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.