It’s an annual ritual: Congress tries to cram month upon month of business into the last few days of the year before the session ends. So it is with 2019, as lawmakers are attempting to stitch together a budget bill that will fund the federal government into 2020. And as usual, they’re seeking shortcuts to cover over more budget-busting spending.
The trouble is, one of their “solutions,” involving price controls to address the “surprise billing” issue, would embroider over an important issue that deserves thoughtful deliberation — all while jabbing taxpayers with a sharp needle.
No one wants to see patients stuck with massive bills they didn’t expect — bills that are generally the result of either emergency room visits or surgeries where patients get treated by out-of-network providers. Unfortunately, some would respond with a sledgehammer to an issue that needs a finely tuned response. And that hammer is price controls — whether they’re called rate-setting, indexing or benchmarking, several pieces of legislation in Congress would allow the federal government to decide or define what a “fair” hospital bill is.
Rate-setting could result in a scarcity of doctors due to an unwillingness to provide services at an artificially low price.
California is wrestling with this shortage now, in the wake of passing a compulsory rate-setting scheme. Our nation’s largest state approved $340 million of taxpayer money this year to fund CalHealthCares, a medical school loan forgiveness program for young doctors, because there are not enough doctors to care for California’s 40 million residents. There are several reasons for this problem, but price controls certainly can’t be helping the situation.
On the other hand, rate-setting could also encourage insurers to pull out of markets. A recent piece in The American Journal of Managed Care put it well, namely that recent contract negotiations in California, between doctors and hospitals on one side and insurers on the other, have led insurers to call the process “an incentive to lower or cancel contracts with rates higher than their average as a means of suppressing (out-of-network) prices.”
California’s experience should serve as a cautionary tale, yet federal lawmakers negotiating a year-end spending deal are attracted to a rate-setting proposal for surprise billing — and one big reason for this attraction reflects terribly short-sighted thinking.
According to the Congressional Budget Office, the Lower Health Care Costs Act (which buys into the price control logic) could over 10 years result in nearly $7.6 billion of lower deficits. Unfortunately, several leading legislative proposals, including this one, have hidden consequences that CBO fails to take into account. The legislation could not only cost the government tax revenue but also harm taxpayers.
Take, for example, the aforementioned Lower Health Care Costs Act. A recent economic study from NDP Analytics shows just how bad federal and state coffers would suffer. The study’s authors write, “Due to the price control policy (of the act), the average physician wage would be reduced by $31,647 per year.”
Given that the Bureau of Labor Statistics pegged the average physician salary last year at $210,980, “the federal government would forgo $7,592 in tax revenue per year per physician,” according to the study. With approximately 800,000 doctors nationwide, that’s significant money the Treasury Department will not see.
What’s more, the American Medical Association estimates that each doctor in the United States supports 17 direct, indirect and induced jobs in the economy. The same NDP Analytics study finds that the total economic effect on state and local taxes for these jobs is $92.9 billion. With many states struggling over their budgets, the last thing Congress should be doing is stifling tax receipts from a growing economy and giving those states an excuse to look for more ways to raise money from taxpayers.
The other side of the story is the adverse spending effect resulting from congressional benchmarking proposals. As has been widely reported, efforts like Lower Health Care Costs Ac would hurt hospitals, particularly in rural and underserved communities. If hospitals are forced to close — or offer fewer services — those most affected will be patients supported by Medicaid or Medicare … and, in turn, taxpayers.
There are several paths to surprise billing reform that have far more promise than rate-setting, such as addressing network complexity or giving carefully limited oversight power to the Federal Trade Commission. Regardless of the path Congress takes, the journey should not begin with a budget-season sprint containing a flawed proposal that conveniently conceals spending increases in the short term, even though it worsens the problem over time.
As members of Congress try to protect patients from surprise medical bills, it is hoped they will make sure that the heat of budget negotiations won’t keep them from seeing the light.