For millions of Americans, getting discharged from the hospital is a huge relief. But too many ex-patients receive an unwanted “surprise bill” in the mail weeks after their emergency stint, even if they went to an in-network medical facility.
When insurance networks become too narrow and restrictive for doctors, physicians are forced to ignore insurance and take billing matters into their own hands. There are consumer-friendly solutions to this pressing nationwide issue, but market approaches will only be embraced once policymakers know all the facts.
The unacceptable status-quo of “surprise billing” has caught the attention of federal and state governments, who have proposed plenty of counterproductive policies where bureaucrats would price-fix services to curb the practice. But in 2015, the state of New York paved the way for a different approach called independent dispute resolution (IDR), or “arbitration,” in which patients only need to pay their in-network insurance rates for an emergency procedure. The “surprise bills” are taken out of the hands of patients and left to doctors and insurers, who must then submit competing claims to an online portal where examiners could then decide which claim is the reasonable one.
In the two years since the new policies went into effect, New York’s law appears to have been a resounding success and patient problems appear to have significantly decreased. But not everybody is pleased with New York’s experiment in arbitration. On Oct. 24, USC-Brookings Schaeffer Initiative for Health Policy Associate Director Loren Adler cited recently released New York Department of Financial Services data to make his case that the IDR law is in fact driving prices higher.
Adler focuses on the state’s guidance stipulating that, when payment disputes are submitted to an online portal, examiners should use the 80th percentile of billed charges as a frame of reference for the final decision. In other words, the arbiter should veer on the high side for payment claims and err on the side of the doctor (versus the insurer). Comparing outcomes to that benchmark, Adler finds that “arbitration decisions [payment amounts] have averaged 8% higher than the 80th percentile of charges.”
This seems to imply that providers and insurers aren’t meeting in the middle for arbitration, and that physicians are getting the upper hand and skewing costs upwards. But the data that Adler relies on omits the one-third of cases where a split decision is reached between the provider and the health plan.
According to New York’s report, “The number of cases, 33% in all, where the IDRE found in favor of the health plan for some CPT codes and the provider for others was also significant, and such split decisions had not been anticipated when the law was implemented.” But that’s a feature, not a bug of the legislation, and an equalizing factor to make sure that arbitration awards aren’t out of control. Without including results from split decisions, we cannot get an accurate sense of how high average payments are in New York’s system.
For actual emergencies, health insurers won a majority (59 percent) of arbitration decisions over 2017 and 2018 (in cases where there was a clear winner instead of a split decision). Because the decision-making process is largely even-keeled, but slightly favors health insurers, compensation toward emergency room physicians has likely decreased instead of increased.
According to a 2018 study by Yale University researchers, “the New York law reduced out-of-network billing by 34 percent and lowered in-network emergency physician payments by 9 percent.” According to the evidence, physicians and insurers clearly feel pressure to come to the negotiating table, even before the arbitration process begins. A 2019 Georgetown University Health Policy Institute report found that “insurers and physicians appear to be making ‘a real concerted effort’ to work out their payment disputes before filing with IDR.”
If the process was rigged in physicians’ favor, doctors would have little incentive to come to the table before the start of arbitration.
Amidst all the statistical trends, quotes, and case studies, it becomes easy to lose cite of the bigger picture about surprise billing, arbitration, and healthcare reform. Patients and providers don’t need the government to come in and set prices. States such as New York have already taken the lead in developing a robust, voluntary system of negotiation rather than bureaucratic fiat. And for the millions of Americans hit with a surprise bill, that’s a huge relief.