Podcast: Elinor Ostrom Checks In

On today's Planet Money:

This month, Indiana University professor Elinor Ostrom became the first woman to win the Nobel prize for economics.

Ostrom explains her groundbreaking research into the public management of natural resources. The political scientist argues that people should be empowered to organize themselves in small ways that scale up to a global network. Government can be helpful in doing that, but people shouldn't rely on it alone.

Bonus: After the jump, the girl who gotten bitten by a dog.

Download the podcast; or subscribe. Music: XX's "Islands" and Magic Missile's "Tragedy of the Commons." Find us: Twitter/ Facebook/ Flickr.

Tanya Dina Ruttenberg writes from WYPR land:

Last winter my daughter was bitten by my neighbor's dog and had to get several stitches on her nose.

It turns out the emergency room doc who stitched her up was an out-of-network provider. She charged about $800 and the insurance company decided the "reasonable and customary" (r&c) charge for the service was about $600. The reimbursement for out-of-network provider was about 70% so they paid her 70% of $600. It never entered my mind that this doc could be out-of-network since every other MD we've seen at this hospital was in our network. Moreover, the question of in or out of network didn't occur to me because we were in the emergency room and you don't get to pick your doctor in the emergency room!

The insurance company processed it as an out of network claim and paid 70%.

After a phone call to the insurance company they "remembered" their policy of paying as in-network for any emergency room visit. This means that they apply $250 to the in-network deductible and then pay at 100% of r&c. However, since the doctor was not really in-network, she had not agreed to accept what the insurance company said was reasonable and customary and persisted in charging $800. Her right to do as far as I was concerned.

The balance therefore was $250 (deductible) plus the difference between "r&c" and balance the doctor said we owed her. Norm (the neighbor) was willing to pay the bills, but was concerned about how much it was and we agreed with him to appeal the decision of the insurance company to only pay "r & c". This totaled about $400 at this point.

The insurance company denied the appeal and refused to pay anymore. So Norm was getting ready to pay the full balance, but decided to first consult a doctor friend of his who has ties to the insurance industry. Norm thought this guy might have some inside knowledge about how these things get paid/decided.

Here is the email exchange between Norm and his friend:

Letter from neighbor Norm to his doctor friend:

My neighbor brought her daughter into the emergency room to get stitches in her nose from a dog bite. She had insurance from Guardian (?). She got a bill for some enormous amount and the insurance company at first refused to pay the physician portion of the bill because she was not one of their providers. After arguing about it they paid a portion of the bill but refused to pay $400 of it saying it was above the customary charges. It is not like she had a choice of who to see in the ER or ask what they were charging. Does she have any recourse?

You are probably saying what am I so concerned about this for and that is a fair question. It was my dog who bit her and I am paying the bills.

Reply from doctor friend:

From a review of the data that you presented it appears that this was a true emergency and the definition of that status is important for the case. Aside from a deductible there should be no other obligation from the patient. It is irrelevant if the provider was outside of the panel of her insurance coverage in view of the emergency. If the charges were above customary, again the obligation should not extend beyond the deductible.

Every insurance plan has an appeal process. If you were denied coverage at the initial level, you can request an appeal to the next level. Lastly, you can contact the insurance commission for the State of Maryland and file a complaint. You can also do this through the Health Department for the State of Maryland ( preferred route ). This complaint would be against the provider for excessive charges if this is true. On the other hand the complaint might be against the insurance company for denial of their fiduciary responsibility for the emergency care. Frequently insurers refuse to pay for services outside of their coverage responsibilities and claim charges exceed the usual and customary charges. The patient does not have an obligation to pay if the insurance company does not pay, even though the provider thinks otherwise.

Norm agreed to pay the $250 deductible and no more. That was fine with us. This left a balance of a little less than $200 which I expected the doctor to settle on, but the collection company employed by the doctor refused to settle.

I fully intended to file a complaint against the insurance company but never got around to it. I did not feel $800 was an excessive charge for stitching up my daughter's nose. If it wasn't done well she might have ended up needing cosmetic surgery (something Norm would have happily paid for had it been necessary). I feel the insurance company should have paid the bill in full.

I never did file any complaint.

What really ended up happening is that we are declaring bankruptcy for other reasons and the balance of this bill will be discharged in the banktruptcy.