Where Did the No Surprises Act Go Wrong? And Can It Be Fixed?

Dan Gorenstein (DG): The No Surprises Act was a rare bipartisan health policy win when it passed back in 2020. 

Just about everyone was excited about the idea of protecting patients from big, unexpected medical bills and lowering health care spending overall.

But six years later, the implementation of this law has left a lot of people frustrated and concerned.

On Tuesday, May 26, Tradeoffs co-hosted a virtual event about the No Surprises Act with the Leonard Davis Institute of Health Economics at the University of Pennsylvania. 

I moderated a conversation with some of the country’s top experts on the law to understand what’s gone wrong, what could be done to change things, and what lessons we can learn about crafting complicated health policy.

Today, a special live edition of Tradeoffs. 

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

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DG: The conversation you’re about to hear was recorded live and has been edited lightly for length, clarity and sound quality.

Hi, and thank you for being here today. My name is Dan Gorenstein. I’m founder and executive editor of Tradeoffs. Tradeoffs is a nonprofit news organization that covers healthcare’s toughest choices. We produce a weekly podcast called Tradeoffs, which you can get wherever you find your podcasts.

And, you know, there have been a lot of fast and furious changes in healthcare over the last year and a half. Many of you know this, and it can be hard to make sense of all of this that’s happening. That’s why we’ve partnered with our friends at the Leonard Davis Institute of Health Economics at the University of Pennsylvania for a series of conversations that we call Decoding the moment.

Rachel Werner (RW): And I am Rachel Werner. I am the executive director of the Leonard Davis Institute. LDI is Penn’s hub for research on health care delivery, population health and health policy. We bring together more than 500 researchers who are national experts and thought leaders on health and health care.

We’re coming together with Tradeoffs to create a place where you all can better understand what’s happening in Washington, D.C., and what it might mean for our future. Today, we’re taking a closer look at a rare bipartisan health policy win from the first Trump administration, and how it seemingly has gone a bit sideways.

DG: We’re talking about the No Surprises Act. Congress passed the hugely popular law in 2020 with two goals shield patients from unexpected medical bills and lower the high prices charged by some doctors. One of those goals is going great. Patients are now protected from bills that occurred after going to a hospital that was covered by their insurance in network, but inadvertently got care from doctors out of network.

But new academic research and reporting from The New York Times suggest that the second goal is falling short. Some doctors are now getting exorbitant payouts, charging insurers so much more that it may be fueling higher premiums that we’re all paying. Joining us to talk about the No Surprises Act and what a fix might look like, are two of the country’s top researchers on surprise bills and a former official from the centers for Medicare and Medicaid who helped write the rules for the law.

I’m going to turn it back over to you, Rachel, to get us started with one of my favorite parts of these decoding episodes, which is three big numbers.

RW: Thank you Dan. So here are three numbers that succinctly tell the story of what’s happening with the No Surprises Act. The first number is 20 million. That’s the number of bills that were out of network in 2024 that could have resulted in a surprise bill.

Now, to be clear, it’s impossible to know how many providers would have actually sent a surprise bill. But the point is that consumers are now protected from the kind of unexpected bill that comes to you when you go to an in-network hospital or emergency department, but get treated by an out-of-network doctor.

The second number is 88%. Multiple researchers have found that doctors are winning more than 80% of their arbitration cases, a system that was set up by the new law. When out-of-network physicians can dispute how much an insurance company offers to pay.

And the final number here is 2.7. That’s one estimate of how much more, on average, providers are getting paid in these arbitration cases, compared with the typical or median in-network rate for some of the same services in the exact same markets. So, for example, we’ve seen a doctor get paid $330,000 for a diagnostic test that usually gets reimbursed at a rate of $2,600.

So those are the three numbers then. And the last two are why people are concerned. This arbitration system, as it’s currently working heavily, favors providers and it’s delivering some huge payouts. That’s not how the system was designed to work. Today, we’ll get under the hood and figure out what happened and where we can go from here.

DG: Great. Thank you so much for that, Rachel. So we’ve got one number that reminds us that the law is actually protecting millions of patients, just as intended. But the other two show that something seems to be going awry. And the arbitration part of the law, which could cancel out the law’s goal of lowering health care costs.

Now, I would like to turn on to our panelists. So if you guys can come off or, you know, make yourselves visible like magicians and these are some of the best folks, as I mentioned before, these are some of the best folks you could hope to have a nuanced, evidence based conversation about what the No Surprises Act is, and I’m going to let them introduce themselves. Let. Lindsey, could you please start? Thank you.

Lindsey Murtagh (LM): Absolutely. Thanks, Dan. I’m Lindsey Murtaugh, I’m at the Brown School of Public Health in the center for Advancing Health Policy through Research. And here at Brown, my research focuses on private health insurance, but perhaps most relevant to today’s discussion, prior to joining Brown, I worked at the centers for Medicare and Medicaid Services, where I was one of the leads in the development of regulations to implement the No Surprises Act. So I had a front row seat as we attempted to take what Congress had passed and put it into reality.

