More Medical Price Fixing in Florida

Last year, the Florida Medical Association managed to get a bill passed that significantly tilted the playing field away from health plans and in favor of physicians. However, one of their key provisions was dropped before the bill landed on the governor's desk: forcing health plans to accept "assignment of benefits" for out-of-network physicians.

For the record, I think the current practice of health plans negotiating contracts with networks of providers is an absurd structure, relying on artificial economies of scale that exist only because of the tax-prejudice in favor of employer-based heath benefits. Nevertheless, it is what we're stuck with today.

I think the doctors' case is bunkum, both legally and ethically. I have previously proposed binding arbitration for the more difficult question of paying ER physicians. However, if a physician declines to join a health plan's network (and I congratulate him for doing so) then that gives him the opportunity to work directly for his patients. He has no right to demand that the state command the health plan to pay him directly.

This year, the FMA is trying to fix what it did not get in last year's reform bill by advocating a stand-alone bill, S1122, which would require health plans to execute assignment of benefits for out-of-network physicians.

But at what fee schedule? We know that doctors are displeased with the way health plans calculate fees for out-of-network providers. Well, Florida's health plans have managed to stymie S1122 by inserting an amendment that caves in on assignment of benefits but limits reimbursement to 80% of Medicare's fees, and forbids doctors from charging the patient extra ("balance billing). That won't make the doctors happy, and effectively kills the intent of the bill.
Which is fine by me, but it still doesn't address the challenge. If we had individual choice in health plans, and state legislators told the insurers and doctors to go and figure out this problem on their own, what would be the result?

I think that each health plan would eventually publish a "schedule of allowances" for out-of-network treatment. When a member presents a bill for a service on the schedule, which he's received from a doctor, the health plan pays the patient the amount on the schedule. If the doctor charges a fee higher than the schedule (which the patient has previously accepted), then the patient ends up paying the doctor somewhat more than his health plan has reimbursed him.

Because the schedules would be public, I anticipate that health plans would be happy to accept assignment of benefits on this basis, which doctors might demand because it would reduce their credit exposure to individual patients. Or, they could simply demand some fraction of their fee up-front.

This is not rocket science: It just requires less government intervention.