No Surprises Act is not lowering total medical costs
April 8, 2024
Source: Fiedler, M and Adler, L Brookings Institution, March 27, 2024 LINK
I used PlotDigitizer to derive numbers from the published exhibits. All prices are expressed as a percentage of the Medicare allowable price; QPA = Qualified Payment Amount
The Congressional Budget Office expected the No Surprises Act (NSA), passed in 2022, to reduce overall medical costs by about 1%. The NSA covers services that are performed emergently, and services provided by hospital-based specialists, including anesthesiologists, radiologists, pathologists, and emergency medicine physicians. The Centers for Medicare and Medicaid Services just released data from the arbitrations conducted when insurance plans and providers couldn’t agree about a price, and the results suggest that when disputes go to arbitration providers are the big winners, and health plans (and those who pay their premiums) are the big losers.
The NSA requires that health plans establish a Qualified Payment Amount (QPA) based on their in-plan payments. If providers are dissatisfied, they can go to an arbitrator for independent dispute resolution (IDR). The arbitration approach is modeled after settling salary disputes in baseball; each side makes a proposal, and the arbitrator chooses one of those two proposals. Theoretically, this prevents disputants from making outlandish proposals, for fear that the arbitrator will reject a price that is far too low from a carrier or far too high from a provider.
Providers argued that guidelines or guardrails for arbitrators should focus on out-of-plan payments, while insurers argued that guidelines should be based on in-plan allowable rates. The Department of Health and Human Services (HHS) established guardrails to limit the price accepted by the arbitrator, but these guardrails are on hold due to litigation.
A new analysis from the Brookings Institute analysis found that over three quarters (77%) of the arbitration findings were in favor of the provider, and almost three quarters of cases (74%) were brought by one of four large private equity owned physician practices. The analysis covered IDR results from emergency medicine, neonatal or pediatric intensive care, and imaging. The median prices determined by the arbitrators were about 90% of what the providers proposed, and between 2.6 and 4 times higher than what the insurance plans proposed. The researchers point out that higher prices in arbitration could increase provider leverage and lead to higher contractual rates. There were 288,000 cases submitted for arbitration in the first half of 2023, far more than the 17,000 predicted annually.
Implications for employers:
The NSA was designed to prevent patients from receiving surprise bills after receiving hospital or emergency care, but in practice it appears to be increasing the cost to health plans.
The guardrails promulgated by HHS could have prevented this outcome, but right now arbitrators are not subject to this guidance as lawsuits wind their way through the court system.
Employers can talk to their carriers about their experience with independent dispute resolution. They can also advocate for effective regulations that do not raise the cost of health care.
Employers should be certain that their carriers are refunding any “shared savings” claimed for out of plan bills where the IDR erased these savings.
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