DG: And Ben, how about you?

Ben Chartock (BC): My name is Ben Chartock. I’m an assistant professor of economics at Bentley University in Massachusetts, and I’ve been working on the No Surprises Act for the better part of a decade at this point.

DG: Thanks, Ben. Zack.

Zack Cooper (ZC): Ben, it’s good to see you. Hi, everybody. Zack Cooper. I’m a faculty member here at the Yale School of Public Health. And our Department of Economics also run the Healthcare affordability lab at Yale. And a lot of my research was in the early days showing how often surprise medical bills occur. And then I was I was pretty hands on as the law made its way through Congress.

DG: Thanks for the introductions, you all. Thanks for keeping them short. I know everybody appreciates that, appreciates that. And I also really want to thank you for being here and spending time with us and investing some time in this really important topic. Zack, let’s start with you. I’d really like you to help us set the table because you’re one of the first researchers to study the issue and really help put it on the radar of lawmakers. What was the problem that you and others identified?

ZC: Yeah. So it’s really there’s this uniquely American idiosyncrasy in our health system, which is that hospitals and physicians independently negotiate with insurance companies over the care that they provide over their prices, over their network participation agreements.

And, you know, if you’re an internist, that’s not a particularly big deal. But if you’re a hospital based physician, that’s a really big deal. And so if Ben got into an accident, I hope he doesn’t. But if he went to an in-network hospital and he did everything in his power to get there, he could still be chosen or treated by an out-of-network physician. He didn’t choose and couldn’t avoid. And that creates a bunch of problems.

So the first and the most obvious is, well, what do you what do you pay in that case, the physicians out of network and that physician might try to collect their charges. And it might be that Ben’s insurance company says, look, we don’t cover out-of-network care to begin with. Well, then, you know, Ben is is not in a great spot. He’s going to be facing a really big bill. Might be the Ben’s insurance company says, okay, we’ll pay, but we’re going to pay what we usually pay for in-network care. And in that case, the physician might actually go after Ben. And and in that case, try to do what’s called a balance bill. Bill. Here’s the difference between what they were billing and what the insurance company paid. And this was happening really, really frequently.

So I did a bunch of work showing that for emergency room care, there are about 1 in 5 of the in-network visits that we saw. And Ben was doing similar research with other data involved, an out-of-network physician, and we were seeing similar incidents for other physicians.

So you want to think about anesthesiologists. It’s happening 10 or 15% of the time. Pathologists similar rate. You saw it a lot with assistant surgeons. And then you also saw it with with radiologists. And that gets us to the second issue, which is that these physicians, Because of this sort of idiosyncrasy in how they’re getting paid. We’re getting paid higher rates as a percentage of Medicare than other physicians because the bargaining structure changed.

So if I’m an orthopedic surgeon, I in a sense, have to be in network, right? If I’m not out of network, I’m just not going to see many folks. If I were an Ed physician or an anesthesiologist, now, there are some obligations because of EMTALA that have to see patients. On the flip side, I don’t have to participate in networks. And so their in-network rates sort of higher than other physicians rates. And that really is what sort of gave rise to to the No Surprises Act. 

DG: Thanks very much for that very straightforward, clear explanation. Zack and you and other folks took this data. Ben took this data to lawmakers, and you said you have to do something. And specifically, as we mentioned before, a fix needed to accomplish two things shield patients from getting these big bills and come up with a way to figure out how much insurance should have to pay doctors because the docs still need to get paid. And voila, Congress passes the No Surprises Act. Lawmakers initially wanted to require insurers to pay providers the median of what they pay to in-network providers, the clinicians and hospitals they already have contracts with.

But the providers push back, and Congress instead set up what’s known as baseball style arbitration, a system to settle these disputes between the docs and the insurers. Zack, can you briefly explain how baseball style arbitration works and the theory behind why folks thought it would actually bring health care costs down?

ZC: For sure. And I’m going to add a third goal in there. So one of the mistakes I often made back in the day talking about it, and I want to make sure we don’t make today, is talking exclusively about physicians because you have this idea that it’s, it’s one doctor and we’ve got this Viking doctor who’s sort of shaking down patients for their.

DG: Did you say Viking doctor?

ZC: Viking doctor? Right. Super aggressive right there out there with, you know, whatever whatever. Vikings. Harry. It turned out there were a handful of physician staffing companies. So envision and its subsidiary Emcare Teamhealth, who’s still around. And, you know, they had really sort of internalized this, this sort of idiosyncrasy as part of their business model. And so Envision Healthcare. And we showed it.

