Payer/provider relationships

Providers’ struggles with claims denials have worsened compared with two years ago, according to Experian Health’s 2024 State of Claims survey released in September 2024. 

Prior authorizations and missing or inaccurate data were the leading reasons for claims denials in 2024, according to the global data and technology firm. Respondents said frequent changes to payer policies also created reimbursement challenges.

As denials tick up, 77% of providers report they are moderately to extremely concerned payers won’t ultimately foot the bill for healthcare as promised.

Providers have recently sounded the alarm over growing strife in their relations with payers.

The Experian Health report, which surveyed 210 healthcare staff between June and July of 2024, confirms an escalation of tensions.

Nearly three in four respondents said claims denials have increased. Two years ago, less than half of respondents said claims denials were on the rise. Nearly 40% of those respondents say their claims are denied at least 10% of the time, while 11% of respondents said their claims were denied at least 15% of the time.

And, even when reimbursements come through, the wait to be reimbursed is increasing, according to 67% of respondents.

Reasons for claims denials vary, and can include incomplete or incorrect data collection, coding errors, staffing shortages or poor training of staff, late submissions and payer policies.

“We had hoped to see a decrease in claim denials from our previous survey, but it’s clear these significant challenges are continuing, adding immense pressure on providers to improve their revenue cycle management processes,” said Clarissa Riggins, chief product officer at Experian, in a release accompanying the report. “This growing crisis is a sign that traditional approaches are no longer enough, and providers should adopt more proactive strategies and the latest technology to navigate this volatility.”

Reducing denials is now a priority for 84% organizations surveyed, and 73% have evaluated their claims process within the past year, according to the survey.

However, healthcare providers have not been jumping to automate claims processing. Only 31% of providers surveyed are using automation or artificial intelligence in claims processing — down from 62% in 2022. 

The data suggests a “retreat from the broader embrace of automation” that occurred during and after the pandemic, according to the study. 

Paradoxically, as hype has grown around AI, researchers said the “comfort gap” has plummeted. Those that are very or extremely confident in understanding automation, machine learning and AI fell to 28% compared to 68% in 2022.

Providers’ reluctance to harness AI in claims processing stands in contrast to payers, who automate claims review and denials.

Cigna, UnitedHealth and Humana are among the nation’s largest payers that have all used algorithms to review claims en masse. 

The payers tout the technology as a boon for efficiency, arguing that it cuts down on time to review claims and is standard across the industry.

But payers have been hit with lawsuits for claims algorithms. UnitedHealth and Humana were accused of ending Medicare Advantage members’ care prematurely via algorithmic denial, while Cigna was accused of violating a California insurance law that requires manual review of claims.

In an escalating technology arms race, providers are beginning to adopt the same technology they say insurers are using to deny claims in masse — artificial intelligence — to combat claims disputes. 

Insurers so far have the upper hand in the race to implement AI into the claims review process, panelists at HLTH said in October 2024. Some of the nation’s largest insurers, including UnitedHealth, Humana and Cigna, already leverage algorithmic decision tools when deciding what care to cover. 

Nonprofit Blue Shield of California said it will also test claims automation technology in early 2025, through a partnership with Salesforce. The insurer billed the tool as way to alleviate provider and patient frustration with the prior authorization process, saying it would cut down decision time from weeks or days to seconds.

Payers argue the tools — which have mostly been applied to the prior authorization process— allow them to quickly flag services that do not align with coverage criteria and plan terms.

However, providers’ experience with current tools — supported by investigations and reports from lawmakers — suggest that when AI enters the equation, more claims are denied.

Providence CFO Greg Hoffman told Healthcare Dive that his nonprofit health system noticed underpayments or initial denials increased by more than 50% over a two-year period when payers began to more heavily adopt AI tools to review claims.

The surge forced Providence to increase its number of human “touches per claim” by over 50% because physicians had to submit additional documents, the executive said.

A Senate subcommittee report in October 2024 alleged three of the nation’s largest Medicare Advantage insurers — UnitedHealthcare, Humana and CVS — use predictive technology to systematically deny patients access to post-acute care in order to increase their profits.

