The House Ways and Means Committee released a bipartisan proposal on Friday to address surprise medical bills. While National Taxpayers Union has warned policymakers on the downsides to using arbitration as a fix for billing disputes, the Ways and Means proposal addresses some of these concerns with a thoughtful, novel approach that should reduce the need for government-led arbitration. The bill also tackles some of the root causes of surprise bills via enhanced transparency measures that should help provide more information to patients. However, the proposal still requires significant revisions, and is problematic in making arbitration the central tool for resolutions.
Background
Surprise medical bills primarily occur in one of two scenarios: 1) when a patient is receiving emergency care at a hospital or facility that is outside their insurance network, or 2) when a patient is receiving emergency or non-emergency care at an in-network facility from out-of-network doctors.
Though some states have passed legislation to tackle the issue, they have a limited ability to protect a majority of insured patients, given federal jurisdiction over self-funded plans that cover 61 percent of Americans who receive health insurance through work.
As Congress looks to weigh in with federal legislation to end the practice of surprise billing, two flawed approaches have dominated the discussion. The more concerning approach would establish a federal benchmark for the rate insurers and health plans would pay doctors in billing disputes. This amounts to a price control that could adversely impact both the rates doctors receive for their services and the supply of physicians across the country. Another concerning approach is government-led arbitration, where doctors and insurance plans with payment disputes submit their claims to a third party and the third party decides on a fair payment. The main issue with arbitration is if the terms Congress sets for arbitrators puts the government's thumb on the scale for either doctors or insurance plans. It should be the role of government to stay out of these private negotiations as much as possible.
The Ways and Means Proposal Makes an Effort to Avoid Government-Led Arbitration
More than past surprise billing proposals to address payment disputes with arbitration, the Ways and Means framework seeks to avoid arbitration if at all possible. This is a positive development. The Ways and Means Committee bill would first allow doctors and insurance plans to attempt to reach a payment agreement on their own. Then, doctors and insurance plans would have a second opportunity to reach a private agreement, with a “30-day open negotiation process” where the parties “are required to share specified information ... to facilitate an agreement.” The Committee appears to be making a genuine effort at avoiding government interference in private payment disputes, and this is a novel approach from earlier arbitration proposals.
Only after two failed attempts at private negotiations would government-led efforts kick in, with a third-party arbitrator mediating a third round of negotiations over a maximum of 30 days. The arbitration process appears to be “baseball-style,” where each party submits a “best and final offer” along with supporting information, and the arbitrator chooses one of those two offers. The loser in the arbitration case would pay a fee to the third party, which would hopefully discourage overuse and abuse of the arbitration system.
One significant concern with the arbitration approach laid out by the Committee is that the arbitrators are instructed to consider the median contracted rate for the given items and services but not the billed charges or usual and customary charges (UCR) billed by the provider or facility. While billed charges rarely reflect what insurance plans actually pay doctors or facilities for services, there is a strong possibility that this arbitration design puts the thumb on the scale for insurers (at the expense of doctors). The Committee should strongly consider adjusting this guidance as it marks up the legislation on February 12. They could do this by allowing the arbitrator to consider several payment factors (median contracted rate, UCR and billed charges, and allowed amounts), or by striking the provision instructing arbitrators to consider the median contracted rate in the first place.
If the Committee passes the bill in its current form, where arbitrators are required to consider median contracted rates but banned from considering billed charges, the approach becomes a lot closer to the benchmark proposal pursued by the Senate Health, Education, Labor, and Pensions (HELP) Committee and the House Energy and Commerce (E&C) Committee. This legislation is of deep concern to NTU. While the Ways and Means Committee deserves credit for designing a process that seeks to avoid arbitration as much as possible, it is imperative to amend the legislation to avoid creating a back-door benchmark.
The Committee Deserves Credit for Attempting to Tackle Root Causes of Surprise Billing
Where the Ways and Means Committee deserves the most credit, though, is making the most serious effort yet to tackle one of the root causes of surprise billing: the lack of accurate, up-to-date, and advance notice of whether or not a provider is in a patient’s insurance network. NTU discussed this issue in this September post on the surprise billing problem.
The Committee’s framework would attempt to solve this problem in two ways: 1) by requiring health plans to provide an Advanced Explanation of Benefits (EOB) for services scheduled ahead of time, and 2) by requiring plans to keep their provider directories accurate and up to date (and exempting the patient from surprise bills if the plan fails to do so).
Here’s how the Committee sums up these provisions:
Advanced EOBs: “Health plans will be required to provide an Advance Explanation of Benefits for services scheduled at least three days in advance. This will give patients new access to important information about their scheduled care and an understanding of which providers are expected to provide treatment, the expected cost, and the network status of the providers.”