The company eventually went bankrupt. They basically just had a policy of not really participating in networks. Team health was was actually different. They would pull out initially and then actually mostly in network. And I think part of the idea with no surprises act was to sort of discourage some of the sort of institutional out-of-network billing. There were different flavors of reform that we could have done.

You know, my personal favorite flavor or favorite was saying, look, like it turns out people by the hospital and the physician together and we should just have that be the payment rate, right? Insurance companies should just pay hospitals and, and have the physician fee baked in. And nobody thought that that was tractable. There are some other folks out there who said, look, we should just regulate the rates. And I’m an economist, so I don’t adore price regulation. That got me a little nervous. And some other folks, you know, agreed. Where we got to is baseball rules arbitration. And the idea is what’s the challenge? We don’t know what to pay because there isn’t a contract.

We’ve got to establish something that’s pretty close to a market determined rate. And so the insurer says, look, here’s what I’m willing to pay. The physician says, look, here’s what I want. And an arbitrator chooses what he or she thinks is the most reasonable amount. And I’ve done some research looking at this in New York and found that in equilibrium. So on average overall this actually raised the lower excuse me, the in-network rates we saw to physicians.

And I do want to sort of caution. We don’t really know what the effect is thus far of the No Surprises act. We know that some of the arbitration payment outs are pretty high. And in some ways, that doesn’t really surprise me because there were different cases to begin with. These are cases that by construction, weren’t settled. You know, I think the jury’s still out about the impact of the program.

But the idea is basically if each party is disciplined in the bids they give and they can only submit one, you’re going to get something that approximates an in-network payment. So that was the idea. An arbitrator. You want. As many of these cases settled as you can get, the ones where there is a dispute can go to arbitration. Each party submits a bid. Insurers what they are willing to pay, hospitals, what they’re willing to accept. The arbitrator chooses one and that’s it. That’s our ballgame.

DG: No. Right. No negotiation, no negotiation beyond that.

ZC: And you can’t even take it to court, right? Once the arbiter has said, you know, I’ve issued my ruling, that’s the amount you have, I think 30 days to pay it. Great. So that that got codified. And one of the things that there was some debate over was what instructions you give to arbitrators.

In New York, they actually had them consider billed charges, which is a little nutty because those are just made up. Doctors and staff and companies didn’t want them to have to consider Medicare. And so the law wrote in that they should consider the Spie was a Spie a, which is basically the median in-network rate in the market. Now there’s all sorts of and we’ll talk more about this litigation over just how much they should consider it. But that’s the information that the arbitrator gets.

DG: Great. So Congress passes the law and then it gets kicked over to the federal agencies, the Department of Labor, Treasury, and the Health and Human Services to turn the No Surprises Act into actual rules and regulations for hospitals and doctors to follow. They had less than a year. Lindsey, looking at you here less than a year to do that. Get that done. You worked on this when you were at CMS, the centers for Medicare and Medicaid Services. Can you tell us a story that captures the scramble that you and your colleagues were in to kind of get this guidance out in a hurry?

LM: Sure. So let me set the stage a little bit more even. We had much less than a year. We had a year until the rules went into effect. The law actually passed on December 27th, 2020, which many of us are on vacation on that day and we’re deep in Covid. I think I had kids still doing Zoom school, as did many other federal workers, and we had six months actually to get our first rule out.

The very first rule was required on July 1st, and that’s happening during a time of presidential transition. So the Trump administration was on its way out. First Trump administration, the new leadership was just showing up. Many of them were not in place as we were having to make critical decisions on these rules. And this would be hard in just one agency, but these rules were, are also overseen by multiple agencies.

So we’re talking about Department of Labor, Health and Human Services, Treasury, and also the Office of Personnel Management. So we are all trying to kind of figure out what this law says. Many of us have been tracking it for months, maybe even over probably years. It had been going on in Congress for a very long time, and we’d seen various iterations. But we suddenly had this law we have to implement. And normally when you’re implementing something of this level, you would be needing to get the very highest levels of leadership buy in at each, at each agency. In this case, they weren’t even there yet.

And so I remember going to, I was a career civil servant. And I remember going to one of my career leadership and laying out the challenges that we have, these massive decisions that need to be made. We don’t have people in place yet, and we have this clock that is ticking. That’s both. Congress has said we have to do this. The incoming secretary has said that he absolutely wants to hit the deadlines.

But perhaps more importantly, we had this time frame where we needed to get the rules in place in order to make sure that consumers were protected on January 1st, 2022. And so we had to move very quickly because we needed the rules in place and we needed to leave issuers, plans, providers, hospitals, all of the regulated entities time to actually stand up whatever procedures they needed on their side to comply with the new rules.

So I, I brought this issue to my leadership and I said, like, what do you want us to do here? We have all of these decisions that need to be made. And the individual gave me some really fantastic advice. He said, look, we have to get this stood up. Let’s think about it in two buckets. One is the bucket of what we need to do now to not break the NSA, to make sure that on January 1st, 2022, people can actually be protected. The other bucket is the stuff that it would be wonderful to have really important policy decisions, but if it’s not stood up on day one, it won’t break the NSA. Now, there were some of that stuff where.

