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RAND draws wrong conclusion on capping surprise bills

March 16, 2020

Topics: Quote of the Day

RAND, Press Release, March 12, 2020

Placing limits on what hospitals can collect for out-of-network care could yield savings similar to more-sweeping proposals such as Medicare for All or setting global health spending caps, according to a new RAND Corporation report.

RAND researchers examined the potential impact of four proposals for out-of-network payment limits: 125% of Medicare payment rates (a strict limit), 200% of Medicare payment rates (a moderate limit), the average of payments made by private health plans in a state (a moderate limit), and 80% of average billed charges in a state (a loose limit).

The analysis found that limiting out-of-network payments to 125% of Medicare would create the biggest drop in hospital payments.

A more-moderate payment limit set at 200% of Medicare rates would reduce negotiated hospital payments by 8% or 23%, depending on the modeling assumptions, while using the average private payment prices in a state are estimated to reduce negotiated hospital prices by 16% or 30%.

“Under the strict and moderate scenarios, the cost savings created by placing limits on out-of-network hospital bills creates savings that are similar to ideas such as Medicare for All, statewide rate setting and creating global health care budgets, without the particular potential disruption that could come from implementing these plans, although the limits would admittedly create some as-yet unknown level of disruption of their own,” said Christopher Whaley, co-author of the report and a policy researcher at RAND.


RAND Report: The Price and Spending Impacts of Limits on Payments to Hospitals for Out-of-Network Care

By Erin L. Duffy, Christopher Whaley, Chapin White

Key Findings

Strict out-of-network payment limits on hospital care could yield savings similar to more-sweeping proposals, such as Medicare for All, rate setting, and global budgets

Although cost containment can benefit patients facing rising health costs, such changes are disruptive to hospital revenues

From the Conclusions and Policy Recommendations (Page 21 of the full report)

“Notably, single-payer health care options seek to expand coverage in addition to controlling costs. In comparison, out-of-network payment limits directly address the cost of care for privately insured patients without directly expanding coverage among uninsured and underinsured people. This distinction is important in considering the potential impacts of these health reforms for different subsets of the U.S. population and the policy objectives of proponents of these different approaches.”


Media reports

“Cutting out-of-network hospital payments may save as much as single-payer system”


“Savings from capping out-of-network payment rates could save as much as $124 billion in hospital spending, making the policy a potential alternative to Medicare-for-All.”



By Don McCanne, M.D.

There has been considerable discussion over what to do about surprise medical bills – bills that arise from care given outside of the insurers’ provider networks. For single payer advocates, it’s easy. Eliminate the private insurers and their networks through enactment of single payer Medicare for All and then all essential care is automatically covered by the public plan.

In this report, RAND has provided an analysis showing that placing a cap on surprise bills can yield savings similar to single payer. This conclusion is prominent in their report and has been picked up by the media. But it ignores all of the many other tremendous advantages of a single payer system – universality, elimination of restrictive provider networks, elimination of financial barriers to care, dramatic reduction in administrative waste, and making health care affordable for everyone through progressive tax policies, to name a few.

It is not as if the authors didn’t understand this. Buried in their conclusions they note that, in addition to controlling costs, single payer directly expands coverage among uninsured and underinsured people, whereas placing limits on out-of-network payments only addresses the cost of care for privately insured patients. It is difficult to see how capping out-of-network payment rates could be considered “a potential alternative to Medicare-for-All” when it fails to correct all of the other profound deficiencies in our health care financing system.

Passing surprise billing legislation would do almost nothing to correct the injustices in our health care system, but it would allow the legislators to once again walk away pretending that they have corrected the problem, when the real problem is so much larger than what they have tackled. We desperately need single payer Medicare for All, and we need it now.

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About the Commentator, Don McCanne

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Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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