practices of air ambulance providers, but congressional leaders ultimately bowed to pressure from the industry. The enacted bill authorized a Department of Transportation advisory committee to study the issue, the ultimate “kick the can” solution to the problem.

This year, although Congress is debating several bills to protect patients from surprise medical charges, only one – sponsored by Senators Lamar Alexander and Patty Murray – would extend those protections to patients needing emergency air transport. Meanwhile, air ambulance bills are only getting higher (for example, air ambulance charges in New Mexico have risen 300 percent since 2006) and more air ambulance providers are choosing not to participate in health plan networks, making it easier for them to sock patients directly with their high charges.

Some states have tried to protect consumers, but the scope of these efforts are curtailed by federal law. For example, Texas and North Dakota laws to limit air ambulance balance billing were ruled as preempted by the ADA in two federal district courts. Another federal law – the Employee Income Security Act (ERISA) – preempts states from regulating self-funded employer plans, including any imposition of a requirement that these plans include air ambulances in their networks or hold enrollees harmless for out-of-network charges.

Wyoming may have hit on a unique solution. The state is proposing to turn air ambulances effectively into a public utility.

Wyoming’s Plan

The Wyoming Department of Health has developed an 1115 Medicaid waiver application that would make all Wyoming residents, regardless of income, eligible for Medicaid for air ambulance services only. Under the plan, the state would:

• Set the basic parameters of air ambulance coverage under the Medicaid program.
• Solicit competitive bids from air ambulance providers to serve as the sole provider within a prescribed geographic area within the state.
• Create a centralized call center that would direct all calls for air ambulance services to the approved providers.
• Make regular flat payments to these providers (instead of reimbursing on a fee-for-service basis).
• Set patient cost-sharing on a sliding scale, based on income.
• Recoup costs for operating the program from private insurers, employer plans, and individuals already paying for transports.

In its pitch to state lawmakers and stakeholders, the Department of Health argues that the air ambulance industry is an example of market failure, noting that most patients cannot “shop around” for air ambulance services. Even in situations when the patient is conscious or in serious medical distress, the cost is not transparent because of differences in network arrangements and cost-sharing among plans. Officials further note that the supply of air ambulances has risen dramatically in the past five years, and these providers have very high fixed costs that they must recoup, largely from private payers and patients. Indeed, in 2018, Wyoming employers paid an average of $36,000 per flight. The Department argues that, as with other critical commodities with high fixed costs such as water and electricity, a regulated monopoly is a more efficient way to deliver the needed services.

Questions and Next Steps

There remain a number of hurdles before Wyoming’s unique plan can take effect. First, the federal government would have to approve the waiver proposal. The Wyoming legislature would then have to enact state-level legislative changes to authorize the program. Both federal officials and state lawmakers will likely be lobbied extensively by the air ambulance industry, which has a vested interest in maintaining the status quo. Also, although the state argues that the Medicaid program should not be preempted under the Airline Deregulation Act, that premise has not yet been tested in court. Other questions include whether self-funded employer plans, which are not subject to state regulation, will opt-in to the state program, enabling it to be budget neutral.

Wyoming has posted its waiver application and invited public comment. It expects to submit the proposal to federal authorities by September 1, 2019, with another public comment period expected later in the year.