CBO on surprise billing bans

The Congressional Budget Office came out yesterday with their cost estimates on Senate Bill 1895 which contains the surprise billing legislation.  Their estimate is that this is big money over a decade with most of the effects happening off of the federal budget:

 

Title I, Ending Surprise Medical Bills. CBO and JCT estimate that, over the 2019-2029 period, enacting title I of S. 1895 would increase revenues by $23.8 billion and reduce direct spending by $1.1 billion, for a total reduction in the deficit of about $24.9 billion over that period.
That estimate accounts for effects on federal subsidies for insurance purchased through the marketplaces and for the effects that arise from lower premiums for employment-based insurance. CBO and JCT estimate that in affected markets in most years, premiums would be just over 1 percent lower than they are projected to be under current law. [MY EMPHASIS]The decline in premiums would occur because the bill would require insurers to reimburse out-of-network providers on the basis of their own median rates for in-network providers (that is, the amount at which half of payment rates are higher and half are lower). Those median rates are  generally lower than the current overall average rates.
CBO and JCT anticipate that under S. 1895, in facilities where surprise bills are likely, payment rates would move toward the median and that insurers’ payments to providers currently commanding in-network rates well above the median would drop to more typical amounts.

$25 billion over 10 years is not nothing in any context except the federal budget. Then it is a rounding error.

However the big news is the 1% change in premiums. 1% is not everything but in this context it is not nothing. Using the 2017 National Health Expenditures data (Table 3), this is worth about $11 billion in 2017. Most of this money will be coming out of the pockets of a few specialist categories. Recent evidence shows that surprise billing is concentrated in only a few tax paying entities within these specialty groups so it is effectively pulling a lot of money out of a very few pockets and creating broad and diffuse benefits.

This is a politically fraught dynamic. It is a core assumption of political science that concentrated pain inflicted on well-organized and coherent interests will produce a much bigger reaction than diffuse and general benefits. I think this is especially true when those benefits are part of the submerged welfare state where people don’t believe that they are getting government benefits to begin with.

I expect that there is a strong sense on the Hill to DO SOMETHING but the space of DOING SOMETHING can range from significant minimization of economic rents like in the example above to arbitration with very high anchor points based on billed charges which are completely disconnected from reality. This is where the political fight will land. How much rent will still be paid in 2021?

** I’m meeting with a couple of potential collaborators to suss out a potential paper and drink good beer on this matter soon enough.






13 replies
  1. 1
    Barbara says:

    Anesthesiology, radiology, pathology, hospitalists, neonatologists, and ER doctors others have this in common: free riding on the participation status of a hospital they have privileges at (often through exclusive contracts) to in effect extract monopoly pricing. Yes, it’s true that there is likely to be a lot of screaming, but one thing they seem not to have accounted for is the impact of high deductible plans and other coverage limitations that end up imposing pain on actual voters, and not just their third party payers. Their preferred solution would be to require payers to pay for their monopoly preferences and they have a few reps shilling for them, so we shall see.

  2. 2
    Ohio Mom says:

    @Barbara: You always have the most knowledgeable comments on health care and coverage issues. Is this your field?

  3. 3
    Barbara says:

    @Ohio Mom: More or less, but I try to be circumspect.

  4. 4
    jl says:

    @Barbara: Specialists have an influence on delivery of health care not seen in other high income industrialized countries with better functioning systems. Like the ability to insert themselves into the stream of care and issue large surprise bills, they dominate committees that slice up care into procedure codes, and define standard of care to steer more profitable services towards specialists. Surprisingly, much of that organizational infrastructure is effectively owned by the AMA. One of the reasons offered for the failure of AMA programs to encourage more primary care docs is that it cannot or will not interfere the effect of specialist domination in these areas. So, medical students eventually decide to follow the money in order to pay back their huge educational debt and go into specialties, even if their original dream was primary care. So, the AMA is kind of at war with itself in that respect.

    Specialists also dominate US health care in terms of proportion of physicians. A few other countries pay their specialists as much as the US does, but they are much smaller proportion of physicians, and they have much less influence on how medical care services are sliced up, and how much specialists versus primary care docs get paid, and who does what for patients. So, they are an important and serious interest group to reckon with.

    I won’t say there is some species of corruption and self-dealing in the system. And the terminology used by some residents I know is not fit for an almost top 10,000 family blog, so I’ll leave it there.

