Why American ambulance rides are so expensive

In July 2023, a 25-year-old man named Jagdish Whitten was out for a run in San Francisco. As he crossed a busy street, a car hit him; he did, in his words, “a little flip” over the vehicle, landed in the road, and dragged himself to the curb. Those who had seen the accident called an ambulance for him. But Whitten waved them off and called a friend, who drove him to a nearby hospital instead: “I knew that ambulances were expensive,” he said, “and I didn’t think I was going to die.”Whitten was right on both counts. At the hospital, doctors found that he had a mild concussion, a broken toe, and a few bruises—nothing too serious. But because he’d suffered a traumatic injury, they were obligated to send him to San Francisco General, the city’s only designated trauma center. This time he didn’t have a choice. He was loaded into an ambulance for a six-mile transfer, evaluated without additional treatment, and sent home the same night.Over the weeks that followed, Whitten got bills from both hospitals. Everything was roughly what he expected, and all of it would be covered by his insurance plan. But a few months later, Whitten got another bill—this time from American Medical Response, the ambulance provider that had transferred him between hospitals. The ambulance ride, he learned, would cost him $12,873: $737 for the miles traveled, $314 for monitoring his heart on the trip, $151 for infection control, and $11,670 as a “base rate.”He sent the bill to his insurance provider, which at first denied the claim, saying that AMR was out of network and that the ride hadn’t been pre-authorized. (Whitten, of course, hadn’t chosen the ambulance, or anything else about the trip.) On appeal, his insurance agreed to cover $9,967 of the charge—better than nothing, but it still left him on the hook for about $3,000. After several failed attempts to contest the bill with AMR, and not wanting it sent to collections to hurt his credit score, he paid the remaining $2,900 or so. The brief ambulance ride from one hospital to another had cost him far more than any other part of the experience.

What Whitten had received was a “surprise bill”—a charge that lands on a patient when they’re treated, without knowledge or consent, by a provider outside their insurer’s network. The insurer pays what they consider reasonable; the provider bills the patient for the difference; and the patient, despite having insurance that’s meant to pay for treatment, is left holding the balance. This is a terrible situation to be in.It’s also the default way that ambulance billing in the United States works. Each year, roughly three million privately insured Americans take an emergency ambulance ride; about half of them get an out-of-network bill for it, a rate unmatched anywhere else in medicine. And the uninsured have it worse still: with no insurer to absorb any of the charge, they face the full, undiscounted bill on their own.This has proven quite difficult to fix. When Congress banned surprise billing across virtually the entire healthcare system in 2020, ground ambulances were the great exception. If you’re privately insured and need an emergency ambulance, you’re entering a lottery whose ticket price you’ll learn weeks or months later.And that’s why so many Americans, like Whitten, avoid ambulances whenever they can. One poll from 2024 found that 23 percent of Americans have forgone an ambulance ride because of concerns about cost.So why are American ambulances so expensive?The standard answer is greed: rapacious ambulance operators, owned by villainous private equity firms, exploit patients at their most helpless. But I don’t think that’s actually what’s going on. Ambulance providers are chronically unprofitable businesses; margins are thin, crews are underpaid, and operators exit the industry every year. Whatever is being extracted from patients like Whitten, it isn’t padding anyone’s pockets.The real problem is much more specific and much more interesting. American ambulance bills are enormous and unpredictable because of how American law forces ambulance services to work. In 1965, almost as an afterthought, Medicare decided to pay for ambulances the way it paid for everything else: as a per-ride fee, after the fact, as though a trip to the hospital were just another medical procedure. Commercial insurers, who build their payment systems on top of Medicare’s fee schedules, followed suit.