DG: And.

LM: It has.

DG: Yeah, just jumping in for a quick second here. What I’m hearing you tell us is this was a like figure out that’s prioritized what needs to get done right now. And what can we push off because we have too much given the time frame, we have absolutely too much to do all at once.

LM: Absolutely. And some of the stuff that was nice to have, if we had an easy, clear solution, obviously we moved that forward. But if it’s a you know, if we can’t get there, we need to just move the rules.

And I think that I personally, and I think a lot of my colleagues assumed that we would be able to return soon after those initial set of rules went out to clean up whatever we didn’t quite get to in that first round, which we’re now in 2026 hasn’t quite happened. 

DG: I feel like your story really does a nice job of illustrating just the kind of time crunch and pressure, and even people with the best of intentions who are trying to sort things out. The reality is, new legislation means new things, new. Everybody’s got to figure out something new, and it’s hard to anticipate exactly what that’s all going to look like.

Just briefly, Lindsey, What did you think of the suite of rules that you all ended up releasing in 2021? Like, if you’re going to grade this, what grade would you give it?

LM: Oh, I hate assigning grades. I would grade it on a curve too.

ZC: This is why I don’t let my students grade their own homework. Dan.

LM: Yeah, I’m new to academia. I haven’t had to assign grades yet.

ZC: This is like my student’s dream.

LM: I think that in the time we had, I really do think we did a fantastic job, but there it was not perfect. It couldn’t have been perfect in that time frame. So I’m going to go with a B+.

DG: Okay.

LM: Although I have feelings in both directions on that one.

DG: You mean like it could be both better or worse than a B?

LM: I feel like the curve for that time frame should push it up. But I also really think that there is a huge value to giving an opportunity for notice and comment rule making, where we actually could have proposed the rules and gotten feedback.

And I know that if we’d had that opportunity to really put out to the public what we were proposing and getting got feedback, identified other issues, addressed those issues in the final rule. I know we would have come out with a much better product, but the timeline just didn’t allow for that.

DG: Very good. So. And one more. One more here quickly, Lindsey, to you, like as soon as you guys released the rules, providers started challenging them in court. There have been some 20 lawsuits against the law by one count, half of those centered on the arbor on the arbitration setup.

Nicholas Bloom, in the audience, asked why there aren’t more controls in this process. And my understanding is this litigation is part of the answer. What impact have these lawsuits? Lindsey had?

LM: I think it’s hard to overstate the impact of the lawsuit. So let me just sort of walk through the rules quickly. The very first rule that was issued around the arbitration process basically said that you begin with the presumption that this qualifying payment amount or QPA that Zack talked about, which is about equal to the median. It’s roughly supposed to be the median of the in-network rates.

You begin with a presumption that that’s the appropriate out-of-network rate for the claim, and the arbitrator is supposed to select the offer that’s closest to that QPA unless they determine that there’s information submitted by either party that clearly demonstrates that the QPA is materially different from whatever the appropriate amount is.

So if those rules had gone into place, you know, that sets a pretty clear standard that the QPA is supposed to anchor the decisions. So that rule gets challenged. It’s challenged so early that we haven’t even seen how it would play out because the process has not gone into place yet.

A judge in Texas who has played a very big role in the litigation around this, most of the cases that have struck down the rules have come out of his court strikes this down. So the agencies scramble because we need this to go live.

And there’s a second rule issued. And so that rule pulls back a bit, but it still does hold on to the qpa as a major factor. And I think that if, you know, I know the court case has said that this is not should not be the case.

But I think if you look at the statute, there’s a very strong argument that this QPA amount was intended to serve a big role in the NSA implementation and in the arbitration process. So under the second rule, the the arbitrators are instructed to basically take the offer that best represents the value of the item or service, um, after they consider the QPA. So they kind of consider the QPA first.

And then they also should consider all the other information that’s submitted, unless it’s in a few of these prohibited factors that they’re just not allowed to look at. So they first look at the qpa and then they’re supposed to say, okay, here, I got this other information. Is it already factored into the QPA?

The QPA is based on contracted rates. So is it somehow already baked into the QPA? And if not, okay, is it credible information? Is it relevant to the offer. Things that, you know, I think make sense in terms of should the arbitrator actually give any credence to this information? And then they take all that information into account and they figure out what the best, you know, what, which offer best represents the value.

This also was struck down by this in the same court. It was challenged immediately and struck down. So now we’re in a situation where I think the agencies probably feel very, very constrained in offering any kind of guidance to the arbitrators in terms of what they should be considering or how they should be considering the QPA. 

