Two senators have a bipartisan plan to fix 'surprise' medical bills. (And hospitals aren't happy about it.)

Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) on Wednesday formally introduced their legislation to address so-called "surprise" medical bills, with plans for the Senate Health, Education, Labor, and Pensions (HELP) Committee to markup the bill next week.

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Background: Alexander, Murray mull proposals to address 'surprise' medical bills

Alexander, the Senate HELP Committee's chair, and Murray the ranking member on the committee, last month unveiled a draft version of the bill that included three proposals aimed at curbing surprise medical bills:

  • Implementing an arbitration process that health care insurers and providers could use to settle payment disputes for bills higher than $750;
  • Requiring hospitals that are in a health plan's network to guarantee that everyone working at the facility, as well as lab and diagnostic testing performed at the hospitals, also are in the plan's network; and
  • Setting a benchmark payment rate that insurers can use to reimburse providers who are not in their plans' networks.

Bill details

The version of the legislation Alexander and Murray introduced Wednesday calls for setting a benchmark payment rate for out-of-network care to address surprise medical bills and includes provisions aimed at lowering U.S. health care costs.

Proposals to address surprise medical bills

Specifically, the bill, called the Lower Health Care Costs Act, would establish a benchmark payment rate that insurers would be required to pay for out-of-network services, and those benchmarks would be based on the median in-network rate in the geographical area where the care was provided.

The bill would not implement an arbitration process, which hospital industry groups had backed, nor would it require hospitals to ensure all providers at their facilities participate in the same insurance networks as the hospitals—a proposal Alexander on Tuesday said he favored. Alexander said he and Murray decided to move forward with the benchmark payment rate proposal because the Congressional Budget Office has estimated it would be "the most effective at lowering health care costs."

The benchmark payment rate provisions would apply to out-of-network care provided by hospitals, physicians, and air ambulance companies.

The bill would mandate that insurers and providers cannot charge patients higher rates for ancillary, diagnostic, or emergency care that is provided by an out-of-network provider. Instead, the bill would permit providers and insurers to bill patients only for any copayment, coinsurance, or other cost-sharing charges they would have faced if they received the care from in-network providers, and would prohibit providers from so-called "balance billing." In addition, the bill would require that any emergency health care charges patients incur be counted toward their in-network health plan deductibles.

The bill also would require providers to inform patients of any potential out-of-network care and costs they could incur if they are moved from an emergency department to a general hospital setting, as well as any in-network options that are available.

Further, the legislation would require:

  • Insurers and providers to give patients estimates of out-of-pocket costs for services within two business days of the patient's inquiry;
  • Providers to send medical bills to patients within 45 days of the service date and give patients at least 30 days to pay the bills upon receipt; and
  • Providers to give patients a list of all the services they received upon discharge.

The bill stipulates that patients would not be required to pay medical bills they receive more than 45 days after the service date.

The bill also would require health plans to disclose their claims data, provider networks, and members' expected out-of-pocket costs.

The bill also includes provisions to ban:

  • So-called "all-or-nothing" clauses in contracts between health insurers and providers that require insurers to contract with all of the providers within a certain system;
  • So-called "anti-tiering" and "anti-steering" clauses in contracts between insurers and providers that would restrict insurers from directing or encourage patients to use providers with higher quality ratings or lower price; and
  • So-called "most-favored-nation" clauses in contracts between insurers and providers that require providers to give insurers the best pricing of any insurer in a given market.

Proposals to lower prescription drug costs

The legislation also includes proposals aimed at lowering prescription drug costs in the United States, largely through boosting competition in the market. For instance, the draft bill includes a proposal intended to make it easier for generic drugs to get to market, and to make it harder for brand-name drugmakers to maintain extended, exclusive patents for their products. The bill includes two measures that already have been approved by the House:

  • One that would require FDA to more quickly update its databases when a drug's exclusivity period ends; and
  • One that would start exclusivity periods more quickly if it appears drugmakers are delaying launching their products.

In addition, the legislation includes a measure approved by the House Judiciary Committee that aims to deter drugmakers from abusing FDA's "citizen petition" process, which critics say can be used to delay competition in the market. In addition, the draft bill would prohibit so-called "pay-for-delay" agreements.

