New York Tried Arbitration. Health Care Costs Went Up.

As Congress pushes forward on a solution to surprise medical bills, KHN’s Rachel Bluth profiled New York’s arbitration model and the significant cost increases facing patients under this flawed approach. Highlights from the article – To End Surprise Medical Bills, New York Tried Arbitration. Health Care Costs Went Up – are included below:

• “In 2015, New York passed a surprise billing law that uses “baseball-style” arbitration as a way to settle payment disputes between insurance companies and doctors. Under this approach, which is used in Major League Baseball to negotiate salaries (hence the name), each party submits a proposed dollar amount to the arbiter, who then chooses one as the final monetary award.”
• “According to an analysis of newly released data from New York’s Department of Financial Services, the New York model is making health care substantially more expensive in the state. In fact, arbiters are typically deciding on dollar amounts above the 80th percentile of typical costs.”
• “Providers’ billed charges, or list prices, are unilaterally set, largely unmoored from market forces, and generally many times higher than in-network negotiated rates or Medicare rates,” Adler wrote. So, bill charges are already much higher than what Medicare pays, and on top of that, arbiters are told to focus on the 80th percentile of those rates, an amount higher than what 80% of doctors charge for that procedure.
• “It wasn’t clear at first how strictly arbiters would follow this guidance, but the data suggest they’re using it most of the time. On average, arbitration decisions have been 8% higher than that 80th percentile mark.”​​​
• “According to the analysis, the number of bills undergoing arbitration went from 115 in 2015 to 1,014 in 2018. Many advocates of arbitration predict the number of claims will drop over time as insurers and providers work out claims themselves. Based on these numbers, though, this hasn’t happened yet.”
• “Insurance plans and doctors ‘won’ about the same number of cases, and in 2018 more cases seemed to go in the providers’ favor. Yet, Adler points out, consumers appeared to lose either way. That’s because even when the insurance plan won, it was on average only 11% less than the 80th percentile, which Adler says is still about three times as much as a patient would pay if the doctor were in-network. Those extra costs, he says, get passed on in the form of higher premiums.”

To view the full article, click here.