Rural America faces a unique set of challenges, as populations get older and young people flee to urban areas. Despite being responsible for most of the challenges facing rural America, federal policymakers and pundits have proposed “fixes” to the plight of sparsely populated counties, arguing relentlessly for subsidies and regulations to reinvigorate rural America. But these “solutions” often just plunge rural Americans deeper into debt, without addressing the core issues at hand. And now, after decades of failing to price Medicare reimbursements fairly in thousands of rural communities, some want to give Washington, D.C. even more price fixing powers over healthcare providers to solve the issue of “surprise billing.” For the sake of patients across the country, lawmakers must reject further federal meddling at the doctor’s office.
Ten years ago, President Barack Obama spoke of a need to “discover great opportunity in the midst of great crisis.” Lawmakers are rediscovering this “opportunity,” as millions of Americans receive deeply unfair “surprise medical bills” in the mail. Patients think they’re covered when they go to an in-network hospital, only to discover weeks later that their attending physicians were out of network. To address this problem, members of Congress such as Sens. Lamar Alexander (R-Tenn.) and Pat Murray (D-Wash.) have proposed a new bureaucracy to set the exact prices doctors can charge all over the country. Physicians rightly fear that, if Washington, D.C. bureaucrats are given the power to set provider prices, the same mistakes that happen with all big government projects will be repeated. Rural doctors’ offices have a hard time staying in business as it is, and rate-setting may drive many out of business or toward consolidation.
Policymakers needn’t dabble in hypotheticals. Through the Medicare program (which insures senior citizens), federal Health and Human Services (HHS) staff have wide discretion in setting provider reimbursement policies. Over the past several decades, bureaucrats have used a “wage index” to determine how much rural versus urban providers should be reimbursed for treating federally-insured patients.
While the idea to compensate providers differently based on different regions of the country is reasonable, the federal government’s lack of insight into market fundamentals has created a deeply flawed program. In 2011, the Institute of Medicine (IOM), affiliated with the National Academies of Science, noted in a report that data used for Medicare reimbursements “do not produce an index that reflects the prevailing wages that hospitals face in their respective markets” and could result in the large-scale underfunding of rural facilities. IOM recommended that the federal government overhaul the system at once, but as with so many issues with government performance, wage index reform got put on the backburner and nothing changed. Fast forward to 2018, when HHS’s Inspector General found, “significant vulnerabilities in the wage index system,” including widespread inaccurate data that has been skewing federal reimbursement policies for years.
These repeated failures only serve to exacerbate the funding problems of rural providers and deter experienced personnel from serving America’s heartland. Despite these clear problems with government price-setting, Sens. Lamar Alexander, R-Tennessee, and Patty Murray, D-Washington, want to double down on rate controls and use federal fiat to “solve” surprise billing. But solving the problems caused by big government with even bigger government never works in practice. In fact, this “solution” has already been tried in California, where a 2017 law enables the state government to dictate prices to physicians. And according to comprehensive interviews with providers, these heavy-handed policies are leading to widespread physician consolidation and even resulting in the underfunding of low-income Medi-Cal patients.
Fortunately, patients needn’t settle for further federal forays into healthcare. Under an alternative proposal spearheaded by Sen. Bill Cassidy, R-Louisiana, surprise bills would be subject to an independent “arbitration” process, in which insurers and doctors could submit competing claims to an independent umpire through an online portal. Meanwhile, the patient would be absolved of responsibility for a bill they should have never received. This system has worked wonders in New York State over the past couple of years. According to a 2018 study by Yale University scholars, out-of-network rates declined by 34 percent and emergency physician bills decreased by 9 percent since the reform. Insurers and doctors embrace a largely even-keeled process, while patients don’t have to worry about how to pay for a $20,000 bill.
This market-based approach empowers local arbiters who understand local factors and market conditions, while keeping Washington’s interference to a minimum. Arbitration may not solve the myriad problems with rural healthcare, but it’s a start.