Only Market Reforms Can End Scourge of Surprise Billing
December 2, 2019
This article was originally published in RealClearHealth on October 17, 2019.
The anguish of emergency room visits doesn’t end with discharge papers for way too many Americans. Patients typically assume that their payments are taken care of by their insurer, only to receive a “surprise bill” in the mail weeks later. And unfortunately, federal policymakers are intent on making a miserable situation even worse. Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) have introduced legislation that would impose an onerous system of price-fixing for health care providers across the country. This disastrous legislation threatens medical practices in rural areas already struggling to recruit doctors. Instead of shuttering hospitals and clinics in communities across the country, policymakers should embrace market-based solutions that could end the scourge of surprise billing.
Virtually everybody in America has a friend or family member hit with a surprise bill. According to a 2019 study by the Kaiser Family Foundation, 1 in 6 patients received a surprise medical bill in 2017. The researchers note, “As many as 26% of admissions from the emergency room resulted in a surprise medical bill.” Sens. Alexander and Murray propose to tackle this problem with the blunt instrument of price-controls on physicians. Under this system, out-of-network physicians would be paid the median in-network rate for the service rendered. But the devil lies in the details of bureaucrats relying on complicated datasets to derive median rates for “comparable” services.
One significant issue lies with subtly-different medical procedures that may appear similar to bureaucrats’ untrained eyes, but have substantial variations in price and outcome. And government bureaucrats aren’t exactly the best at figuring out medical billing. In September 2019, more than 400,000 seniors across America were billed twice for their Medicare premiums. And, health insurers are known to have systematically overcharged Medicare to the tune of $30 billion over the past three years. The Department of Health and Human Services (HHS), which runs Medicare, should probably fix their in-house billing snafus before taking charge of a new, intricate billing process for out-of-network physicians.
And the stakes could not be higher, since setting physician payments too low could spark a health care crisis across America. A September 2019 report by NDP Analytics concluded, “Payment reductions will force self-employed physicians to join hospitals, which will incur higher costs to patients and insurers. A combination of lower payment rates and a continued rising education cost will negatively affect the supply of physicians and exacerbate physician shortages.” An overnight 15 to 20 percent cut to provider payments would wreak havoc on rural America, which already has significant issues luring trained medical staff to their communities. The doctor population would shrink up as the senior population balloons, leading to a perfect storm for a crisis in care.
Fortunately, there’s a better solution that wouldn’t compromise medical care for patients. Dr. (and Sen.) Bill Cassidy’s (R-La.) STOP Surprise Bills Act of 2019 would use a baseball-style arbitration approach to work out payment disputes between doctors and insurers. The proposal would embolden a neutral arbiter (basically a private judge) to sort out billing quibbles between the different parties who would submit rival claims to the third-party. This approach has already paid dividends in New York State, which rolled out a health care arbitration system in 2015. Since then, out-of-network bills have dropped by more than a third in the Empire State, as thousands of billing disputes have been taken out of the hands of patients.
As New York’s experience demonstrates, it is possible to solve the surprise billing crisis without an onerous federal price-setting scheme. With nationwide arbitration, physicians and insurers would be able to settle payment disputes without a draconian cut to provider rates. Emergency rooms are bad enough and policymakers should strive to minimize the financial toll of medical maladies for patients. Sen. Cassidy’s approach accomplishes this goal, while keeping doctors on the job.