DG: And so one sentence I want to get I want to bring Ben in here. And I want to kind of fast forward to today, but one final in in one sentence, Lindsey, would you say something like these lawsuits have really sort of almost like neutered the arbitration process? We actually haven’t seen the arbitration process work in the way it was set up to because of these lawsuits. Like, what’s the one sentence takeaway here on the impact these lawsuits have had? One sentence,

LM: The litigation has transformed the arbitration process into an extremely provider friendly environment. I don’t think it has neutered it. I think it’s made it very provider friendly.

DG: Fast forward to today. And while the consumer protection piece of the No Surprises Act is working quite well as we’ve established, the arbitration process, as Lindsey just laid out, is not working how Congress envisioned.

And as Rachel highlighted at the top providers winning 80 plus percent of cases and usually winning nearly three times the average in network price for a given procedure. Ben, you’ve been trying to understand why this is happening. Something Jesus Vasquez and many others in the audience are eager to hear more about. What has your research, sir, found?

BC: My research has looked at the arbitration process itself that Lindsey and Zack so eloquently teed up. So I have on my other screen in front of me, um, the amount of money an arbitrator gets from each and every individual case that they take. So on the low end, it’s about three 400 bucks. On the high end, it’s $8,900.

And Rachel put three big numbers up at the beginning of the talk, 20 million. So 20 million potential out-of-network medical bills, if about 1 million or 2 million a year, which is the number of arbitration cases we see are going in front of arbitrators. Multiply that a couple of hundred bucks times a million cases, and all of a sudden you have an opportunity for the arbitrators themselves to do quite well. Now more cases are going to come to the NSA if they’re particularly favorable to one side or another. And what we’re seeing is consistent with the story that looks like that.

DG: That looks like what?

BC: I’m going to use a word from the economics world called inducement, meaning I’m inducing someone to do something. We have a regulatory system at play that induces the arbitrators to bring more cases to, to kind of be to. There’s not, I’m not…

DG: Well, let me let me jump in. I think what you’re saying to me here is I should quit my job at Tradeoffs and become an arbitrator.

BC: Dan, I love what you do. And I would be sad if you quit your job at Tradeoffs, but I’m not telling you don’t do it.

DG: So the arbitrators have an incentive. They are being induced potentially to take more of these cases. The broad picture we have though, right, is physicians winning big, potentially some.

And when we say physicians, we’re talking you know, many of them are employed. We’re not talking about a doc who’s hung their shingle out there, but the entities that own these practices, these physician practices, potentially gaming the system to increase payout.

With that in mind, Kelsey Burke, wants to know what would you all say to providers who think the process allows them to get what they should really be paid? What do you think, Ben?

KC: So I’ll answer. This is the reason why an arbitration system that isn’t clogged up with cases could be beneficial because if the provider really does have a reason to get paid away from what the median in the market is, they can come to an arbitrator and kind of make that pitch. But with a million cases every six months, it’s very, very difficult for that to get through.

DG: Zack, thoughts on this question?

ZC: So I think we need much clearer instructions for arbitrators. I think we need, in a sense, a review process for them. And that will require us specifying what we think good arbitration looks like. You know, I think it is right that if the case was wildly atypical, the physician should absolutely get paid more if it’s your standard visit. Probably not.

And so what we actually see and Ben can talk a whole lot more about it, you know, certain companies, you know, physician staffing companies basically submitting all their stuff to arbitration. And that that was never, I think, the intention of the law to begin with. We also see, really curiously, some ownership stuff that should get us all concerned.

So when the same financial firm owns the physicians and owns the arbitrators at a minimum, like that ain’t a good look. So I think we got to get rid of that. I think we need instructions for arbitrators. We need to shift their incentives. And and I think we got to start doing some grading on them and think about whether we want to renew their contracts.

DG: And thanks for that, Zack. Ben, on that point, based on the research you’re doing, you know, in my question, I use the phrase gaming the system based on the research, based on the evidence in front of you, would you say you’re seeing what looks like to you providers gaming the system?

ZC: I’m going to be sober about the facts that I’m seeing. I’m seeing that the median arbitration award is higher than all but 1.5% of any negotiated price. So these are rates that are almost never found in actual market negotiated processes. I’m also seeing…

DG: And wait sorry, sorry. Before you go to the…and also what does…so break that down in a simple way. What does that mean when you say you’ve never seen prices in all but like the most rare of instances in the market?

ZC: Using the transparency and coverage data, which is new data that’s come out under price transparency rules and regulations, we can look at the actual prices that are paid in in these markets. And only 1.5% of those cases, a very, very small fraction, are as high as the average amount that comes out, the medium amount that comes out of these arbitration cases. So they.

DG: Are what.

ZC: They are on the far, far end of extreme for provider reimbursement amounts. Now, maybe some of that elevation is warranted by the the facts of the case that are allowed to be brought into arbitration. But this is a particularly high number. And they’re happening millions of times. And insurers are not often winning in these arbitration cases when they bring these arbitration cases to the dispute resolution entities.

