By Abe Sutton
Surprise medical billing has emerged as a top political priority amid a torrent of complaints about expensive balance billing.
Despite leaders such as President Trump, former Vice President Biden, and members of the 116th Congress pledging to address surprise medical billing, federal legislation is unlikely, due to powerful health associations’ divergent interests. To shake legislation loose, the President would need to publicly take a side and expend political capital on a creative solution.
In this piece, I walk through why federal legislative action has been stymied to date, and what it would take to get surprise medical billing legislation over the line.
A Bipartisan Concern
Surprise medical billing is the rare health policy issue with bipartisan support. Leaders in the House, Senate and think-tank community have collaborated on proposals both sides of the aisle can accept.
But, on the industry side, no one wants to foot the bill. While providers and payers both support banning surprise medical billing, they favor different approaches. Providers favor negotiations to determine what should be paid for out-of-network services, followed by an arbitration process if parties cannot agree. Payers favor default rates.
Divergent Industry Interests
The Providers’ Side
Providers want to continue negotiating their payment rates. They are afraid that if the government sets a default rate, it may become a price ceiling for in-network services. After all, payers who enter price negotiations knowing hospitals’ and clinicians’ best alternative to a negotiated agreement (here, the default out-of-network rate) have little incentive to compromise. Providers are afraid of losing leverage and receiving lower payment rates.
Of course, provider leverage would not completely erode. Network adequacy requirements and payers’ need to offer members useable plans will continue to give providers some leverage. However, with a default rate, the power dynamic shift definitely would benefit payers.
At the most basic level, if payers gain leverage, the rates they pay will fall. This should eventually translate into lower premiums. This analysis ignores how regulatory distortions and anti-competitive health markets may lead payers to prefer higher prices. Setting aside that concern, if the federal government adopted a default rate for surprise medical bills, we should expect the rate of growth of health prices to be slower than it would be absent this change. Data seems to support this.
The Payers’ Side
Payers want the federal government to set default out-of-network rates if negotiations fail. They are afraid of ending up on the hook for arbitrary rates to which they never consented. Additionally, they worry providers will not have an incentive to join networks if payers are forced to cover their bills regardless. Based on this, they argue that shifting responsibility for surprise medical billing to them will raise premiums. New York’s experience with arbitration backs up this concern.
A Path Forward To Address Surprise Medical Billing
I advocate for the default rate approach, due to the evidence that arbitration raises premiums. Passing default rate legislation to address surprise medical billing would require a nuanced approach and decisive leadership from the President.
Nuanced Approach
Two adjustments should be made to the basic default rate legislation to increase the odds of passage.
First, legislation should allow arbitration as long as less than a specified percentage of a providers’ billing goes to arbitration. Allowing providers to rely on arbitration rather than default rates as long as they use the system sparingly would protect provider negotiating leverage. It would also penalize providers who abuse the system by remaining out-of-network with most payers in their area.
Second, the stakes should be lowered by writing narrow legislation that only bans surprise medical billing on emergency services. Under this approach, emergency services should be deemed to end once a patient is safe enough to transport. After all, the patient is in a position to consent to out-of-network services. Balance billing should still be allowed on non-emergency services, as long as providers clearly disclose their prices and network status in advance of care delivery.
Presidential Leadership
While the White House has championed ending surprise medical billing, it stopped short of endorsing specific legislation. Without someone twisting their arms, each side will claim to be for ending surprise medical billing and point fingers at the other side. To change this dynamic, the White House should weigh in and have the President explicitly endorse the nuanced approach laid out here.
While President Trump is championing the issue via executive order, which must have a legal basis if it was cleared by the Office of Legal Council, it remains to be seen how sweeping regulations taken pursuant to the executive order will be. And, as legislation is generally on firmer legal ground compared with new interpretations of statute adopted via regulation, it is still worth advocating for legislation.
Assessment
Given the divergent views of different interest groups, and competing priorities, I do not expect legislative action anytime soon. This is likely good news for those private equity firms with portfolio companies that rely on the practice. Unfortunately, it’s bad news for patients.
