In so-calledbaseball-style arbitration, each side submits a price, and anarbiter chooses one. Both sides are bound by the decision. (Photo:Shutterstock)

In most markets, when a buyer and a seller can't settle on aprice, they walk away. Medicine is different.

Doctors and insurance companies often sort out who owes whatonly after a patient has been treated, especially in emergencies. When they disagree, patients canend up with unexpected bills they can't pay.

Efforts to keep patients from getting stuck in the middle aregaining steam in Washington. Six Senators sent a letter to healthplans and providers this week seeking data on surprise medicalbilling. President Donald Trump pledged in January to stop unexpected medicalbills.

Related: Balance-billing court cases force hospitals tojustify charges

One possible solution, already in place in New York and ahandful of other states, puts insurers and doctors throughso-called baseball-style arbitration. Each side submits a price,and an arbiter chooses one. Both sides are bound by the decision.Patients' charges for out-of-network care are limited to what theywould owe to in-network providers.

By forcing an arbiter to pick an offer, rather than forging acompromise, both parties are, in theory, encouraged to moderatetheir bids.

“If it's loser-pay, you're going to make a reasonable offer,”said Vidor Friedman, president of the American College of EmergencyPhysicians. “If you're acting outrageously in the marketplace,you're going to lose every time.”

For policy makers, final-offer arbitration can addresssituations where markets break down without the government steppingin to set prices. “You're actually trying to simulate, if you had amarket, which you don't, where might the market come out,” saidPaul Ginsburg, a health economist and director of the USC-BrookingsSchaeffer Initiative for Health Policy.

In 2015, New York state adopted a law that limited patients'costs for unexpected bills to what they would owe to an in-networkdoctor and set up arbitration to resolve contested charges betweenhealth plans and doctors. More than 1,100 disputes have beenresolved under the new process, according to the latest availabledata from the state. Other states including New Jersey and Illinoisuse similar approaches.

Friedman said the New York policy has worked, and arbitration isan element of the plan the emergency physicians group proposed inlate January.

Insurers also support the New York state process, said LeslieMoran, senior vice president of the New York Health PlanAssociation. The number of cases that go to arbitration isrelatively small. “A good number settle, which was part of thegoal, too,” Moran said.

Half of Americans have received an unexpected medical bill,according to an August survey by the research group NORC at theUniversity of Chicago. The problem is especially acute insituations where patients can't shop ahead of time. One-fifth ofemergency-room admissions triggered a surprise bill, economistsfrom the Federal Trade Commission reported in 2017.

Proposed caps

A few proposals in Congress would cap what patients owe and makerules for settling disputed charges. A bill sponsored by SenatorBill Cassidy, a Louisiana Republican who is also a physician, wouldset out-of-network reimbursements based on typical payments for thesame services in the area. Two other Republicans and threeDemocrats have signed on to that proposal.

Another proposal from Senator Maggie Hassan, a New HampshireDemocrat, relies on baseball-style arbitration, similar to New Yorkstate's law. Hassan's bill would go further by requiring theresults of arbitration to be made public. That could bring sometransparency to prices, potentially helping inform futuredisputes.

“You have health plans, insurance plans and providersnegotiating about the fate of a patient who has very little controlover this level of coverage and pricing,” Hassan said in aninterview. “We also have a system with very little transparency inpricing, and so it isn't operating as a typical market systemmight.”

Others have suggested the binding arbitration might be asolution to broader problems in health-care markets. Mark Miller, ahealth-policy expert at the Laura and John Arnold Foundation,suggested in recent Senate testimony that Medicare could use theprocess to determine fair prices for expensive new drugs with nocompetitors. At the hearing, Cassidy called the idea“intriguing.”

Read more: 

• Time for federal action against balancebilling?
• Jury deems Centura Health $230K surgical bill'unreasonable,' awards $766
• GOP and Dems agree: Put an end to surprisebilling

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