Fair Dispute Resolution Offers the Right Approach to Surprise Medical Bills

Americans want surprise medical bills to be a thing of the past. These bills occur when an insured patient receives an unexpected bill for health care, often following an emergency room visit. Even though no one supports surprise bills, lawmakers have struggled to reach a consensus on how best to resolve the problem.

Not only are policymakers toying with horrible ideas like price controls, but the best politically viable option, independent dispute resolution (IDR), must be carefully designed to prevent rigging by insurers and their allies in Congress.

There have been numerous efforts in Congress to impose price controls by using rate-setting to address surprise medical bills. This approach would require that practitioners charge in-network rates, or rates derived therefrom, for out-of-network services. The Trump Administration also threatened to impose rate-setting through executive order but, to its credit, backed off as doctors nationwide objected to yet further socialization of health care.

California imposed a version of rate-setting in 2017, and the results confirm everything we know about price controls: they lower quality and create shortages. As predicted, a recent report from the Pacific Research Institute found evidence that “worsening quality and rising cost pressures are emerging in California.” It has meant fewer doctors on call and led to a large spike in complaints to the state’s Department of Managed Health Care concerning access to care.

The legislation providing the best alternative to price controls, H.R. 3502, also happens to be the one with the widest bipartisan support, including 110 House co-sponsors. It would create a fair IDR system similar to those implemented in both red and blue states like Texas and New York.

With IDR, instead of becoming a “surprise” to the patient, a disputed bill would go to a neutral arbiter to resolve. Critically, IDR rules can be constructed in such a way as to provide the incentives that best resemble those found in a competitive market.

Many states use a “baseball-style” system, so-called due to its similarity to the sport’s system for addressing player pay before they reach free agency, where the arbiter can only select from among the offers made by either party. This encourages reasonableness over outlandish proposals. For the same reason, some states require the loser to pay a fee.

Long story short, Congress must be careful because not all dispute resolution systems are created equal.

Insurance company allies in Congress are seeking a “compromise” that would ensure they are able to maintain record profits through a rigged system, either by restricting the relevant information that physicians could share to make their case or by instructing arbiters to rely on in-network rates in their decision making. The latter creates the same problem seen with rate-setting where insurers can manipulate prices by unilaterally narrowing their networks. Shrinking networks reduce patient access to care and worsen health outcomes.

If a free market health care system were being reconstructed from the ground up, IDR is not something likely to be included. But within the context of the system we have, and with fair rules that favor neither side, it offers a solution that protects patients from unexpected, and what are sometimes exceptionally high, bills.

Andrew F. Quinlan is co-founder and president of the Center for Freedom and Prosperity.