How much is a doctor’s skill and time worth? Is it what some bureaucrat tucked into a back office of a government building deems his value, or what a market deems his value? Do we accept the number that an insurance company says is a fair value to pay, or do we trust the doctor?
There is currently a debate around “Surprise Billing” on Capitol Hill, and again, a populist wave seems to be guiding the way. The proposed solutions vary from forcing doctors to join every insurance plan to setting the price that they will be forced to take — and almost all of them seem to ignore how any of the solutions will affect the market.
The correct answer is, of course, not to trust anyone in the market to set their own government-mandated price. The way that prices should be set is by buyers and sellers figuring out the market. (Free market is supposed to be free — so all this “forcing” seems wrong.)
The doctors want fair reimbursement for their services, and that is understandable. The hospitals want fair reimbursement for their services, and that is understandable. The insurers want to keep as much money as they can; this too is understandable. And all of these motivations should be expected and appreciated.
The problem is that once you add government payments, regulations, and layers into the mix, prices stop reflecting normal market dynamics. In a normal market, individuals would reward middlemen that provide access to high-quality, high-value healthcare. However, in the current broken market, many times it is the hospital that is rewarded for providing the greatest discount, no matter the ending price, the quality of care, or the access provided. And, because of these poor market dynamics (no real-time feedback to the payers) there are delays in the normal market and changes take longer to affect the demand, supply, and overall prices.
It is really this delay that gives the populists the power.
Any free-market reform passed today will take a while to work. On the other hand, any top-down legislation passed today might superficially address the problem immediately, with problems only popping up after the market has reacted — many months later.
We shouldn’t stand for this, but we also shouldn’t stand for a solution that is no more than a superficial Band-Aid, which is what at least three of the policy solutions currently are. One of these Band-Aid ideas is to simply prohibit balance billing and also set new bureaucratically decided low out-of-network payment standards tied to Medicare or some other artificial benchmark.
In other words, the government decides what a doctor is worth. The patient should make this decision; they are the only person that should make this decision.
Another solution under consideration is called “network matching,” where hospital-based physicians would be required by law to participate in the same commercial health plan networks as the facilities where they practice. While a bureaucrat setting a price is bad, a bureaucrat forcing doctors into a contract with insurers they don’t want to work with is worse. Some doctors don’t like working with insurers because they don’t pay on time. Some don’t pay at all. Some pay too little. Currently, doctors have some leverage with the insurance companies, but if the government takes their leverage away with a law, the market response will be fewer doctors and lower net access for patients.
This is a formula for substandard care — or worse, doctors quitting the field.
We should be outraged that the market hasn’t taken care of this. If your car gets fixed at a local mechanic and their customer is sent a surprise bill, the scorned customer might be able to convince the whole community to stop going to the mechanic. However, with kickbacks and rebates, regulations, slow sales cycles, the fact that patients are almost never the payers, and the hospitals have little incentive to act because rallying a community to boycott a hospital is nearly impossible. The same goes for insurance companies. They don’t really answer to the patients; the employers are the primary payer of insurance.
This is what should change. We should construct a healthcare market that will actually react to the demands of the patients.
We also shouldn’t gloss over the blame that is being put onto the doctors who are trying to help their patients. They are one of the last groups that we should attack. They are the ones that are actually doing the life-saving work. Everyone else, besides the patient, is just arbitraging the middle. Hospitals and insurance companies are the ones that are allowing the surprise billing to happen.
The right solution might be being discussed on Capitol Hill, and I just haven’t heard of it yet. For now, the problem is that the solutions discussed above villainize doctors, will have a long-run effect of reducing access to care, and undermine what market dynamics are still in existence in our healthcare system.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.
