Surprise medical bills expose Americans to the high prices and occasional greed lurking in the heart of our health care system. Medical insurers typically provide some insulation from these bills by negotiating prices for their in-network patients. In its effort to fix surprise bills, Congress must not undermine this key lever for controlling hospital and doctor bills by instituting an arbitration solution, which is strongly backed by organized medicine, that is now working its way through several Congressional committees.
The Protecting People From Surprise Medical Bills Act, introduced into the House of Representatives in June, would use arbitration to settle disputes over surprise medical bills. The bill stipulates that to resolve such disputes, an arbiter will typically pay out-of-network providers significantly more than the in-network rate. The average award — near the 80th percentile of physician billings — will ensure that it is almost always more profitable for a physician to be out of network than in it. This incentive will only increase over time as arbitration awards incrementally but continually rise with each new above-network arbitration decision.
By ending the financial distress and anger that patients can experience when hit with surprise medical bills, and by guaranteeing insurance payments far above in-network rates, arbitration will prompt many doctors to leave insurance networks as soon as they can. It would, in fact, be folly to remain as an in-network physician in most instances.
That’s bad for consumers. Insurance networks build value and reduce costs by negotiating lower rates for patients covered by insurance while at the same time including quality standards in insurance contracts. Insurers can get better prices and quality covenants from providers than would be available to any individual patient negotiating for herself.
Unfortunately, I know many doctors who are waiting to see if mandatory arbitration becomes law before deciding to leave their insurance networks. Doctors like me who practice orthopedic surgery, for example, along with general surgeons, cardiologists who treat heart attack victims, and neurologists who treat stroke patients will all have financial incentives to promptly leave insurance networks and bill patients directly at rates significantly above those allowed by insurers, safe in the knowledge that insurance companies are now legally required to pay all out-of-network bills.
Doctors across specialties will quickly follow emergency physicians, radiologists, and anesthesiologists, who have made surprise billing a staple of their business models — only now the bills will no longer be a surprise, and insurers will be legally obliged to pay them.
I can already imagine financial consultants visiting medical offices across the country with the promise of finding added revenue through out-of-network ancillary medical services, and private equity continuing to offer doctors large sums of “free” money for the privilege of taking them out of network and raising their billing rates.
It shouldn’t come as a surprise that the Congressional Budget Office projected that the arbitration approach to surprise medical bills will increase our deficit by “double digit billions” of dollars, money that will flow to medical providers.
A far better way to address the problem of out-of-network medical bills is through benchmarking. Using this approach, Congress would set a benchmark for out-of-network rates as a percentage of the current Medicare rate or prevailing in-network rate. The Senate Committee on Health, Education, Labor, and Pensions backed this approach in the Lower Health Care Costs Act this summer, which passed with strong bipartisan support. Unlike the arbitration approach, the Congressional Budget Office projects that benchmarking would save Americans billions of dollars between 2019 and 2029.
This isn’t to say that the benchmark chosen by the HELP Committee — the average in-network rate — is ideal. Instead, the benchmark rate should be chosen with the goal of improving health care efficiency. How? Congress should instruct the Congressional Budget Office to determine the optimal out-of-network payment to solve not just the problem of surprise billing but also to tackle the problem of insurance network adequacy. Sometimes, in their quest to lower prices, insurers can create networks that are too restricted or narrow, which can then result in reduced choices for patients.
Proper benchmarking can address these problems. An optimal out-of-network rate would be low enough to remove the incentive for talented medical professionals to leave insurance networks or stay out of them, and high enough to make it relatively expensive for insurers to leave popular medical providers out of their networks. By this mechanism, the best physicians and hospitals would be most accessible to the most patients at reasonable prices.
Whether it is physician self-referral or hiring collection agencies to go after patients with outstanding debts, doctors have repeatedly turned strategies that were originally scorned as purely money-making schemes into customary, routine aspects of medical care. Congress should recognize that providers who now choose to remain out of network in order to surprise bill their patients are the proverbial tip of the spear — and that spear is sharp.
If Congress passes a flawed solution to surprise medical bills that contains incentives for out-of-network care, it will eviscerate insurance networks. Some will contract and others will collapse as large numbers of physicians forgo insurance contracts to increase their revenues. Benchmarking out-of-network prices, on the other hand, will build on one of the few market dynamics working in America today to add both value and quality to medical care.
James Rickert, M.D., is a general orthopedist and president of the Society for Patient Centered Orthopedics.