Independent Dispute Resolution (IDR) Decisions Appear to Greatly Increase Claim Costs for Self-funded Health Plans and Other Payors
Source: Kevin A. Schulman, MD; Barak Richman, JD, PhD, Addressing Surprise Medical Bills and Out-of-Network Prices, JAMA Internal Medicine, 10/21/2024
Excerpts
After Congress passed the No Surprises Act (NSA), the US Department of Health and Human Services issued 2 sets of implementing rules—one in October 2021 and another in August 2022—instructing arbitrators how to resolve price disputes. Each time, provider associations successfully sued to block implementation within a month of the rules’ releases. To date, there remain no implementing rules in force, and arbitrators have been operating with little substantive guidance.
Recent reports revealed the costs of this legal uncertainty.
- Rather than curtailing this aggressive out-of-network practice strategy, arbitrators were found to have issued awards that closely match what providers have requested, amounts that far exceed what both Medicare and in-network commercial insurance pay.
- Further, two-thirds of the claims from out-of-network providers pursuing these higher prices were from practices backed by 4 private equity firms, some of which had previously pursued a surprise billing–based business model.
- In essence, the NSA may have protected patients from this exploitive business model, but it has not removed the underlying incentives to pursue the business model and has simply shifted the costs it imposes from patients to the rest of us in the insurance pool.
IDR Decisions Exceed Medicare and In-network Commercial Market Rates
IDR decisions greatly exceed Medicare rates and prior in-network commercial market prices
We first examine the prices decided upon by IDR entities. In doing so, we exclude the 10% of line items where the IDR decision is missing. Most missing data is due to CMS’ small-cell suppression policy.
The figure below reports median IDR decisions for the three categories of services. Median decisions greatly exceed Medicare prices, by a factor of 3.7 or more for all three service types. We report medians rather than means because the data include some extreme outlier decision amounts that we suspect may be data errors.
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The prices emerging from IDR also appear to greatly exceed estimates of historical mean in-network commercial prices for these services.
We examined four studies using data for 2014 or later that reported mean in-network prices for emergency care services, imaging services, or both relative to Medicare’s prices.
- For emergency care, estimates ranged from 2.5 to 2.6 times Medicare’s price.
- For imaging, estimates ranged from 1.8 to 2.4 times Medicare’s price. For both categories, median IDR decisions relative to Medicare are at least 50% higher than even the top end of these ranges.
