Over the past couple of months, health care professionals have put their lives on the line to contain the coronavirus pandemic. Thus far, lawmakers and the Trump administration have done their best in clearing hurdles for doctors and hospitals, including allowing the recognition of medical licenses across state lines. But, if members of Congress such as Sen. Lamar Alexander, R-Tenn., and Rep. Frank Pallone, D-N.J., had their way, these selfless healthcare workers would have to take a gargantuan pay cut overnight.
In a letter released Tuesday, more than 160 economists urged lawmakers to keep the price-fixing of medical services (aka “rate-setting”) out of any future COVID-19 related legislation. Millions of patients’ lives depend on doctors getting their due and bureaucrats staying away from meddling in health care pricing.
Even before the pandemic, a small group of vocal lawmakers were determined to have bureaucrats dictate prices for physicians nationwide. Led by Sen. Alexander and Rep. Pallone, these members of Congress are convinced that rate-setting will eliminate the very real problem of “surprise medical billing.” Every year, approximately 1 and 7 patients will receive an unwanted, unneeded medical bill in the mail days or even weeks after leaving the hospital. In these cases, the hospital hosting the patient may well have been in-network but the patient’s insurance failed to cover one or more of the attending physicians. This very real problem, however, would be made far worse by having the government tell these out-of-network doctors what constitutes a fair price.
In a letter released Tuesday by the Coalition Against Rate-Setting, more than 160 economists warn lawmakers that, “government price controls often result in shortages and market distortions. These outcomes should be avoided, especially when dealing with important health care services like emergency room visits and physician care.” Government meddling in medicine via price-controls “would hurt access to care, especially for patients in rural areas.” These experts’ opinions stem from the real-world failures of health care rate-setting at all levels of government.
The federal Medicare program, which offers health insurance to America’s senior population, has systematically underpaid rural doctors and health care facilities leading to rampant closures and access issues. Bureaucrats administering the program created a “wage index” to determine fair, reasonable reimbursements for rural versus urban providers based on labor market conditions. The Centers for Medicare and Medicaid Services explain that they “derive an average hourly wage for each labor market area (total wage costs divided by total hours for all hospitals in the geographic area) and a national average hourly wage (total wage costs divided by total hours for all hospitals in the nation).”
But these healthcare pricing schemes concocted in Washington, D.C. betray a fundamental ignorance of America’s rural healthcare. The National Academy of Medicine, affiliated with the National Academies of Science, found in 2011 that these index-based payments “do not produce an index that reflects the prevailing wages that hospitals face in their respective markets” and can create serious health care funding problems in America’s heartland. More than 100 rural hospitals have shut their doors over the past 10 years in large part due to these systematic funding problems.
Unfortunately, states such as California have failed to pay heed to this federal funding fiasco and tried their hand at fixing health care prices. And, since California enacted rate-setting in 2017, doctor’s offices and clinics have been consolidating at a break-neck pace with patients being left in the lurch. Doctors surveyed in a 2019 American Journal of Managed Care study report having decreased leverage versus big insurance companies and are even contemplating leaving the Golden State. Yet, somehow, lawmakers such as Sen. Alexander and Rep. Pallone believe that exporting this failed system nationwide in the middle of a pandemic will lead to better outcomes.
Fortunately, hundreds of economists are making their voices heard and trying to convince Congress otherwise. Lawmakers should listen to the experts and learn from real-world experience when determining how to “fix” surprise billing. Millions of patients will thank them for doing their homework.