Up-to-Date Directories: “Health plans will be required to provide accurate and up-to-date information to consumers regarding provider participation in the health plan. Providers will be required to update information to a health plan in a timely manner. If inaccurate information is provided, consumers’ cost-sharing will be limited to in-network cost-sharing.”
The advanced EOB provision is similar to what the Trump administration has proposed through regulation. In response to that proposed rule, NTU noted:
“It is not unreasonable for people with health insurance to expect much of the above information from their health insurers. If a person is receiving an elective item and/or service, and arranging to receive that item and/or service days or weeks ahead of time, then insurers should be able to provide a good-faith estimate of the person’s cost-sharing liability as quickly and accurately as possible (#1). That person should also be able to know how much they have contributed to a deductible or out-of-pocket maximum for the year (#2). They should also know any important disclosures or prerequisites that may impact the provision of care (items #6 and #7 above).”
Where NTU took issue with the proposed rule was its requirement that insurers publicly disclose their privately negotiated rates. At first glance, the Ways and Means Committee proposal appears to avoid requiring public disclosure, which is a step in the right direction.
As for the importance of up-to-date directories, NTU highlighted back in September how health experts Simon F. Haeder, David L. Weimer, and Dana B. Mukamel framed the issue:
“First, consumers may face unexpected out-of-network charges because of their reliance on inaccurate provider directories. That is, consumers may seek care from what they think is an in-network provider based on the directory they received from their insurer, but later find out that the provider has either left the network or was never part of it to begin with. Provider directory accuracy may seem pedestrian, but it can be a major problem for consumers. And the problem is ubiquitous and significant.”
The Committee’s commitments to preventing surprises from happening in the first place is commendable.
The Education and Labor Committee’s Proposal Raises More Concerns
A few hours after the Ways and Means Committee released their framework, the House Education and Labor Committee also weighed in with a surprise billing proposal, one they will mark up on February 11. Unfortunately, the Education and Labor proposal appears very similar to the deal reached by HELP and E&C late last year, in that it includes a benchmark up to a certain dollar threshold ($750) and government-led arbitration after that. The Education and Labor Committee does deserve some credit for its transparency provisions, like accurate provider directories and expected cost-sharing estimates, but their payment dispute process combines some of the harmful elements of both a benchmark and government-led arbitration. NTU opposes this proposal, as it would be a bad deal for patients and taxpayers.
The Contract-Based Alternative Is Still NTU’s Preferred Solution
NTU remains opposed to surprise billing proposals that rely on a benchmark and on government-led arbitration. Like many stakeholders in this debate, though, we seek an end to the practice of surprise billing and a solution that involves the least amount of government interference in the private market.
That is why we have highlighted what health experts David Hyman (of the Cato Institute) and Ben Ippolito (of the American Enterprise Institute) call the “contract-based alternative.” As we wrote in January:
“The terms are relatively simple: providers would no longer be able to balance bill patients at hospitals that are otherwise in-network for those patients. Insurers would not be able to contract with hospitals that do not guarantee all of their providers would be in-network. However, doctors would have a choice: they could agree to receive all payments from the hospital they work at, which would be wrapped into the facility fee hospitals charge insurers, or the doctors could contract separately with the same insurers as the hospitals they work at. This option affords out-of-network doctors some flexibility that neither the benchmark nor arbitration offer, while preserving for insurers some leverage over payments that they lose under IDR.”
…“The contract-based alternative is preferable because it is agnostic when it comes to government favoring one part of the private health care sector over another. It relies on a modest adjustment to existing law, rather than setting up a new regime that would control prices (the benchmark) or heavily dictate the terms of those prices (IDR with ‘80th percentile’ guidance). Most important of all, it removes the worry of surprise bills for patients while avoiding the pitfall of requiring government bureaucrats to determine the price of care.”
NTU also believes that the Doug Badger and Brian Blase proposal for the Galen Institute is worth consideration, especially when it comes to addressing out-of-network emergency services.
Conclusion
The Ways and Means Committee deserves credit for some thoughtful, novel approaches to the surprise billing issue. They seek to avoid the overuse of government-led arbitration, and they would also tackle some of the root causes of surprise medical bills in the process. However, NTU remains highly concerned about the proposal’s over-reliance on arbitration, especially when federal guidance wittingly or unwittingly puts one private party at advantage over another. We strongly urge the Committee to address this part of their legislation at their markup. While its proposal still requires significant revisions, the Committee’s contribution to the discussion should not go ignored, especially when it comes to advanced EOBs and updated provider directories.