Now, one thing I do want to caution us on, Dan. So this is a little like if you Google side effects, you find a bunch of people who report having side effects. So I was looking at a new car. I went and looked at reviews for it on Reddit. And it turns out like lots of people have had bad experiences with this car.

Well, that’s because the people who have bad experiences go to Reddit and people have good experiences. Don’t go to Reddit. They drive their car and they’re incredibly happy. So I think we don’t quite have the full picture yet. So I think Ben’s work has told us something very clear and very important, which is that when these cases go to arbitration, providers are getting a lot and they’re winning most of the time. B

But in some ways that’s like kind of not surprising. I think it was always going to mechanically look this way. So you wouldn’t take a typical case to arbitration. But if I had a typical case, chances are I’m going to settle that. Now I think what we need to know are two things. One, I think Ben showed us.

The other is out there. I’m working on a little bit right now. How has this affected total spending on emergency room services? Because in New York, what we know is that slowed the growth rate in emergency spending down. And we just haven’t seen great work on that yet. It’s also pretty tough to measure.

The second is whether there are entities that are clearly abusing the system. Now we then have to make the decision about whether the abuse forces have changed or opinions. But, you know, The New York Times did this exposé about David Rowe, the plastic surgeon who’s, you know, whatever, I’ll just say it. I mean, the guy’s gaming the system and getting hundreds of thousands of dollars for cases, which he should not be getting hundreds of thousands of dollars for.

There’s a person who used to be on The Apprentice, who Donald Trump fired for being too vicious. Think about that. Right? And that person’s just bringing litigation at an industrial scale that probably isn’t right now for the other cases. You know, I think we need to look at it more.

DG: When we come back, our panelists discuss how the No Surprises Act could be improved, and the lessons we can learn for future policymaking.

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DG: Welcome back. You’re listening to a live conversation that I moderated on May 26 about the No Surprises Act with Yale University’s Zack Cooper, Ben Chartock from Bentley University and Lindsey Murtagh, a former CMS official who is now at Brown University.

So I’d like to turn to solutions. I think you’re alluding to that, Zack. Lindsey, you you have, Ben, you’ve studied states that have separate surprise bill protections. Peter Newell is curious about states role in all of this. You’ve singled out to us in background conversations, Ben, that Washington state is a place that’s finding some more luck here. What’s what’s in the water in Washington, which I think is a question I asked you three years ago when we did this story.

BC: Yeah. Thanks for the question, Dan. There are some other states that have chosen to use their own dispute resolution system for these surprise out-of-network medical bills, and they are not seeing the runaway volumes nor the high, um, payment amounts that we’re seeing in the No Surprises Act. They publish a lot of data. They arm the arbitrators with a lot of that data.

But I think Zack alluded to this point before when he mentioned looking back at the arbitrators who we’ve already certified. It’s not losing sight of the minutia in the rules of, hey, we can actually make sure that, that the arbitration entities that we certify are up to standard with what we’re looking to see in dispute resolution.

And so when you look at the outcomes in Washington state, you see at most a couple hundred disputes a year rather than on the order of a magnitude of of millions. So that’s what I’ve seen in looking at the states.

DG: And so if there’s one thing that you’re seeing, that’s if there’s one thing that the federal system could graft from the states, it seems to be the most effective. What has it been?

BC: Looking back at a regular basis on who were empowering to make these decisions is a worthwhile exercise, not necessarily one that comes out of Congress, but comes out of the agencies themselves.

LM: If I could just jump in here so I am not an economist. I am a lawyer. But when we were initially looking at, kind of thinking through how we would implement this, what numbers to expect, which we got massively wrong.

One of the things we were seeing was that in states where the, the win for provider, the whatever the process was that they sort of set up, leaned towards the providers and at higher numbers there, they created more of an incentive for providers to bring whatever the case would bring it to whatever process the state had.

And so I remember looking back at the numbers then, and if I recall correctly, you know, you just saw huge growth in the number of disputes that were in those states, whereas in other states where it was more kind of even, you didn’t see that same growth.

And I think that while I completely agree with Zack, that we need to get a better understanding of what’s really going on and what the true impact is of the no surprises act over everybody, I do think it’s noteworthy that we’re starting. We are seeing that real increase in volume, and we’re seeing huge volumes in the No Surprises Act in a world where providers are winning, they have every incentive.

It makes a ton of business sense for providers to go when they see those sorts of wins. And so I think my concern is that we really are only seeing the beginning of the impact of the No Surprises Act if it sort of follows that growth rate.

I remember looking at early on, the volume of disputes and everything in IDR. I think we’re just at the very beginning of where the NSA leads. The other thing I did want to highlight while we’re talking about solutions is you mentioned that some states have this in place. Any state could adopt a law that does set the out-of-network rate.