The largest offender was UnitedHealth, which increased its post-acute services denial rate from 8.7% in 2019 to 22.7% in 2022, alongside the roll out of its predictive tool, NaviHealth-backed nH Predict.

In some sense, payers are forcing an “AI arms race,” said Jeffrey Cribbs, a distinguished vice president analyst on consultancy Gartner’s healthcare team.

“We will see more efficient coding, more efficient submission of authorization claims and then resubmission of claims,” he said. “And then on the other side, we will see more efficient extraction of exceptions and things that might be cause for denial of those claims.”

Providers say they’re currently behind payers in that race — though they’re dedicated to catching up.

During a HLTH panel on provider and payers’ use of AI, Sara Vaezy, EVP and chief strategy and digital officer at Providence said providers lag payers in developing large language models, but are likely to have sophisticated options soon. 

The executive urged providers to form coalitions to share data and develop standards around AI in the claims process to better compete in the space.

Once providers catch up, experts believe AI could ultimately help them in prior authorizations.

“It’s still early innings, but I think the technology is actually going to go a long way to leveling that playing field, from a provider's perspective,” said Amit Phull, chief physician experience officer for online networking service Doximity, during the panel.

He said the tech will ultimately offer providers “a leg up” in claims disputes and cut down time it takes to complete claims documentation.

Bill Fera, a principal consultant at Deloitte, agreed.

“Plans have been building for longer. They have the the upper hand right now. Providers are newer to thinking this way and building these tools,” Fera said during an interview. But he said AI will be an equalizer, because it will help providers quickly go through massive amounts of data to find a “truth” about whether the patient ought to qualify for a service under their plan’s terms.

“Policies will now be available to a provider. I wouldn't go to read a policy in full, but ... now we're surfacing all that knowledge. We're taking the mystery away,” Fera said. “And there is a fact base. There's a core piece of information that can be interrogated. It's just now, it can be interrogated very quickly.”

Still, health systems are contending with payers that are ready to apply AI right now, and many don’t have the AI know-how to build competing models today.

Providence decided to outsource its revenue cycle management to compete in the short-term, Hoffman said. The nonprofit entered a 10-year partnership with R1, a revenue cycle management company, in January 2024, in part to combat rising claims denials associated with payers’ increased use of AI tools.

“As we began to look at our technology roadmap for us to respond quickly and so forth, we realized that it would take us two to three years to build the technology roadmap to be more efficient in this area,” Hoffman said. “And that's where we've now leaned into our partnership with R1 to leverage equivalent technologies.”

A provider lobby is catalogueing the ways insurers are allegedly taking advantage of federal legislation preventing surprise bills in the latest industry salvo over the implementation of the No Surprises Act.

Americans for Fair Health Care, an advocacy group for providers around surprise billing issues, published a report surveying more than 30,000 physicians about their experiences dealing with insurers in 2023.

AFHC found a number of concerning statistics, including insurers failing to honor payment determinations or delaying reimbursement and stretching out the negotiation process, essentially requiring providers to float them revenue in the meantime.

Insurers are also continuing to cancel contracts with providers, forcing them out of network, according to the survey. As a result, many providers have to rely on the framework for billing negotiations set up by No Surprises, called independent dispute resolution or IDR, for reimbursement, AFHC said.

“Insurers’ persistent contract terminations, payment cuts and delays, patient burdens, and compliance failures are forcing physicians to seek fair treatment through the IDR process,” said Eric Berger, AFHC executive director, in a statement.

No Surprises, which went into effect in early 2022, protects consumers from unexpected medical bills after receiving out-of-network care at an in-network facility or other surprise situations. It does so by holding them blameless for any charges, and requiring insurers and providers to decide how much the provider should be reimbursed for a member’s care.

If they can’t do so themselves, the dispute comes before a third-party arbiter, who reviews a payment offer submitted by each side before picking one of the two amounts.

In the first half of 2023, providers won more than three-fourths of payment determinations.

Yet the AFHC survey found that many insurers are still failing to pay IDR awards altogether, though the rate has lessened somewhat from the prior year’s survey.

In 2022, providers reported that insurers failed to pay 52% of determinations. That fell to 22% in 2023, though the finding is still illustrative of continued abuse, the AFHC spokesperson said.

