Price Controls Are Not What the Doctor Ordered

Inflation has been eating away at Americans’ bank accounts, and healthcare costs are no
exception. The annual cost of the average, employer-provided healthcare plan is now more than $6,500, an 8 percent hike since 2022. One rare reprieve has been surprise medical bills, which have sharply declined since the passage of the No Surprises Act (NSA) at the end of 2020.

The bipartisan legislation encouraged the use of market-based arbitration to ensure that
patients never have to worry about the financial consequences of a surprise bill in the mail days, weeks, or even months after being discharged from the hospital. While implementation has been rocky, new rules from the Department of Health and Human Services (HHS) provide a less painful process for patients, providers, and payers.

Under the NSA, patients are held blameless for out-of-pocket costs beyond their contractual, in-network responsibility. Lawmakers wrote the bill after hearing testimony from countless patients who purchased a pricey insurance policy, only to receive a $10,000 bill (or more) from an out-of-network provider.

Unfortunately, landmark legislation is only as good as the agency rules implementing it. The independent dispute resolution (IDR) process established under the NSA has been undermined by reckless rule-making that has undermined the impartiality of the system in favor of insurers through backdoor federal rate-setting. Instead of having arbitrators consider a variety of factors in determining proper compensation to providers, Biden administration regulations have focused disproportionately on the median in-network rate, creating de-facto price controls on healthcare services. According to one analysis, payers slashed reimbursements for out-of-network care provided by emergency medicine groups in 2022 by $1 billion (or 32 percent) under the shadow of HHS rule-making.

Fortunately, the judicial system has served as a useful check on the administration’s dubious interpretation of the NSA. In August, the U.S. District Court for the Eastern District of Texas ruled that the administration needed to set aside rules prioritizing the in-network rate over other sensible factors that arbitrators must also take into account. Bureaucrats at the HHS are back to the drawing board and have recently released new proposed rules (re)-implementing the NSA. While critical issues about rate-setting and median in-network rates remain in flux, proposed rules are at least offering certainty about arbitration timelines and communications.

The new rules clarify the information that payers (i.e., insurers) need to provide at the
beginning of the process and specify the required steps leading to a payment determination. For example, the rules put some flesh on the bones of the NSA by giving a timeframe for conflict-of-interest and service qualification reviews by arbitrators. In addition, providers and payers now have more flexibility in “batching” various related medical services into a single arbitration dispute instead of having several, costly individual disputes. The agency also proposes revamping the administrative fee structure to fund arbitration services while ensuring that low-cost disputes don’t break the bank for all parties involved.

These rule-making provisions are welcome first steps toward implementation, but the Biden Administration and HHS must address the elephant in the room, price controls. Absent needed clarification that the median, in-network rate is not the “central” issue for arbitrators, price controls will continue to wreak havoc on the healthcare system. Regulators must send a clear message that arbitrators can and should focus on a variety of factors in mediating disputes between payers and providers.

The NSA has already come a long way in shielding patients from costly surprise medical bills. With the right implementing regulations, policymakers can keep the healthcare system working for everyone while giving doctors their due. Now is not the time to handicap the healthcare system with onerous and misguided regulations.

David Williams is the president of the Taxpayers Protection Alliance.