So that plan disputes that are subject to their jurisdiction go to that state process instead. That doesn’t cover everybody. Self-funded employer sponsored plans are not going to be subject to that, probably isn’t going to reach a case where the providers in one state and the plans in another state, but that is a sort of a safety valve. States have to control costs within their own state if they’re not happy with the direction of the dispute. The federal arbitration process.

DG: And so go ahead. Zack.

ZC: No, please. I mean, I was just going to say, look, let’s let’s talk about for, I think, pretty common sense things that could be done really quickly. I think the first is just saying, look, you can’t have conflicts of interest. You cannot be an arbitrator ruling on an entity who’s owned by the same company as you. I don’t think you’re going to get a whole lot of pushback on that. We should see if it’s happening. It’s happening. Those entities should just be disqualified.

DG: And real quick, Zack, real sorry. Before you go to number two. Yeah. Is there any evidence of that conflict of interest? Do we know that that’s actually happening?

ZC: So it’d be a private equity firm or another. I don’t want to, you know, vilify private equity in this. But but let’s just say a private equity firm owns a physician staffing company and in its portfolio also owns a company who’s doing arbitration. So the same parent company owns the arbitration and arbiters and then owns the physician.

So at a minimum, they’re getting a whole lot of inside information about how these processes are playing out. That’s at best. Certainly there’s a conflict and then there’s the scope for, for, for that. You know, one of the things I want to see Ben look at is, you know, I don’t know if he has it in this data, but what are the patterns we see across arbitrators? Like how much variation do we see? Are there some arbitrators who are better at this and worse at this.

And that really gets us to to my next three recommendations. So the first is we should be auditing the arbitrators. We should be saying, here’s how these folks do. Here’s what this one does. Here’s how you know, this one does.

And then third, we should have a set of, of rules for contracting with them in the future. Now that’s going to be tough. And we have to think about that from a rule-making process.

But you know, the contracting shouldn’t just be that you sign up and say, you can do this and get your 500 bucks and off you go. Do we think you’re good at doing this?

The final one and I think this is incredibly important. There are penalties for arbitrating on cases that weren’t eligible in the first place. So there are cases that are going through arbitration where Medicare is the payer. Right. That’s just nutty. Right. And because these things are binding, they go to the courts and the courts like, oh, we can’t do anything to change it. Like the law says, once these cases that are ineligible go through. And there’s been a ruling the payers got to pay.

And so I think we need penalties for the arbitrators to do that. So we got to think a lot about how we’re contracting these entities. We got to audit them. We got to get rid of the conflicts. And I think hopefully that gets us closer to the world that Ben’s describing. The research that I saw from New York that I did showed that it lowered spending, because I think right now it’s just just not working as well as it should.

DG: Lindsey, there’s a question from Peter Wehrwein. If you were to advise Congress on how to address solutions based on the evidence. What would you tell them to do so?

LM: I think I would. A lot of what Zack just outlined is stuff that it would be really, really good for Congress to address. Agencies, maybe they can audit the ideas, the arbitrators now, but what standard are they able to hold them to when the litigation has basically said you can’t direct them to do anything? So Congress should, at a minimum, really step in, I think, to restore that authority to the agencies.

I think Congress has a number of options that they could take, and with varying levels of impact in terms of costs they could take, they could adopt a rule that puts in place the types of rules that the agencies originally adopted. They could adopt a benchmark approach, even though that was originally rejected.

You know they could take some of the transparency and coverage data that Ben was just talking about and set a new benchmark based on that they could add in address the incentive issue that Ben has talked about in terms of the IDREs and changed the way fees are collected, so that there are fewer incentives in place to to try to attract more cases to the dispute resolution process.

So there are a number of steps that they could take, but I think at a minimum, having them step in to give the agencies authority to direct arbitrators and oversee arbitrators more directly would be incredibly helpful.

DG: Are there any other solutions that you would like to see coming from Congress, Ben?

BC: I’m an economist and not a political scientist, so I want to punt on this a little bit, only to say that my sense is that beyond Congress, a lot of the activity will come from the administration itself and from the agencies, because so much of this law that was passed with bipartisan support, Congress has said, look, we solved this. We got our wins when we got them, when we passed this thing. Let’s move on to the next piece and have left wonks like Zack and Lindsey and myself looking at the the pieces on what’s happening with prices and one way to think about what’s going on here is even if you can’t exactly quantify the equilibrium effect of the law or in layman’s terms, how much prices are or are not going up from it, one way to think about the No Surprises act is as insurance itself against surprise bills.

So we may all be paying higher insurance premiums as a result of this, but we’ve also removed ourselves from the likelihood of being stuck with an unexpected out-of-network medical bill is the price we’re paying, so to speak, for that insurance, is it worth it? That’s where the hard work that that we’re all doing here is kind of hopefully coming to bear.

