The Potential Pitfalls from Methods to End Surprise Billing in Healthcare

17 Pages Posted: 11 Jul 2019 Last revised: 16 Jul 2019

See all articles by Ike Brannon

Ike Brannon

The Jack Kemp Foundation

David Kemp

Savings and Retirement Foundation

Date Written: July 10, 2019


In an era of almost unprecedented partisan enmity there are few issues that have the ability to unite both political parties in a common desire to effect change. The problem of surprise billing has proven to be precisely one such issue, and Congress appears intent on passing legislation to address the problem by year end.

Surprise billing occurs when a patient unknowingly gets treated by a provider not in her network, and afterward receives a bill well above the customary co-pays, co-insurance, and deductibles for which patients are typically responsible. These bills can be substantial.

At the moment there is no clear consensus on precisely how to reduce the incidence of surprise billing. Congress is currently considering three broad solutions: the first is for the government to set the out-of-network price in such situations at some measure of local healthcare prices, with the local, median in-network rate as the leading proposal; another is an in-network guarantee requiring that all providers operating at an in-network healthcare facility join the same networks as the facility or be considered in-network for billing purposes; and the third would direct providers and insurers to settle the charge between the two of them via an independent dispute resolution process.

We believe that economic theory – and the available evidence – suggest that creating an independent dispute resolution mechanism to arbitrate the price differences would have the least impact on broader healthcare markets and should be the preferred solution.

Keywords: healthcare, prices, arbitration

JEL Classification: I13, I18

Suggested Citation

Brannon, Ike and Kemp, David, The Potential Pitfalls from Methods to End Surprise Billing in Healthcare (July 10, 2019). Available at SSRN: or

Ike Brannon (Contact Author)

The Jack Kemp Foundation ( email )

1200 New Hampshire Avenue N.W.
suite 800
Washington, DC 20036
United States

David Kemp

Savings and Retirement Foundation ( email )

Washington, DC
United States

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