Surprise Medical Billing Update
“Cost-Sharing” Subsidy Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- These days, it is a really BIG deal when you see bi-partisan legislation. It is even a BIGGER deal when the lead sponsors of the bi-partisan legislation are the Chairman and Ranking Member of a Committee that has jurisdiction over health care. That is what we saw last week. Bi-partisan legislation introduced by the Chairman and Ranking Member of the House Energy and Commerce (E&C) Committee. That is not to say that I am minimizing the bi-partisan legislation that Senators Cassidy (R-LA) and Hassan (D-NH) – as mentioned above – introduced in the Senate (neither are Chair or Ranking Member of a Committee). The bi-partisanship they are showing is still a BIG deal. But at this point, I see the House E&C bi-partisan bill as the most noteworthy piece of legislation on surprise medical billing due to the fact that the Chairman and Ranking Member of the E&C Committee are the lead sponsors.
- Analysis: And just to add to the weight I am placing on the House E&C bill, the White House recently released “principles” for surprise billing policy changes that mirror some of what we see in the House E&C bill. In addition, the White House is on record saying that arbitration is NOT the right way to go. This all sets the stage for the forthcoming debate on surprise billing that will rage-on throughout the next 2 months. I believe members of Congress would like to get something done on surprise billing before the August recess, so they can go home and tell their constituents that they are actually “doing something” to control health care costs. BUT, I could very well see the enactment of any surprise billing legislation spilling into the Fall – if not becoming an end-of-the-year exercise – due to the fight between the provider and the insurance carrier/employer communities that has been simmering for weeks, but now, will likely erupt into full-scale lobbying on the issue. I could be wrong though, considering the President’s recent demands for solving the surprise medical billing problem as soon as possible. And, we will be seeing the Chairman and Ranking Member of the Senate HELP Committee add their viewpoint to the surprise billing mix when they introduce a broader “health care reduction” package that is expected to include suggested surprise billing policy changes (although we do not yet know if the suggested changes will mirror the Cassidy-Hassan bill or the E&C bill). As I have said in past updates, everyone agrees that the patient should NOT be charged extra if and when the patient is (1) treated at an out-of-network medical facility for a medical emergency or (2) treated by an out-of-network medical provider at an in-network medical facility. BOTH the bi-partisan E&C and the bi-partisan Cassidy-Hassan bills include these protections. In addition, BOTH bills require the insurance carrier (in the case of a fully-insured plan) and the employer (in the case of a self-insured plan) to pay any excess charges. But where these 2 pieces of legislation diverge is what the appropriate amount of the excess charges should be. On this aspect of the bills, the battle-lines have already been drawn. On the one side, you have the insurance carriers and the employers. And on the other side, you have the health care providers (e.g., hospitals and specialty physicians). What do the insurance carriers and employers want? Answer: A specific Federal “benchmark” which would be used to determine how much the insurance carriers/employers are required to pay to the providers. The Federal “benchmarks” that we have seen proposed so far range from a percentage of Medicare to (e.g., 150% or 180% or 200% of Medicare) to a payment rate equal to the average amount charged by insurance carriers and self-insured plans in a particular geographic area (determined based on a centralized database of fees for services rendered). What do the health care providers (e.g., hospitals and specialty physicians) want? Answer: Arbitration, where the provider and the insurance carrier/employer fight over what the actual charge for the excess amounts should be, with the help of a third-party arbiter. A number of States that have tried to address the surprise medical billing problem have gone with arbitration for determining how much the insurance carrier would pay the provider. Because of ERISA preemption, however, self-insured employers are NOT subject to State surprise medical billing laws, although many self-insured employers voluntarily acquiesce to arbitration through an intermediary mutually agreed to by the employer and the provider.
Arbitration or a Federal “Benchmark”?
- The main argument AGAINST arbitration is that it is unpredictable, it lacks transparency, and it often times requires a lot of work (thus increasing administrative costs). The main argument AGAINST a Federal “benchmark” is that the Federal government – or any government for that matter – should not be price-setting. To me, these are very interesting arguments, and there are good arguments on both sides (i.e., I see the merit in the arguments against BOTH arbitration AND Federal “benchmarks”).