DG: Okay. Very good. Thank you. I want to end the conversation by moving beyond the No Surprises Act and using this as a case study for policy making. Bill Juram asks, what lessons does this experience offer future policymakers, researchers and advocates on how to avoid unintended consequences? We have this very popular bipartisan piece of legislation. People were psyched. I remember reporting on this. I remember interviewing you, Zack. There’s a lot of enthusiasm.

ZC: I’m still psyched, by the way, you know.

DG: Great, great, great. At the same time, we’re seeing these, like, super unintended consequences that are, they were, they’re, they’re kind of ugly. And so this question is like, what lesson does this experience offer for future policy makers, researchers, and advocates on? Are there ways to avoid unintended consequences? Zack. Thoughts.

ZC: Yeah. So I’m going to give three points. So first I do want to say that we have to be cautious. You know, I think there’s it is actually probably too soon to sort of say this thing is, is hurting people. And we got to go back to the drawing board. I think patience is a virtue on this one. And I don’t want to see us act too quickly. But I think three things in practice that we should be taken from this going forward.

The first is policy making shouldn’t be one and done right. That is, Congress votes on the thing and moves to the next issue, never to look at the issue ever again. This is like a long term committed relationship, right? Once you sort of married and entered into your your nuptial bonds like you are with this issue for the long stretch and.

DG: You need counseling.

ZC: You need counseling. Well, you need to, to, you know, keep communication open. All the, all the things, but, you know, truthfully and, you know, getting serious for a second, you probably have to revisit laws and you find something that isn’t working and you fix it.

And I think one of the challenges is that right now, in this hyper partisan environment, folks are on, you know, they’re just scared to open the hood of what’s happening. So that’s, that’s number one.

The second is, look, I actually think we’re on the precipice of another set of big health reforms. So every 10 to 20 years, we get big health reform in the US. And if we look back at the reforms we had over the last 50 years, most of them have been about expanding coverage right there, addressing problems of scarcity, too little coverage.

The next one is going to be about affordability. That’s a problem of access, where the solution is, in a sense, to do less to take away. Those are really hard problems, problems of access for for democratic institutions to solve. And there’s a member of Congress out there who looks at the No Surprises Act.

And when you ask him about it, he says, look, people are protected as long as people are protected. I don’t really care what providers get paid. That’s how we end up spending 18%, and we’re going to end up, if we follow his path, then in 25% of GDP on health care, which takes me to the sort of third point, which is, you know, economists have a minimalist approach. So when I say a problem, I’m very reluctant to deviate from the sort of competitive equilibrium. Say, I like competition. That’s why I like arbitration.

I think the question a lot of the folks who are out there listening, folks on this panel have to think about is, does the policy making process? Has it gotten so sort of sort of bent out of shape at the moment that instead of doing the minimalist approach, we got to move towards a more maximalist position, which would look like price regulation. I’m not totally there yet, but, you know, one of the lessons from from this for me is that if you proceed incredibly cautiously and take that minimum approach, you open the door for for what we’ve seen here.

DG: Final question to you, Lindsey. Two minutes. What do you think of what Zack just said?

LM: I agree with a lot of what he just said. I think it really takes time to make good policy. And I would just add on to that. You know, I think that we’ve been talking a lot about the actual like nuts and bolts of what policies were put on the books. We haven’t talked about how things are operationalized much at all. And that also takes time.

And I think that you can look at a lot of what’s going on in the No Surprises Act, and a lot of the challenges that we’ve seen and see operational problems. We’re taking two groups that didn’t communicate with each other. One was an out-of-network provider who purposefully didn’t stay in touch with the insurer, and we’re forcing them to communicate in a way we never have before and didn’t really have systems in place. We still don’t have systems in place for them to communicate.

So I think like, I don’t want to be too patient because I think that we are overdue to fix some of those operational problems. But I do think that we haven’t yet seen what the No Surprises Act could look like in kind of that world where we have figured out how to implement it smoothly.

And I think building in time for the policy to develop, it would have been great if we had more time, as I think I’ve made very clear, for the policy to be developed at the agencies to then have more time for parties to operationalize it. All of that would, I think, help with a much smoother rollout of the No Surprises Act.

DG: Thank you. Lindsey, let’s leave it there. If the audience were here, I know they’d be snapping or clapping or hooting or hollering. Uh, the three of you have done an excellent job. We really appreciate the time. Thank you very, very much. 

DG: And thank you for listening to this extended live edition of Tradeoffs.

Since we had this conversation, the Trump administration released some long-awaited tweaks to the No Surprises Act arbitration process.

Lindsey Murtagh says the changes should make it easier to cut down on the number of ineligible medical bills that go through arbitration.

But she added the larger concerns remain. 

I’m Dan Gorenstein, this is Tradeoffs.