Patients, Insurers Seen as Biggest Winners in Surprise Medical Bill Deal

Congress is closing in on a deal that could shield patients from surprise medical bills, eliminating a source of frustration for Americans who face unexpected charges from emergency care and other procedures.

Source: Bloomberg | Published on December 16, 2019

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The question for the health-care industry is whether that fix might have broader implications for overall medical prices.

The new proposal advanced last week by bipartisan committee leaders would remove patients from disputes among insurance companies, doctors, and hospitals. It would apply in emergencies and other circumstances where patients can’t avoid bills from physicians who don’t accept their insurance. In those situations, patients would have to pay only what they would owe to an in-network provider for the same service.

Doctors, hospitals, and health insurers have millions of dollars at stake in how those disputed bills are resolved once patients are taken out of the middle.

The proposal moving through Congress would require that health insurers pay at least the median in-network market rate for the area. For those bills above $750, either side could seek to have the conflict resolved by an independent arbitrator if they disagree with the benchmark rate.

Removing the ability to bill patients directly could weaken a chief source of leverage that doctors and hospitals have to bargain with insurers over payment rates. Some private equity firms that own doctor-staffing companies lobbied against the measure.

“Certainly you remove that club and I think you’ll see some downward pressure on costs, particularly among private equity providers,” said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy in Washington. “It moves it back so the scales are only slightly tipped in the favor of providers, whereas before it was just overwhelmingly tipped.”

Any surprise-billing legislation to pass Congress this year would likely be attached to spending bills that must be passed by Dec. 20. The Trump administration, which endorsed the latest deal, has also pushed for more transparency in hospital prices, an effort that now faces a legal challenge from hospital groups.

Some medical industry groups assert that the new bill would allow health insurers to dictate prices.

“An arbitrary rate gives insurers an incentive to remove hospitals from their networks and force artificially low reimbursement rates, which limits access,” Rick Pollack, president of the American Hospital Association said in an emailed statement.

Emergency Care

Medical providers can set their sticker prices as high as they like. Health insurers negotiate discounts from those rates by setting up networks where they steer patients for care. If a patient goes to a doctor or hospital that isn’t in her insurance network, the provider is free to bill the patient for the full charge.

Surprise billing arises when patients have no way to avoid out-of-network charges. That can happen after medical emergencies or planned procedures where patients can’t choose all their doctors. Even someone going to an in-network surgeon at an in-network hospital might get a bill from an anesthesiologist who isn’t on the plan, for example.

Nationwide, about 16% of inpatient hospital visits trigger bills from out-of-network providers, according to an analysis by the Kaiser Family Foundation. The practice raised consumers’ ire and drew political heat, especially as some physician groups were accused of using it deliberately to boost reimbursements.

“Certain types of providers can negotiate higher payment rates by declining to join a network and threatening to balance-bill patients,” analysts from the Congressional Budget Office wrote in July. “That strategy is most effective for providers whose services are not chosen directly by patients — such as anesthesiologists, pathologists, and emergency physicians.”

As rising U.S. health-care prices collide with Americans’ increasingly thin financial cushions, surprise medical billing has come to the forefront as an issue that Republicans and Democrats agree needs fixing.

The new proposal, called the No Surprises Act, was advanced by a bipartisan group of three committee leaders in the House and Senate. It follows months of deliberations and intense lobbying from health-care industry interests.

Medical industry groups representing hospitals, some physicians and air ambulance providers urged Congress to delay surprise-billing legislation or change course.

Outsize Spending

U.S. health-care spending reached $3.6 trillion in 2018, or about 18% of gross domestic product. That’s far higher than other developed countries, and economists blame outsize spending primarily on higher prices.

Though politicians frequently blame insurance companies and drugmakers for high health costs, the majority of health-care spending goes to hospitals, physicians and other professionals. Those services are purchased in local markets that are often dominated by a small handful of powerful health systems. While large employers and national insurers may have vast buying power across the country, they’re often out-matched in any local market by the bargaining power of big hospital systems.

Certain medical specialties including anesthesiologists, pathologists and emergency physicians have been identified with surprise bills, because patients often can’t choose these physicians. Those specialties also have among the highest sticker charges. Anesthesiologists charged almost six times what Medicare will pay, and emergency physicians charged four times Medicare rates, according to a 2017 analysis published in JAMA. Family physicians, whom patients can more easily select, charged 180% of Medicare rates.

Curbs on surprise billing might change that, and two distinct approaches have emerged as solutions. One would set payments for out-of-network charges based on a benchmark of other existing rates, like a 2017 California law. That approach has faced fierce opposition from hospital and provider groups.

Doctors and hospitals, meanwhile, favor a system in which third-party arbitrators settle disputed charges, an approach adopted by New York state in 2015.

The new proposal in Congress melds elements of the two models.

“This is sort of between a California model and a probably better New York model,” said Ben Ippolito, an economist with the American Enterprise Institute. However, he noted that that the proposal gives arbitrators a lot of flexibility, making it difficult to predict how arbitration will be used and work over time.