Protecting Patients Against Surprise Medical Bills

Patients should be held harmless from surprise medical bills received in emergency situations and when out-of-network providers serve them at in-network facilities. Surprise bills are a growing problem, in part, because private equity firms are increasingly buying up staffing agencies for emergency care and are taking these physicians out-of-network on purpose to drive up prices.

Two ideas currently being considered in Congress to resolve surprise bills are to use a benchmark approach or to use an arbitration approach. With a benchmark, a patient hit with a surprise bill would be charged the median in-network rate of that service within their geographical region. This is the approach taken in a bipartisan bill that was passed out of the Senate’s Health, Education, Labor, and Pensions (HELP) Committee in July. On the other hand, with arbitration, both the provider and the payor would use an arbitrator to negotiate a price for the service.

The latter approach would only increase patient costs and lead to more health care price inflation over time, writes Avik Roy in his latest Forbes piece. At the state level, New York uses arbitration for surprise bills given to patients that are in fully-insured health plans. Arbitrators in New York are told to use the 80th percentile of hospital list prices as the starting point for their decision. By starting arbitration at such a high rate, the law in New York incentivizes providers to raise their prices even higher.

It’s no surprise that private equity is therefore backing the arbitration approach. They’ve paid for more than $28 million in advertisements targeting members of Congress that are up for reelection in 2020, urging them to reject the HELP bill’s benchmark approach and support arbitration instead.

By contrast, California has a state law to address surprise bills that is similar to the benchmark used in the HELP bill. A study by the USC-Brookings Schaeffer Initiative for Health Policy found that this approach reduced out-of-network billing in affected specialties by 17 percent, while surprise bills in the ER dropped by 5 percent. California’s benchmark works because it doesn’t incentivize providers to stay out of network, since the prices they’d receive would be similar to in-network rates.

Members of Congress should be wary of listening to bad-acting providers that want to continue charging patients exorbitant rates. Arbitration would allow them to do so.

To read Avik’s full piece in Forbes, click here.