- Analysis: When it comes to arbitration, based on my work with self-insured employers, I can attest to the increased administrative costs. Also, the amount that a third-party arbiter ultimately determines is typically still a pretty high amount. What do I mean by a “pretty high amount”? Answer: Amounts that would NOT constitute “reasonable compensation” because the amount determined by the third-party arbiter represents an inflated price for the medical services rendered. How do you determine what is an “inflated price” that would NOT constitute “reasonable compensation”? Well, RAND just came out with a study showing that “privately insured” health plans pay 2.4 times of what Medicare pays. Specifically, RAND found that employer-sponsored health plans paid hospitals, on average, 241% of Medicare prices. Note, this 241% is an average of a pretty wide swing in prices depending on your geography. For example, rates in Michigan ranged around 156% of Medicare, while rates in Indiana were 311% of Medicare, along with Colorado at 302%, Maine at 283%, and Wisconsin at 279%. Now, there are a number of reasons for what I am referring to as the “high amounts” identified by RAND. And one of those reasons is market domination – or “monopoly power” – of a particular health care provider in a particular geographic area. But regardless of the reason, most industry experts would tell you that 241% of Medicare represents an inflated price for most medical services rendered. Yet, it is more likely than not that a third-party arbiter is going to go with this average 241% of Medicare rate, which again, many industry experts believe is an inflated charge. Now, the provider community would certainly disagree with my comments above, and I am not suggesting that they are wrong. But what I am suggesting is that relying on arbitration to determine excess charges in a surprise medical billing situation has a proven track-record of requiring insurance carriers and self-insured employers to pay excess charges that can reasonably be argued as NOT constituting “reasonable compensation.” When it comes to a Federal “benchmark,” you cannot disagree with the argument that this amounts to government price-setting. Because…it IS government price-setting. Isn’t government price-setting a slippery-slope? On the one hand, by “setting” prices under a Federal “benchmark” for surprise medical billing situations, the government is arbitrarily telling the market what the prices should be, as opposed to letting the market determine the price. BUT, health care is NOT a normal market, so the economic theory of letting the market determine the price is not applicable here (while it IS applicable in most other markets where goods and services are bought and sold). Okay, so setting aside economic theory, won’t “setting” prices – even for surprise medical billing situations – ultimately lead us to a single-payer system like Medicare-for-All? After all, that is what proponents of Medicare-for-All want, a finite “set” of prices for medical services that are much lower than 241% of Medicare. Actually, the RAND study found that if employers paid 100% of Medicare rates, they would have saved $7.7 billion. That type of savings could REALLY help fund a Medicare-for-All program. Even if prices were set at 125% of Medicare – which is a percentage that some single-payer advocates are okay with – the RAND study tells us that there are significant savings there. Sorry for the digression, but I think you get my point. The bottom-line is that arbitration often times – if not most times – produces an inflated excess payment amount. And, the back-and-forth that goes on before this inflated excess payment amount is determined further increases health care costs for employers and employees. HOWEVER, do we really want to go down the path of government-price setting? I think that the majority of moderate Democrats and Republicans would say NO. BUT, something-has-got-give. Congress has to either go with arbitration OR go with government price-setting. Or does it? Interestingly, the E&C bi-partisan bill ties the Federal “benchmark” to an insurance carrier’s or self-insured health plan’s own median in-network rate for the relevant medical service in a geographic area. This approach arguably still allows the market to determine the amount of the in-network rate that an insurance carrier or self-insured employer negotiates with ALL of the various health care providers in a particular geographic area. And, it picks the mid-point of whatever the negotiated in-network rate may be for the particular medical service rendered in that geographic area. In essence, the Federal government is not necessarily price-setting. But what the Federal government is likely doing is limiting the amount of the excess charge relative to what a third-party arbiter would likely come up with. Let the food fight begin!
- I have so many reactions to the fact that Washington State recently enacted a “public option” to be made available to individuals seeking to purchase a health plan through the Washington State Exchange.
- Analysis: My first reaction is that it took Democrats 10 years to actually enact a “public option.” What I mean is, during 2009, there was a robust debate over whether the ACA should include a “public option” in the newly reformed “individual” market. House Democrats and the Obama White House were supportive. However, moderate Democrats in the Senate were uneasy about a “public option,” and without their support, the idea of including a “public option” in the ACA died. BUT, that has NOT stopped Democrats from talking about adding a “public option” to the “individual” market. Calls for a “public option” have been made each and every year since 2009. Then why did it take so long for Democrats to successfully add a “public option” to the “individual” market? My quick take is that while Democrats have called for a “public option” each and every year since 2009, when it really came down to brass tacks, support for a “public option” was really NOT there. Private insurance carriers surely did NOT support a “public option.” Their main argument: If private insurance carriers have to compete against a government plan that pays providers at rates lower than what private insurance pay (e.g., 125% of Medicare), private insurance carriers could NOT compete, and the carriers would exit the market leaving only the “public option.” For supporters of the various “shades” of single-payer, however, they did NOT mind if what I described above was the end-result. BUT, for a long time now, there have not been enough supporters of the various “shades” of single-payer to over-ride the political influence that private insurance carriers – along with hospitals and physicians – wield at both the Federal and State level. BUT, times-they-are-a-changin’… What I mean is: As you all know, the volume on the various “shades” of single-payer has steadily been turned up over the past year or so. And I fully believe that due to the steady increase in the volume on the various “shades” of single-payer, we are now finally seeing a “public option” get over the finish line. Stated differently, without the increased attention on the various “shades” of single-payer by single-payer advocates – which essentially brought these issues from the fringe to the mainstream – I still think it would be 10 years and counting for a “public option.” So what will Washington State’s “public option” look like? In short, the “public option” will be another health plan option for those individuals purchasing a health plan through the Exchange. The “public option” will be under-written by a private insurance carrier, but the payment rates for most medical services will be capped at 165% of Medicare, while primary care provider payments would be capped at 135% of Medicare. Washington State officials argue that these are “good’ rates, considering the average reimbursement rate in Washington State’s “individual” market is 175% of Medicare. Importantly, health care providers are NOT required to participate in the “public option’s” network, which has led some experts to question whether the providers will even be willing to participate in this newly created health plan. It is reasonable to assume that if providers do NOT participate in the “public option’s” network, Washington State will turn around and mandate that they do so, so it is kind of a be-careful-what-you-wish-for situation for Washington State providers. The bottom-line is this: The questions and concerns over whether a “public option” in the “individual” market will be successful or not are NOT new. But what IS new is that we actually have a “public option” that is going to finally be put into place. My prediction is that things will go very well or they will go very badly. I do NOT believe that there will be an in-between here. So – at least to me – this is a very big gamble for supporters of the various “shades” of single-payer. If things end up going badly, it will be a significant set-back for single-payer advocates, where NO other State will want to follow Washington State, and you can kiss goodbye any opportunities at the Federal level. BUT, if things go well, Washington State will likely be the new Massachusetts and used as a model for future health care reform efforts (just like Massachusetts was used when we developed the ACA).
