In most markets, when a buyer and a seller can’t settle on a price, they walk away. Medicine is different.
Doctors and insurance companies often sort out who owes what only after a patient has been treated, especially in emergencies. When they disagree, patients can end up with unexpected bills they can’t pay.
Efforts to keep patients from getting stuck in the middle are gaining steam in Washington. Six Senators sent a letter to health plans and providers this week seeking data on surprise medical billing. President Donald Trump pledged in January to stop unexpected medical bills.
One possible solution, already in place in New York and a handful of other states, puts insurers and doctors through so-called baseball-style arbitration. Each side submits a price, and an arbiter chooses one. Both sides are bound by the decision. Patients’ charges for out-of-network care are limited to what they would owe to in-network providers.
By forcing an arbiter to pick an offer, rather than forging a compromise, both parties are, in theory, encouraged to moderate their bids.
“If it’s loser-pay, you’re going to make a reasonable offer,” said Vidor Friedman, president of the American College of Emergency Physicians. “If you’re acting outrageously in the marketplace, you’re going to lose every time.”
For policy makers, final-offer arbitration can address situations where markets break down without the government stepping in to set prices. “You’re actually trying to simulate, if you had a market, which you don’t, where might the market come out,” said Paul Ginsburg, a health economist and director of the USC-Brookings Schaeffer Initiative for Health Policy.
In 2015, New York state adopted a law that limited patients’ costs for unexpected bills to what they would owe to an in-network doctor and set up arbitration to resolve contested charges between health plans and doctors. More than 1,100 disputes have been resolved under the new process, according to the latest available data from the state. Other states including New Jersey and Illinois use similar approaches.
Friedman said the New York policy has worked, and arbitration is an element of the plan the emergency physicians group proposed in late January.