Association for Public Policy Analysis & Management

States that have attempted to regulate air ambulance rates and protect patients from balance billing have encountered a significant legal obstacle: federal pre-emption of state authority through the Airline Deregulation Act of 1978. It eliminated the previous system that regulated commercial air transport as a public utility. In doing so, it forbids states from re-imposing any form of aviation rate regulation. Federally, initiatives to lift this accidental pre-emption, or to impose federal rate limits, have stalled because of the divergent committee jurisdictions between health and transportation. Nevertheless, Congress has called for a study of the issue, and there are some creative approaches potentially available to states for avoiding legal pre-emption.

This paper evaluates issues relating to air ambulance surprise billing along three dimensions: 1) A descriptive review of newly emerging evidence about extent and magnitude of this area of surprise billing. 2) A critique of public policy rationales for the absence of state authority to regulate that considers both aviation as well as health policy perspectives (drawing in part from the author’s aviation expertise as a private pilot). 3) Description and analysis of creative options that state lawmakers have for avoiding federal pre-emption, such as: a) creating an opt-in program that is attractive for both service providers and payors; b) funding air ambulance service through Medicaid.

The paper also analyzes the reasons underlying federal inaction and develops approaches for federal regulation that can be considered.