The bill also would require pharmacy benefit managers (PBMs) to submit quarterly reports outlining their fees, costs, and rebates from drugmakers. In addition, the bill would mandate that PBMs pass any rebates they receive along to consumers and prohibit so-called "spread pricing," which occurs when a health insurer contracts with a PBM to manage prescription drug benefits, and the PBM charges the health insurer more for a drug than it pays pharmacies to dispense the drug.

The bill also would give FDA new authority when it comes to regulating drug labels. For instance, the bill would allow FDA to require generic drugmakers to update their products' labels in instances when the labels are incorrect or outdated because a corresponding brand-name drug is no longer available on the U.S. market.

The bill also would clarify that biosimilar drugmakers can include information in their applications showing that their proposed conditions of use for their drugs already have been approved by FDA for their corresponding biologics, and clarify that FDA's clinical superiority standard apply to orphan drugs approved after the enactment of the FDA Reauthorization Act of 2017.

Public health, data sharing proposals

The bill also includes provisions intended to address certain public health issues in the United States and bolster transparency and data sharing in the U.S. health care system. For instance, the bill calls for:

  • Four years of funding for community health centers, the Graduate Medical Education center, the National Health Service Corps, the Special Diabetes Program for Type I Diabetes, and the Special Diabetes Program for Indians;

  • Funding for programs to education people about vaccines, as well as to curb vaccine-preventable diseases;

  • Funding to bolster training for health care professionals that is aimed at preventing bias and discrimination;

  • Grants aimed at developing, evaluating, and expanding the use of technology-enabled collaborative learning and capacity building models to bolster access to specialty health care services in underserved areas and for underserved populations;

  • Grants aimed at researching and improving maternal mortality, as well as bolstering pregnancy and postpartum care and child health;

  • HHS to develop and distribute a guide on evidence-based obesity prevention and treatment strategies to local and state health departments, as well as Indian tribes and tribal organizations;

  • Improving cybersecurity and privacy for health data and electronic health records;

  • Requiring HHS to create a grant program for state and local public health departments to expand and modernize public health data systems and bolster interoperability; and

  • Requiring health plans to conduct an analysis of the treatment limitations for medical and surgical benefits compared with those for mental health and substance use disorder treatments.

The bill also would require the Department of Labor to specify actions for insurers to take to come into compliance with federal mental health parity requirements if the department finds an insurer is not in compliance.

Further, the legislation would create a non-profit entity tasked with launching an all-payer claims database that would group together unidentified claims from Medicare, self-insured, and participating state health plans.

Next steps

Alexander has said the Senate HELP Committee plans to mark up his and Murray's legislation next week, before sending it to the full Senate for consideration.

The bill is one of several measures intended to address surprise medical bills that federal lawmakers are considering. Sens. Bill Cassidy (R-La.) and Maggie Hassan (D-N.H.), who both are members of the Senate HELP committee, have released a separate bipartisan draft bill, called the STOP Surprise Medical Bills Act, that would allow providers and insurers to dispute out-of-network payment rates by establishing a binding arbitration process.

In addition, the House Energy and Commerce Committee last week held a hearing on another draft bill, called the No Surprises Act, which—like Alexander's and Murray's bill—would establish a benchmark payment rate for out-of-network care that is based on the median in-network rate in the geographical area where the care was provided.

Reaction

American Hospital Association EVP Tom Nickels called the payment rate proposals "unworkable." He said, "Arbitrary, government-dictated reimbursement would result in significant unintended consequences for patients and create a disincentive for insurers to maintain adequate provider networks, particularly in rural America."

Nickels also raised concerns about the proposed contract changes included in Alexander and Murray's bill. "[C]ertain restrictions on contracting could lead to even more narrow networks with fewer provider choices for patients, while adversely affecting access to care at rural and community hospitals serving vulnerable communities," he said.

Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, estimated that the proposed benchmark payment rate provision could help lower health insurance premiums by about 0.5% across the country. He said the bill could go farther, but added, "you've got to take small wins, and you're getting rid of surprise bills themselves" (Sullivan, The Hill, 6/19; Roubein, Politico, 6/19; LHCC Act section by section, 6/19; Luthi, Modern Healthcare, 6/19; AHA News, 6/19; Stein/Wang, Inside Health Policy, 6/19 [subscription required]).

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