It isn’t often that a divided Congress and the White House agree.
However, surprise medical bills and the pain they cause patients, regardless of political party, have caused several representatives to put forth bipartisan proposals to end surprise medical bills.
But these groups are quickly realizing that protecting patients is the easy part; choosing who will pick up the tab for these expensive and federally protected treatments is more difficult.
The Difficulty of Finding the “Right” Price
These costly surprise medical bills end up in a patient’s mailbox due to a difference between what insurers believe a treatment costs and a doctor’s rate. Finding the “true” price for healthcare services is difficult when treatment costs are the result of negotiations between insurance companies and doctors. Most of the Federal proposals to end surprise medical bills plan on upending these negotiations and mandating insurers to pay only the “median in-network rate” to emergency care providers in instances of out-of-network care. It is unclear what set of services and which geographic areas will be included in the median in-network rate; however, what is less often discussed are the unintended consequences of rate-setting and the fragile state of emergency department economics.
Emergency departments are required by the Emergency Medical Treatment and Labor Act (EMTALA) to provide medical screening exams and stabilization to every patient that comes to an emergency department without considering their insurance status, ability to pay, national origin, race, creed or color.
EMTALA was enacted to establish a 24-hour social safety net that guarantees every individual in the U.S. the right to life-saving care.
This also means that emergency departments lose money on 70 percent of their patient interactions because uninsured, indigent, Medicaid and Medicare patients do not cover the cost of care.
According to a 2017 Medicare Payment Advisory Commission report, hospitals’ aggregate Medicare margin was -9.9 percent and is projected to decline to -11% in 2019. In 2017, hospitals had an operating margin of 6 percent, on average, for all payor types. Utilizing the median in-network rate to determine out-of-network payments to “bring down costs” would result in fewer resources to maintain the current healthcare system. This would have detrimental effects on a patient’s ability to access the right care, at the right time, especially in rural communities where it is difficult to recruit physicians. The social safety net of emergency departments is extremely fragile and the median in-network rate would negatively impact the health systems throughout the country, which is why an independent dispute resolution process (IDR) is an attractive solution.
How Does IDR Work?
An independent dispute resolution (IDR) process could help insurers and doctors find a fair price without relying on the government to find the “right rate” that would not disrupt the delicate network of care.
The legislation introduced by Representatives Raul Ruiz, M.D., Phil Roe M.D., Joseph Morelle, and others does not proscribe a payment rate. Instead, it establishes an independent dispute resolution process and directs insurers and doctors to reach a commercially reasonable rate.
Ruiz’s proposal uses “baseball-style” (also known as "best-offer") arbitration, where the arbiter will select either the initial provider charge or the payment that the plan initially paid the provider. This system would encourage providers to lower their billed rates and insurers to increase their payment rates, as both want to have the best chance of winning an arbitration.
IDR circumvents the risk of relying on the median in-network rate (however calculated) to support all providers across geographies and cases of care.
In a recent Georgetown study on the effectiveness of New York’s IDR law, state officials reported a “dramatic” decline in consumer complaints. Further, the report’s authors write “insurers and physicians appear to be making a real concerted effort to work out their payment disputes before filing with IDR.” This is consistent with another study that found a 34 percent drop in out-of-network billing since the New York law went into effect and a 9 percent drop in physician payments.
Perhaps most importantly, IDR has not caused premiums in New York to climb higher than other states. IDR is a market-based approach that corrects the underlying incentives that result in surprise medical bills without the potentially dangerous consequences associated with government rate-setting.
Adam Brown, MD, MBA, FACEP, is a practicing emergency physician and senior vice president for Envision Healthcare.