In response to President Donald Trump’s laudable desire to crackdown on surprise medical billing, Sen. Lamar Alexander, R-Tenn., told reporters that he hopes the Senate Committee on Health, Education, Labor and Pensions (HELP) he chairs will mark up legislation to alleviate the problem next week.
Frequently in emergency situations, patients with insurance receive treatment from facilities outside of their insurance networks. Although this occurs due to no fault of their own, predatory practices from the insurance industry have led to patients receiving exorbitant, unexpected bills.
This practice has been criticized for decades for being downright immoral, and it is refreshing to see an administration in Washington finally making rectifying it a priority.
The only thing more damaging than a public policy crisis are purported solutions that fester the drama or lead to other unintended consequences. This risk is always prevalent when dealing with well-intentioned but imperfect lawmakers in Washington, and this circumstance is of no exception.
Case in point: Rather than embrace the conservative solution that has been proposed and championed by the likes of congressional healthcare experts, such as Dr. Bill Cassidy, R-La., the bill introduced by the HELP Committee leaders on June 19 instead sided with the camp that is pulling for big-government price controls cloaked under another name: a federal benchmark rate. Stooped in an economic fallacy that has been debunked for several centuries, this proposal is a dangerous one that is destined to fail.
On its face, the federal benchmark rate, which would freeze prices at median in-network costs, may sound like a pragmatic solution; however, there is a reason that some have called out its similarity to single-payer systems like Medicare for All. Like Alexandria Ocasio-Cortez’s blueprint, it too is based on government rate-setting and will similarly lead to shortages, lower quality of care, and higher prices for consumers.
Given that the proposal bases the benchmark off the median rate consumers pay in-network, the new proposal may seem to be market-based; however, it is not any different from most other times in history that the government has failed in price-fixing goods and services.
It is extremely rare for the government to pick prices out of thin air, as the Soviet Union may have done by lifting prices directly from a U.S. Sears catalog. Typically, price controls are based off empirical data, just as the HELP leaders’ benchmark proposal is. That has never merited applause from free marketers in the past, and it shouldn’t be seen as commendable now.
For example, in 1995, India imposed price-ceiling on the cost of drugs, amounting to double the standard retail price as measured by a formula consisting of material cost, conversion cost, cost of packing material, excise duties, and maximum allowable post-manufacturing expenses. While it may have sounded like a sensible idea at the time, National Pharmaceutical Pricing Authority (NPPA) studies now show that it resulted in only 47 of the 74 notified bulk drugs targeted within the order being produced, resulting in less competition and medical affordability. What would make anyone believe that the HELP Committee leaders’ benchmark proposal will have different results?
Simply put, price controls don’t work, no matter what data grounds their basis – not today, not tomorrow, not ever. Conservatives already know it won’t work for Medicare for All and it will be just as ineffective on the smaller scale that the HELP Committee leaders are proposing as well.
Rather than accept a Medicare for All-lite, members of the HELP Committee should reject these underlying principles in the upcoming mark up and instead replace them with the free market ideas offered by their very own Sen. Cassidy.
From his time as a medical doctor, Sen. Cassidy knows that Internal Dispute Resolution (IDR) is the only true market-based solution that can eliminate the threat of surprise medical billing without creating further turmoil.
Through an arbitration process, an independent mediator would work with hospitals, doctors, and insurers alike to privately resolve pricing disputes between all the parties involved – eliminating the need for government intervention in the marketplace with a process that has already been proven to lower costs and reduce complaints on the state level.
New York has utilized an IDR model since 2015, and according to a May 2019 study from the Georgetown University Health Policy Institute, it has worked tremendously well. Per the report, “State officials report a 'dramatic' decline in consumer complaints about balance billing,” with one regulator stating, that “It’s downgraded the issue from one of the biggest [consumer concerns our call center receives] to barely an issue.’” Why meddle with government price-controls when a free-market solution has already been proven to be viable?
The road to full-out government control over the U.S. healthcare system has been a slow but steady one, but the Republican-controlled Senate needs to lead the push against this movement, not push the ball forward even further.
It is critical for Chairman Alexander to work with Sen. Cassidy and other members of the HELP Committee to fix the proposal during the mark up, ensuring that the free-market, not government price-fixing, is in the driver’s seat.
The fate of consumers’ pocketbooks, as well as their quality and access to care, will depend on it.
Dr. Michael Busler, Ph.D., is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.
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