A divided Congress is rolling out compromise proposals to deal with the scourge of surprise billing in health care. Surprise billing occurs when patients are treated by doctors who — without patients’ knowledge — are not covered by their health insurance.
These patients often don’t learn that a physician who treated them wasn’t in their network until they receive a surprise medical bill in the mail. Recent research from Stanford University found that nearly 40 percent of hospital patients get hit with these unexpected bills.
Insurance companies sometimes pay out-of-network providers a small portion of the charge. Then, providers bill patients directly for the remainder — what’s known as balance billing. Hospital bills regularly run into the thousands of dollars, and balance bills add to the enormous financial strain on ordinary Americans.
Legislation coming out of Congress, including a plan from the House Education and Labor Committee, attempts to address this problem by limiting surprise bills to the median rates that insurance companies pay for in-network treatments. This median benchmarking solution seems reasonable at first glance. Yet, when considered further, this approach threatens to start a ratchet-like downward spiral of reimbursement rates.
Here’s how this slippery slope would work: Insurance companies looking to maximize profits would stop contracting with providers whose rates are above the median. Eliminating contracts with doctors and hospitals that charge above the median threshold would drive down future median benchmarks when new calculations are made.
Then this process would repeat itself again and again. The Congressional Budget Office estimates that benchmark legislation would cut rates to in-network physicians (those who don’t send balance bills) by 20 percent.
Artificially low physician reimbursement rates created by this process would have significant consequences — namely, the acceleration of the ongoing “Dr-exit,” where doctors are leaving the profession in unprecedented numbers. According to a 2018 survey of physicians, 78 percent of respondents have experienced burnout, and 40 percent plan to either retire or cut back working in the next one to three years.
Nearly half plan to change career paths. About one-third of doctors are at least 60 years old. Physician groups estimate a nationwide doctor shortfall of nearly 100,000 by 2030.
A “Dr-exit” couldn’t come at a worse time, as the country will rely on frontline doctors to fight the coronavirus pandemic. Physician shortages will lead to increased wait times, rural hospital closures and increased mortality.
More than 1 in 5 rural hospitals in the United States is at high risk of closure. According to a report from the University of Washington, when a rural hospital closes, mortality in the surrounding area increases by 6 percent.
An alternative proposal with bipartisan support uses “baseball-style arbitration” or independent dispute resolution. With IDR, providers and insurers submit competing “offers” for out-of-network bills, and an independent arbiter picks the more reasonable one. Good-faith negotiation is incentivized upfront, so arbitration is rarely needed at all.
In 2018 in New York state, which uses IDR, less than 0.02 percent of all emergency room bills proceeded to dispute. Yet this resolution process was enough to reduce surprise bills by 34 percent and save patients more than $400 million.
Most importantly, no patients were harmed. Recently released surprise billing legislation must use this pure IDR approach over median benchmarking.
Another way to reduce the cost of surprise bills is price transparency, which would allow patients to shop for treatments before care is provided, so they know what they’ll pay before their bills arrive. The Department of Health and Human Services recently announced new rules requiring hospitals and insurers to publish their secret rates, yet special interests are fighting back with lawsuits to try to protect their enormous profits made by keeping patients in the dark. Broad health care reform proposals such as Healthcare for You also emphasize such basic transparency reforms.
Physicians want a solution to surprise billing, but the devil is in the details. Independent physicians, specialty associations, state medical societies and physician members of Congress support IDR. To finally address the surprise billing scourge, while minimizing negative side effects to doctors and patients, Congress should proceed with legislation that has IDR, not median benchmarking, at its heart.
Dr. Marion Mass is a Pennsylvania pediatrician and co-founder of Practicing Physicians of America.
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