  5. 5
    Kent says:

    Three years ago my wife and I relocated across the country to the Pacific Northwest and in the process changed from the PPO plans we had in Texas to an HMO plan with Kaiser Permanente in Northwest.

    I can’t express how much easier it is to deal with Kaiser. You just show up to any Kaiser facility, they swipe your card, and they tell you exactly what your co-pay is up front with no hassles or surprises or anything. Everything is just seamless. If a medicare for all type of plan would be anything similar then I’m all in.

  6. 6
    gene108 says:

    If we want to reduce healthcare costs, providers will have to take a hit. They are contributing to the year-over-year cost increases

  7. 7
    Martin says:

    @Kent: I have Kaiser SoCal and love it. It has its faults, which we’ve seen first hand (their behavioral health has wonderful staff but not nearly enough of them) but I’ve long advocated that CA go single payer and simply adopt the Kaiser model.

  8. 8
    Kent says:

    @Martin:

    @Kent: I have Kaiser SoCal and love it. It has its faults, which we’ve seen first hand (their behavioral health has wonderful staff but not nearly enough of them) but I’ve long advocated that CA go single payer and simply adopt the Kaiser model.

    Yes, most of the “faults” with Kaiser are related to cost-containment. Not enough specialists for example, and primary care physicians used as the gateway to limit access to more expensive specialists. But those are the exact same constraints that will be apparent in any kind of single-payer model.

    I honestly don’t think we will ever get to the point of a single medicare for all model with all providers acting like independent points of contact. I think organizations like Kaiser will still be around doing pretty much the same thing and a government-subsidized “Kaiser card” will be one of the options along with a more traditional PPO public option.

    I think those who advocate abolishing private insurance are simply dreaming. There is no conceivable world in which that sort of thing will ever get 50 votes in the Senate much less 60.

  9. 9
    EthylEster says:

    @jl wrote:

    A few other countries pay their specialists as much as the US does, but they are much smaller proportion of physicians, and they have much less influence on how medical care services are sliced up, and how much specialists versus primary care docs get paid, and who does what for patients. So, they are an important and serious interest group to reckon with.

    I agree wholeheartedly. I don’t think most people understand that medical specialties are what has made those docs fabulously rich. Yes, docs were always paid more than many other professions but the difference now is huge for the specialists.

  10. 10
    EthylEster says:

    @gene108 wrote:

    If we want to reduce healthcare costs, providers will have to take a hit.

    I agree but I don’t think the primary care docs are massively overcompensated like the specialty docs.

    Wow, these health insurance threads die quick!

  11. 11
    Mormo says:

    I’d be interested in a comparison with current state balance-billing protections. From someone who knows more than me!

    In sunny CA there’s been various balance billing protections introduced, including fairly complete coverage in mid 2017. That bill (ab72) called for reimbursement based on average rates as arbitrated between regulators, providers, and insurers, not average in network for the insurer, which seems like it has got to be more pain for the specialists in question than this federal proposal.

    I worry on the one hand about the intensity of opposition from the rentiers and the power granted to the insurers, and on the other to the trust placed in the regulator involved. Here in CA the system is clearly short of some fields (psychiatry for sure) but it seems the system is decidedly not in danger of collapse.

  12. 12
    Barbara says:

    @Mormo: “Surprise billing” is a subset of “balance billing” that involves professionals you didn’t select, probably didn’t even see or know that they were involved in your care in some cases, and therefore, you did not realize were not in the network of a hospital that is in the network, or, emergency room providers that have basically adopted a business model of staying out of all networks and making money by price gouging. Medicare has true balance billing protection that goes beyond “surprise billing” and extends to all class of providers under the Medicare program (can’t charge more than Medicare approved amounts) except those who “opt out” altogether. I don’t think there is any move afoot to apply Medicare beneficiary protections to commercial plans or programs except for in the “surprise billing” category. Therefore, these moves are unlikely to have an impact on the volume of specialists in any given specialty.

  13. 13
    Mormo says:

    Thank you! My misunderstanding. I believe the CA protections at least extend only to surprise billing then (and only to hmo plans, but those are the vast majority). Apparently there’s a new bill to extend surprise billing protection to ppo plans, which are under a different regulator out here.

    The worry I’ve heard sometimes is something like, there won’t be enough radiologists/anesthesiologists/etc. in an area any more with this Big Government Interference. Again I’m no expert but that doesn’t seem to be happening. Presumably it would make the news if an emergency surgery couldn’t happen due to no anesthesia or something. And it’s not like CA has ballooning health insurance premiums either.

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