Reimbursement arrangements for medical services are usually negotiated between insurers and networks of hospitals and physicians. But what if patients need emergency care from a provider who is not in their network? Current law allows hospitals and physicians to charge whatever they deem fit for such care, and requires that insurers reimburse the greater of its usual rates or what Medicare pays. The difference between what is charged and reimbursed potentially leaves patients on the hook for what has become known as “surprise medical bills.” A recent study by the Kaiser Family Foundation estimated that 18% of emergency visits by those with private insurance involved surprised bills.
On Dec. 9, the Senate HELP committee released the outline of a bipartisan agreement that it has reached with the House Energy & Commerce Committee to address surprise billing as a part of an end-of-year legislative package. Their proposed “No Surprises Act” would entitle medical providers to reimbursement according to insurers’ median in-network rate for out-of-network care, but allow them to appeal to arbitration if the amount exceeded $750.
The CEO of the Federation of American Hospitals, Chip Kahn, has argued that basing payments on the median in-network rate could limit patient care. However, in-network rates are those which have already proven sufficient to secure the provision of equivalent services on an in-network basis, and medical providers would remain free to decide whether or not to operate and deliver medical services to an area based on the expectation of payment at such a benchmark.
The availability of medical providers will necessarily be limited at some point. It can never be the case that every rural hospital in America has a neurosurgeon on-call for emergencies 24/7. The appropriate question is therefore: How can the relevant trade-offs between cost and access to care be made most appropriately?
With benchmark prices based on in-network rates, levels of payment to secure the local provision of out-of-network care would reflect the willingness of consumers to pay for insurance that covers such services in-network. Nonetheless, a reasonable argument could be made for a strictly limited arbitration provision, to help fine-tune benchmark rates to adjust for localized market idiosyncrasies.
But the outline of the revised bill goes far beyond this—instructing arbitrators to “consider information brought by the parties related to the training, education, and experience of the provider, the market share of the parties, and other extenuating factors such as patient acuity and the complexity of furnishing the item or service.” Rather than helping to ensure access to emergency care by refining benchmarks to account for local circumstances, this array of permitted justifications is so broad as to eliminate constraints and considerations of value-for-money from the determination of payment for emergency care altogether.
In this respect, it resembles Medicare’s initial system of cost-based reimbursement, under which hospitals were paid for whatever expenses they incurred in delivering care to beneficiaries—causing their costs to soar.
This may be even more problematic in the proposed arrangement for air ambulance costs, which provides a right for providers to appeal to arbitration for bills over $25,000, and instructs arbitrators to base rates on “the training, education, and experience of the provider, location where the patient was picked up, and the population density of that location, air ambulance vehicle type and medical capabilities, and other extenuating factors such as patient acuity and the complexity of furnishing the item or service.”
Such a system could easily engender an arms race in air ambulance costs. If one air ambulance provider already covers a broad rural area, a second would be encouraged to enter the market with a more expensive aircraft, medical equipment, and crew—and insurers required to pay for it. Furthermore, as the fixed costs of each competing air ambulance provider become spread on fewer patients, prices would likely be driven up at the incumbent provider.
Given the complexity of costs that influence the ability of medical providers to deliver care in diverse local circumstances, the desire of Congress to pass the buck to arbitrators and give them maximum flexibility to decide case-by-case is understandable. However, given the looseness of the guidance, the question of to what extent insurers should be required to fund various emergency care services from area to area is ultimately a political one, which is inappropriate to delegate to arbitrators. Indeed, it is a question that ought to be determined with ongoing notice and comment from stakeholders, by public officials who are responsible for all associated trade-offs, rather than on an ad hoc basis by arbitrators who are accountable to no one.
There is no perfect price that will make everyone happy, and any solution will necessarily be a political process of trial and error over time. But it should not be made afresh every 90 days, for each combination of insurers and providers, without any long-term plan or design, as the current bill implicitly proposes. To the extent that Congress wishes to delegate the authority to tweak and make exceptions to payment rules for out-of-network care, it should pass it to officials within the executive branch, rather than to arbitrators.
Chris Pope is a senior fellow at the Manhattan Institute.
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