In the decades since then, the cost structure of ambulance services has changed enormously, and very little of their cost now comes from the ride itself: nearly all of it goes to standing ready—the stations, the vehicles, the crews waiting around the clock for a call that may never come. But the way we pay for ambulance rides has stayed the same. And nearly everything strange and cruel about ambulance billing follows from that disjunction.To understand what went wrong, we need to learn a little bit about the economic logic of ambulances, and why ambulance services are more like option sellers than taxi companies. It’s more interesting than it sounds.If you want to think in crude financial terms—not a terrible way to go through life, all things considered—you can think of an ambulance service as an option on rescue.What does that mean? An “option,” in finance, is simply a contract that gives its holder the right, but not the obligation, to make some transaction in the future—to buy a share at a fixed price at some point in the next three months, for example. And when I write an option—sell it, in the jargon—I take on the mirror-image obligation: if the holder ever chooses to exercise it, I have to deliver, whether it suits me or not. Options, in this broad sense, are all around us. Insurance, for example, is one type of option: when I buy a fire policy, I pay a small premium every year for the right to a large payout if my house ever burns down, and the insurer takes on the obligation to pay it whether or not the timing suits them. So are fire departments: they keep engines and firefighters ready at all times so that any moment people can call them for help—a readiness that residents pay for with their taxes.And ambulance services work a lot like option sellers as well.Let’s say I live in San Francisco. By dint of living there, I hold a perpetual right to summon an ambulance from the San Francisco Fire Department: whenever I call, they’re obligated to come and rescue me. I haven’t entered into an explicit contract with them, but the arrangement functions the same way regardless. The SFFD, in other words, is selling me—and every other resident of San Francisco—an option on being rescued in an emergency. If I ever need an ambulance, I can exercise that option.

But even if I never do, simply having it is valuable to me: knowing that help would come if I needed it allows me to take risks I wouldn’t take otherwise. In that sense, I’m consuming the option of rescue every day of my life.Of course, offering me that option isn’t free for the SFFD. Selling options always imposes costs on the seller: the SFFD has to spend money, around the clock, to ensure that if I ever collapse on the sidewalk and someone calls 911, it’s prepared to arrive rapidly and resuscitate me.And for the whole system to work, they need to be compensated for that cost. The product is the readiness, not the ride; and the readiness has to be funded whether or not the ride ever happens.An ambulance service, then, should work the same way. The SFFD should collect a small premium from every household that enjoys the guarantee of rescue, and use the proceeds to pay for everything it needs to be ready to pick people up. And because everyone would pay, no one would pay very much.But—for strange and particular reasons of American history and law—that’s not how the American ambulance system works.As long as there have been hospitals, there’s been an occasional need to get people to them rapidly. For most of history, there was no specialized infrastructure for this. The badly sick and injured might travel by cart or horse to the nearest doctor, and a great many of them simply died on the way; or they might just give up and die in place.This began to change in the nineteenth century, with innovations in battlefield medicine that eventually migrated into civilian life. And by the early twentieth century, with the arrival of the automobile, the ambulance as we know it today began to take shape: a motor vehicle dedicated to bringing people to the hospital as quickly as possible.But the ambulance couldn’t just be any motor vehicle. Patients generally needed to be transported lying flat, since sitting a badly injured person upright worsens shock and blood loss: so the car needed a long, low, flat cargo bed. The only car that had one, in most places, was the funeral hearse: the car that carried coffins to the cemetery.And so for most of the twentieth century, ambulance services were provided by funeral homes. They would use their hearses as “combination cars,” able to transport both living patients and dead bodies.

They were open at every hour of the day anyway—since people can die at any time—and you could call at any hour of the night and they’d send someone out with the hearse to pick you up. It was common, in fact, for the same car to make both kinds of trip in a single day, perhaps even for the same person.As you can probably guess, the ambulance services these funeral homes provided weren’t very good. Their equipment was crude—a stretcher, a blanket, perhaps an oxygen bottle—and the attendant sent out on a call was simply whichever employee was free, with no pretense of medical training. Death rates, unsurprisingly, were extremely high.But death wasn’t a huge problem for the funeral homes, since they provided ambulance runs as a loss leader for the high-margin business of funeral services. The real prize was the relationship: the family that called you for the ride to the hospital was likely to also call you for the funeral. The runs weren’t very expensive to provide, basically amounting to an employee driving the hearse somewhere nearby. So the funeral homes might charge the patient a nominal fee and not try very hard to collect it, or they might not charge anything at all.In other words: the cost of writing the option was low, because ambulance services were simple and cheap.And in the 1960s, the logic of that peculiar arrangement was written into federal law. In 1965, the United States government created two massive programs of social insurance: Medicare, which provided public health insurance for Americans over 65, and Medicaid, which did the same for the poor. Both programs worked by enumerating the medical services they would pay for, and reimbursing each per unit of service rendered: a hospital that performed an appendectomy, say, billed the government for one appendectomy. And among those services, added almost as an afterthought, was ambulance transportation. Trips would be covered by both programs, with a fee paid to the operator for each trip, after the fact.At the time it was a perfectly reasonable choice: it made sense, given how cheap ambulance rides were at the time, to treat them as just another procedure to be billed. But that innocuous classification turned out to warp the entire system of emergency care in the United States.