Surprise medical bills have increasingly become a topic of heated national debate. One out of every two adults in America has opened their mail in disbelief due to one of these surprise charges. Thankfully, there is almost unanimous consent among policymakers and regulators that something must be done. Yet Senate legislation like the Lower Health Care Costs Act (S. 1895), which proposes to use a median in-network rate as the benchmark for out-of-network providers, is not the answer. This approach will drain the number of practicing physicians, reduce the quality of care, and increase costs.

The details of these direct impacts, moreover, are troublesome.

  • The proposed price control system will reduce payment rates for both in- and out-of-network healthcare service providers by between 15 and 20%.
  • With lower payment rates, self-employed physicians will be very likely to leave their practices to become employed physicians in hospitals.
  • Lower payment rates will also force employed physicians to see more patients and cut down their non-patient time, which is typically devoted to research and training.
  • Federal and state governments will lose both corporate and individual income tax revenue from physicians who leave their practice. 

Without question, public support for ending surprise medical bills is strong. And so is opposition to a rate setting system. According to a recent national poll conducted from May 31 to June 1, 69% of Americans prefer an independent third-party resolution over allowing the government to set rates. Furthermore, 81% of Americans believe insurance companies should pay for surprise medical bills.

Finally, there is much to be learned from individual states who have set their own policies to address these surprise charges. New York successfully curbs surprise medical bills by requiring the mediator to use the 80th percentile of charges to eliminate outlier charges by out-of-network healthcare service providers. An assessment of five years since the law’s enactment shows New York’s system has many positive outcomes. In addition, evidence from New York suggests that the independent dispute resolution (IDR) system that relies on market-based rates would work for all parties. In contrast, the California price control system has created additional physician shortages. Worse yet, under California’s model, premiums continue to rise, insurers frequently fail to pay out-of-network physicians usual and customary rates for out-of-network emergency services, and regulators fail to enforce the system.

Our new report on this issue, “An Assessment of the CBO Cost Estimate of S. 1895”, provides further details on why a market-based approach, like New York State’s system, will lead to better outcomes for patients, healthcare providers, and insurers alike. 

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About the Author

Dr. Nam Pham
Managing Partner
ndp | analytics

Nam Pham is managing partner of ndp | analytics, a strategic research firm that specializes in economic analysis of public policy and legal issues. Prior to founding ndp | analytics in 2000, Dr. Pham was vice president at Scudder Kemper Investments in Boston, where he was responsible for research, asset allocations, and currency hedging for global and international bond funds. Before that he was chief economist of the Asia region for Standard & Poor’s DRI; an economist at the World Bank; and a consultant to both the Department of Commerce and the Federal Trade Commission. 

Dr. Pham is an adjunct professor at The George Washington University. Dr. Pham holds a PhD in economics from The George Washington University, an MA from Georgetown University, and a BA from the University of Maryland. He is a former member of the board of advisors to the Dingman Center for Entrepreneurship at the University of Maryland, Smith School of Business and a board member of the Food Recovery Network.


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About ndp | analytics 

Founded in 2000, ndp | analytics is a strategic economic and communications research firm. Through the rigor of quantitative analyses, the firm produces reports, creative content, and other research for a diverse group of clients, including trade associations, corporations, law firms, multi-lateral organizations, and government agencies. By uniting this rigorous analysis with clear communication, ndp | analytics turns data into action.

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