- I am not sure if the Congressional Budget Office (CBO) estimates are the reason, or because the “moderate” Democrats that just entered the Democratic Presidential Primary are getting all of the media attention, or whether the concern that a majority of the American public will not be happy if they lose their employer plan is having an impact, BUT, support for Medicare-for-All seems to be waning a bit among Democrats.
- Analysis: The LA Times came out with an interesting story noting that “wary of the political risks and practical difficulties of Medicare-for-All proposals that would move every American into a government health plan, Democrats increasingly are embracing more modest plans to use Medicare to expand insurance coverage,” like the Medicare-Buy-In program that Former Vice President Biden recently announced on the campaign trail. The LA Times article (which you can read by clicking the link above) goes on to explain much of what I have explained in my last update (e.g., the comments Candidate Biden made about a Medicare-Buy-In program, and also, the survey polling that shows support for Medicare-for-All around 70%, but when told that people would lose their private health plan and/or pay more in taxes, support fell to around 30%). I am NOT highlighting the LA Times article as an I-told-you-so moment. Instead, I wanted to highlight the LA Times article to say this: While my boss while I was on Senate Finance was Senator Grassley (R-IA), my immediate boss was a gentleman named Mark Prater, long-time Chief Tax Counsel for the Finance Committee (in charge of the Tax staff of which I was a part of). Mark would always tell me stories how both Congressional Democrats AND Republicans would come up with “grandiose” policy changes that in the end, were too big to ever get enacted. BUT, the late-Senator Kennedy (D-MA) took a different approach. Mark would tell me: “Senator Kennedy would do a little bit here, and do a little bit there, and when Senator Kennedy would finally get all of these little things into the law – viola – Senator Kennedy would get the grandiose policy change he wanted all along.” To me, it feels that this is going on with the debate over Medicare-for-All and the various “shades” of single-payer. What I mean is this: You have the full-throated, pedal-to-the-metal supporters of Medicare-for-All who have dominated the air-waves over the past year or so. And, through their full-throated, pedal-to-the-metal support of Medicare-for-All, an idea that was once on the fringe is now part of the mainstream debate in American politics. So now, most Americans know at least a little bit about Medicare-for-All. BUT, Medicare-for-All is a “grandiose” policy change that most policy analysts – including me – think will never happen. BUT, the fact that the debate over Medicare-for-All and the various “shades” of single-payer is now in the mainstream, it allows elected officials – maybe a President Biden – to pull a late-Senator Kennedy and “do a little bit here, and do a little bit there” by enacting the various “shades” of single-payer (e.g., a Medicare-Buy-In program, or a “public option” in the “individual” market, or other government price-controls), and viola, in a decade or so, elected officials finally get Medicare-for-All into the law. Now, I am NOT saying that this is some sort of “secret-plan” that supporters of Medicare-for-All are devising and executing, but what I am saying is that I do believe that among some of the full-throated, pedal-to-the-metal supporters of Medicare-for-All – deep down – they are saying to themselves: “If we can expose more Americans to idea of Medicare-for-All now, and then let elected officials like a President Biden (should he ever be President) incrementally move the country toward single-payer by enacting the various “shades” of single-payer, all of my screaming and yelling and irritating Democratic Leadership over the years will have been worth it because we will finally have Medicare-for-All!” Will all of this come to fruition? I believe my former boss Mark Prater would tell you that the late-Senator Kennedy model is a time-tested model of success. I believe the real question is: Will we have elected officials who can execute on this model, either inadvertently or purposefully?? Only time will tell…