When Congress wrote the No Surprises Act, it borrowed its arbitration model from Major League Baseball. A new analysis from the New York Times lays out how that system has failed in healthcare.
More than 2.5 million disputes went to arbitration last year, compared with the 17,000 a year that regulators projected when the law passed, and providers are winning more than 85 percent of cases, often with “head-turning payouts.” The Trump administration recently said the system was being “gamed for higher prices.”
Highlights from the piece are included below (emphasis added). Together, they explain why IDR has become a revenue engine rather than a last resort.
IDR has no data anchor, so providers are encouraged to submit outrageous bids.
- “Compare that with surprise billing arbitration, where doctors’ typical bids have been 3.4 times what insurers offered. In some specialties, it’s not unusual for them to ask for 10 or 20 times as much. In one outlier case, a breast surgeon won 950 times what the insurer UnitedHealthcare offered.”
- “Some have earned exceptionally high awards, like $440,000 for a breast reduction and $50,000 for assisting with prostate surgery.”
- “‘I don’t know a single person involved in the drafting who thought baseball-style arbitration would lead to major league awards,’ said Adam Buckalew, who worked as a Republican staffer on the committees that wrote the bill, and now consults for insurance companies.”
IDR arbitrators have a financial incentive to side with the providers who bring them business.
- “Doctors bring nearly all health care disputes. Arbitrators are paid by the case, and may get more business if they keep doctors happy.”
- “In most arbitration systems, extreme bids are less likely to win. An aggressive bid can function like a lottery ticket — a big potential payout but with low odds. But when Mr. Chartock looked at the health care data, he saw no such pattern. Doctors win cases at similar rates whether they ask for slightly more than what the insurance company offers or 10 times as much.”
- “‘I call arbitration like a money printing machine,’ [Benjamin Chartock, a health economist at Bentley University] said. ‘They get $800 every time they do one of these.’”
- “In baseball, either side can fire an arbitrator at the end of the season if it’s unhappy with the results or suspects bias. No similar mechanism exists in health care.”
Providers are incentivized to flood the system.
- “In health care, the government charges $15 to file an arbitration case. The whole process happens through an online portal, no in-person attendance required. There are additional fees paid to the third-party arbitrator, which range from $425 to $800, and those get covered by whoever loses.”
- “Doctors do sometimes hire outside experts to file their arbitration cases. Many of those firms are paid only if they win.”
- “Far more claims have gone to arbitration than expected — more than 2.5 million last year, compared with the 17,000 a year projected after the law passed.”
The model Congress borrowed may not even endure in the sport it came from. As the article notes, salary arbitration is on the table in baseball’s upcoming collective bargaining negotiation, and “the current system — the model for Congress in health care — may not survive.” If arbitration is straining under baseball’s data, costs, and accountability measures, it cannot hold up in healthcare, where these guardrails do not exist.
For more on how IDR abuse is driving up healthcare costs, click here.
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