Government Price-Fixing Will Put Health Care on Life Support

Government Price-Fixing Will Put Health Care on Life Support
AP Photo/Jason Redmond
Government Price-Fixing Will Put Health Care on Life Support
AP Photo/Jason Redmond
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Congress is back from summer recess and returning to its usual business of forcing socialism onto the American health care system – guided, of course, by truckloads of lobbying cash. This time, so-called progressive groups that support crony capitalism are seizing on the issue of surprise medical billing to push for widespread government rate setting. If they succeed, it would compromise the few remaining market forces keeping U.S. health care afloat. 

Surprise billing became a crisis following the last major government takeover of health care. Obamacare drove insurance companies to shrink their networks to boost profits, causing patients to receive surprise out-of-pocket charges for care that they assumed was in-network. Since the law’s passage, 40% of all U.S. patients have been hit with these surprise bills, which often run in the tens of thousands. 

Now the very industry groups behind Obamacare are pushing government price controls as the solution. Families USA is lobbying for a benchmark reimbursement rate for out-of-network care, which Congress would set using median in-network rates. Since the insurance companies determine the in-network rates, this amounts to government rigging the market in favor of big insurers. 

Benchmark rate-setting would fail the same way every other price control mechanism fails: by undermining the integrity of markets and triggering a cascade of unintended consequences. Insurers would raise in-network rates and further shrink networks, which would reduce pay for providers and cause a shortage of doctors and hospitals. 

If you don’t believe me, just ask California. It instituted a rate-fixing plan two years ago and doctor shortages are now approaching crisis levels. The problem is felt most acutely in rural areas, where residents already have few choices for health care. 

The same will be true nationwide. A recent study found that 21% of rural hospitals are already at high risk of closing, totaling 430 nationwide. In Tennessee alone, at least 11 rural hospitals have closed in recent years, requiring many residents to drive over an hour to reach a hospital. The benchmark rate would hasten this trend. 

The good news is: There’s a better solution to surprise medical billing — one that would avoid government price-fixing. Known as Independent Dispute Resolution, the approach protects market forces by utilizing a neutral arbitrator to settle disputes between providers and insurers. It gives doctors a fighting chance against insurance companies and takes patients out of the middle of price disputes. 

New York was the first state to implement an IDR system, and it has seen out-of-network bills decrease and administrative costs shrink. With Families USA and other deep-pocketed lobbying groups working against IDR legislation, Congress will face an uphill climb to get arbitration over the line. Fortunately, opponents of national health care have basic economics on their side. From the decline of Rome to modern-day Venezuela, price-fixing has only led to ruin. Preserving the integrity of the markets through IDR is the best way to ensure that providers, insurers, and patients alike can pursue their best interests in harmony.

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