Under the strictest cap on out-of-network charges, in-network negotiated hospital prices could fall by $124 billion per year.
Policy proposals that limit out-of-network payments to hospitals could deliver cost savings comparable to those produced under a 'Medicare-for-All' style system, according to a RAND Corporation study released Thursday morning.
RAND examined four different proposals to address surprise medical bills, ranging from out-of-network payment limits at 125% of Medicare rates to 80% of average billed charges in a state.
Under the strictest cap on out-of-network charges, in-network negotiated hospital prices could fall between 31% to 40% per year, or $108 billion to $124 billion.
One proposal which would set a limit at 200% of Medicare rates, could lead to reduced hospital prices by 8% to 23%, a decrease of $56 billion to $94 billion per year.
Meanwhile, a plan to use average private payment rates in a state would reduce prices by 16% to 30%, a decrease of $23 billion to $70 billion annually.
However, the least strict cap would either reduce prices by 3%, a decrease of $7 billion, or "create a modest price increase" of 4%, a rise of $13 billion, according to the study.
Christopher Whaley, PhD, an associate policy researcher at RAND Corporation, told HealthLeaders that policy changes to out-of-network charges by providers could have an indirect impact on in-network negotiated hospital prices.
"We find that the tightest out-of-network policy could be something that leads to about a 30% reduction in in-network prices and these are the kind of savings that are on par at least with broader policies for implementing Medicare-for-All," Whaley said.
RAND's study is the latest analysis to highlight the potential cost savings associated with proposals to curb surprise billing practices.
According to a study published in Health Affairs in mid-December, annual healthcare spending for patients with employer-sponsored health insurance would drop by $40 billion if specialists were not allowed to bill out-of-network.
Surprise billing has even affected patients that receive treatment through in-network providers. About one-in-five patients that undergo elective surgeries at in-network hospitals receive an out-of-network bill, according to a recent study published in JAMA.
Whaley said that limiting how much hospitals can charge for out-of-network services would also reduce the leverage for providers to negotiate with insurers.
He added this is part of the reason that many providers have been publicly opposed to balance billing proposals at the federal level, which they see as ceding negotiating power to insurers. However, these policy proposals would still have a less sweeping effect on the healthcare at large compared to the implementation of a single-payer system, Whaley said.
"From our perspective, changing the balance of these contract negotiations would be something that could lead to similar savings [as Medicare-for-All]," Whaley said. "But because you're changing how hospitals and insurers negotiate with each other, and not going through and reinventing the healthcare system, that level of disruption is potentially lower."
The issue of surprise billing has garnered attention from not only concerned healthcare consumers over the past year, but also from federal lawmakers.
Proposals to curb balance billing have served as one of the few healthcare policies to garner bipartisan support on Capitol Hill.
Last month, the House Ways & Means Committee released the text of the Consumer Protections Against Surprise Medical Bills Act of 2020, a bipartisan proposal to end balance billing and institute consumer protections.
The legislation includes a provision to establish an independent dispute resolution (IDR) process, or 'baseball-style' arbitration, for billing disagreements.
The inclusion of an IDR process in the bill was a major victory for emergency providers, who have been consistently opposed to congressional proposals that would set benchmark rates to the median in-network rates for a geographic area.
In the fall, emergency providers voiced opposition to proposals from both the Senate Health Education Labor and Pensions (HELP) Committee and the House Energy and Commerce (HEC) Committee that would have set benchmark rates based on a provider's geographic area.
Subsequently, the Senate HELP Committee and the HEC Committee expanded a bipartisan probe into surprise billing practices by both providers and payers, now including physician staffing companies as well.
Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.