Going under the knife for major surgery can be one of the most stressful, anxiety-filled experiences of a person’s entire life. But for many, the worst part isn’t the interminable waiting, the lengthy procedure, or the painful recovery. Worse than all of that is the surprise medical bill some people receive in the mail, informing them that they are on the hook for tens of thousands of dollars.
These unexpected medical expenses arise when patients, in situations where there is little time for thought or deliberation, receive care from a doctor or hospital not covered by their insurance. This often occurs through no fault of the patient, yet often, insurance companies will refuse to cover the costs, leaving people with thousands of dollars in medical bills and no recourse. Worse yet, there are currently no federal measures to protect patients from this nasty situation. Obviously, that needs to change.
Luckily, the United States has an answer to this healthcare travesty. It was built right into our Constitution.
America’s federalist system—the framework through which our governance is divided between national and state-level governments—provides the ideal method to solve the problem of surprise healthcare billing. States, as U.S. Supreme Court Justice Louis Brandeis explained, are meant to serve as “laboratories of democracy.” A principle born from the Tenth Amendment to the U.S. Constitution, states are the testing grounds for laws and policies, providing the federal government with the evidence to determine whether particular proposals would function on a national scale.
The use of state policies as bellwethers for the efficacy of federal laws is a handy technique, especially in the medical field. One need only look to the failed attempts to implement single-payer healthcare plans in Vermont and California, for example, to understand that a nationwide socialized system of medicine would be met with devastating results.
When it comes to the issue of surprise medical billings, states have been hard at work developing policies to combat the frequency and severity of unexpected medical costs. New York State, in particular, has been a leader on this front. In 2015, New York passed a law to help consumers avoid surprise out-of-network expenses. The policy has found tremendous success and is serving as a model for other states to follow.
The New York law tackles the problem by implementing a system of arbitration. Instead of sticking the unsuspecting patient with the bill, the law mandates that healthcare providers and insurance companies engage in good-faith negotiation. Both parties are obligated to submit their “final offer” to a neutral arbitrator. The arbitrator would then impartially select the best offer, with the loser of the negotiation paying for the cost of the arbitration process. That way, the providers and the insurers are incentivized to submit the most reasonable offer, reducing the price in the process.
The arbitration process has managed to reduce the costs of surprise medical bills substantially. According to a working paper from the National Bureau of Economic Research, the law reduced out-of-network billing costs by 34 percent! Additionally, a Georgetown University analysis found that New York’s arbitration system dramatically reduced consumer complaints. Now, it’s time for us to put America’s system of federalism to work, crafting federal policy which emulates New York’s overwhelming successful approach. Now, the U.S. Senate has the opportunity to do just that.
On June 19, 2019, the Senate HELP Committee sent the Lower Health Care Costs Act to the Senate floor. The bill, however, fails to use the arbitration approach embraced by committee members like Sen. Bill Cassidy (R-La.) that have shown to be so successful. Instead, the legislation utilizes the so-called “benchmark pricing solution,” a form of government-imposed price controls which would only exacerbate the situation by driving doctors out of business. While the bill is far from ideal, the legislation nevertheless has the opportunity to be redeemed in its upcoming Senate markup.
During next week’s scheduled markup, it is imperative that the bill be amended to include arbitration has the primary technique to resolve the surprise medical billing problem. If properly amended, the bill would establish a national system of arbitration modeled after the one in New York. Rather than cramming down harmful price controls or government-mandated red tape, the legislation would rely upon a tried-and-true solution, proven at the state level as effective at reducing the burden of surprise medical costs.
The arbitration solution illustrates the beauty and efficiency of the American system. Different states, operating in tandem with one another to discover and implement successful social policy—that is the essence of federalism. Indeed, America’s unique approach to governance has afforded us the solution to the problem of surprise medical costs. Now, we just need to implement it.