While the No Surprises Act was intended to curb the worst of unfair billing practices from out-of-network providers and certain private equity firms, a recent analysis from the Niskanen Center highlights how misuse of the arbitration process is contributing to $1 billion in excessive costs and waste in the health care system.
The volume of claims going through arbitration is rising, and associated costs are climbing even faster, driven by deliberate provider strategies that rely on arbitration to drive up their reimbursement, rather than serving as a last resort for disputes.
Below are key insights from the Niskanen Center. To read more, click here.
- “Total program costs have now reached $1 billion and are rising faster than the disputes themselves. These escalating payouts risk worsening hospital market consolidation, enabling large and private equity–backed provider groups to boost revenue by pursuing arbitration.”
- “As the IDR program is used more frequently, its associated costs are rising even faster than the volume of disputes. Using the first quarter of 2023 as a baseline, we found that total program costs surged by over 1,120 percent, compared to an 888 percent increase in closed disputes over the same period. The widening gap highlights the administrative waste embedded in the arbitration process.”
- “The primary driver of rising costs is higher compensation paid to arbitrators. Ultimately, this dynamic disproportionately benefits arbitrators and providers—while shifting the financial burden onto patients and employers through higher insurance premiums and taxpayer-funded administrative expenses.”
- “Beyond its immediate impact on costs and administration, the arbitration process also poses long-term risks to the healthcare market by further enabling profit-seeking behavior among providers.”
- “Absent corrective action from policymakers, patients will ultimately bear the cost, through higher premiums and the administrative overhead of an increasingly exploited arbitration process.”
What was meant to protect patients from unfair billing has instead opened the door to exploitation, with outsized payments and administrative inefficiencies that strain employers, health plans and families alike. If left unchecked, the abuse of the No Surprises Act’s arbitration process will continue to drive up health care costs and add to the growing burden of wasteful spending in our system.
To preserve the No Surprises Act’s original goal, and to protect employers, patients and families from manipulation of the arbitration process from certain providers and private equity-backed groups, the Trump administration and Congress must implement common-sense reforms to address current flaws with the process, including:
- Preventing ineligible claims—including Medicare, Medicaid, state-arbitration claims, in-network claims, untimely claims, incorrectly batched claims and claims that have already been through arbitration—from being entered into the arbitration portal;
- Prohibiting Independent Dispute Resolution entities (IDRE) from issuing payment determinations on ineligible claims and disputes initiated with incomplete or inaccurate information;
- Establishing timely processes for correcting or addressing errors on non-eligible claims and a formal process to reject payment determinations for non-eligible claims;
- Encouraging IDRE performance audits and hold initiating parties accountable where there is a demonstrated pattern of making false or misleading representations in the IDR process;
- Requiring enhanced training and oversight of IDREs on the No Surprises Act statute and guidance to ensure compliance and mitigate instances of abuse or misuse; and
- Mandating timely and transparent disclosures on IDR utilization by individual providers, as well as transparency on IDREs’ performance to ensure objective decision-making.
Fixing the flaws in the arbitration process is not just a policy imperative—it’s a fiscal necessity to ensure that this well-intentioned law doesn’t become another source of unsustainable health care waste.
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