How to Eliminate Surprise Medical Bills

February 27, 2020

Surprise medical bills occur most often when a patient receives emergency or unscheduled services from an out-of-network provider, and the health insurer refuses to pay the bill. Almost all of these bills are for medically indicated services and are within the range of what other doctors in the area have charged and have been paid in the past. Health insurance companies don’t pay the bills so they can increase their profits. And these profits are now at record highs.

We want to eliminate these surprise bills through the process resembled in the landmark New York State surprise medical bill law of 2014. This law keeps patients out of the payment dispute. It also allows doctors and insurance companies to negotiate the payments. There’s also a fallback to a neutral, quick, and inexpensive arbitration process that has to primarily consider what other non-contracted doctors in the area have been charging and being paid for similar services. New York doctors lose roughly half of the arbitrations, and that’s how a fair arbitration system works. Still, private doctors are struggling to survive. The rate of physicians in private practice is around 45%, down from 75% a generation ago. About 50% of physicians report workplace “burnout”. Most devastating, he suicide rate among physicians is already twice the national average.

Powerful health insurance companies, however, only want to eliminate surprise medical bills in Congress if they are allowed to dramatically lower their rate of payment to doctors. They have proposed using their mean in-network (i.e., “contracted”) payment rates, which they completely control. These rates are significantly lower than the mean out-of-network (i.e., “non-contracted”) payment rates, which are the current market rates of payment for these non-contracted doctors. Congressional committees have thus far bowed to the wishes of the insurance, essentially allowing them to draft the proposed new laws.

Everyone knows that, under the proposed laws backed by the insurance companies, the insurance industry’s profits would dramatically increase. Additionally, payments to doctors and hospitals would dramatically decrease. The Congressional Budget Office (CBO) estimates that the in-network payment rates to doctors would fall at least 20%. Out-of-network payment rates, which would primarily affect private doctors, would fall much more drastically.

Health insurers have explained to CBO that, if their preferred laws were enacted, they would share at least some of their massive new profits with their customers. This, they claim, would lead to some decrease in premiums. CBO estimates that this would, in turn, save the federal government some $1.5 billion per year (or about 0.1% savings on total federal healthcare spending). Unfortunately, the CBO analysis does not include “dynamic” considerations, does not include the loss of tax revenue from doctors who are forced to shut their practices, and does not consider significant increases in cost that would result from the accelerated consolidation of private doctors joining giant hospital systems.

The health insurance companies are insisting that their proposals will “save the government money”. As we all know, however, price fixing in the private sector has never worked. These same proposals have also never led to any government savings or reduction in premiums. Furthermore, insurers are arguing that this “alleged savings” is somehow necessary to pay for a modest federal healthcare extender package this coming May.

The consequences to patients, doctors, and hospitals of such a massive transfer of healthcare funds from doctors to insurance companies is ill advised and completely unnecessary. Surprise medical bills can be eliminated without dramatically enriching wealthy insurance companies, and without significantly harming struggling doctors and hospitals.

Congress should do the right thing here and stop focusing on increasing profits for the giant insurance monopolies.