Powerful insurance lobby AHIP implied the AFHC’s results could be skewed due to the group’s backing. AFHC is comprised of physician practices such as Envision Healthcare and TeamHealth that have been accused of remaining out of network with insurers as a business strategy.

“Americans for Fair Health Care is run by the private equity-backed provider groups that are directly benefiting from arbitration,” an AHIP spokesperson said over email.

For their part, insurers have accused providers of sending large numbers of claims through IDR to try and garner higher reimbursement than the fair market value of their services.

AFHC’s survey also found that 94% of insurers were submitting qualifying payment amounts — an important metric that helps determine how much providers eventually get paid —  at or below Medicare rates.

Providers have argued IDR’s reliance on QPAs, which represent the median in-network charge for a service in a specific geographic area, skews the process toward insurers, since insurers are the ones setting the rates.

How heavily the QPA factors into the dispute resolution process has been at the center of multiple suits against the government.

As a result of the lawsuits, regulators have had to pause and restart the dispute resolution process multiple times. That’s contributed to a backlog in claims, putting more stress on the IDR system. Regulators say they’re facing a growing mountain of disputes, after receiving more requests for arbitration than anticipated.

Insurers’ actions are forcing providers into IDR, according to AFHC. However, the group’s second annual analysis of No Surprises also found some insurer actions were abating compared to 2022, especially around the threat of termination.

In 2022, 100% of providers said insurers threatened to end their contract. That fell to 53% in 2023, AFHC found.

The group attributed the decline to fewer contracts benefiting providers surviving 2022’s cull. Contract negotiations are traditionally hammered out behind closed doors, but more disputes between payers and providers have been bubbling into the public sphere, a trend providers chalk up to increasingly contentious debates over fair rates.

“Insurers did so much damage to in-network contracts and reimbursement in 2022 that there simply weren’t as many relationships and rates they could disrupt in 2023,” a spokesperson for the group said. “Contract terminations are just one part of the story.”

Medicare’s largest value-based care program saved the government more than $2.1 billion in 2023 — an all-time record, according to the CMS.

Accountable care organizations, groups of providers that join together to manage the care of a patient population, also benefited, receiving performance payments of $3.1 billion in 2023. That’s also a historic high since the Medicare Shared Savings Program was formed more than one decade ago.

The quality of ACOs is also rising, the CMS said. Regulators specifically called out improvement in measures related to diabetes and blood pressure control, statin therapy for cardiovascular diseases and screening for depression, fall risk and breast and colorectal cancers.

The Medicare Shared Savings Program, or MSSP, is the largest ACO program in Medicare with almost 11 million beneficiaries covered by 480 ACOs.

Participating ACOs receive a portion of the savings they generate compared to a benchmark, while ACOs with spending exceeding the benchmark might have to pay a penalty. The goal is to improve outcomes and lower healthcare costs by incentivizing providers to better manage patient care.

The CMS in October 2024 lauded seven straight years of savings in MSSP. Under the Biden administration, the agency has gone all-in on accountable care — its goal is to bring all 34 million beneficiaries in traditional Medicare into value-based arrangements by 2030.

In 2023, 453 of the 480 ACOs participating in MSSP achieved total savings of $5.2 billion, according to the CMS. Medicare retained $2.1 billion while another $3.1 billion was divvied out in shared savings. In comparison, in 2022 Medicare saved $1.8 billion while ACOs earned $2.5 billion.

In 2023, Citrus ACO in Central West Florida had the highest shared savings rate of 19.44%, while Health Connect Partners — the MSSP ACO operated by nonprofit hospital giant Providence — had the highest net savings of $137 million, according to CMS data.

AnewCare Collaborative in east Tennessee had the worst shared savings rate of -6.91%, while Northwestern Medicine Physician Network ACO in Chicago had the steepest losses, at $19 million.

ACOs led by primary care clinicians had higher savings than other ACOs, the CMS said. The finding is important in light of a shift toward hospital-owned ACOs, which earn more revenue when patients are admitted, giving them less of an incentive to reduce pricey hospital care, according to congressional scorekeepers.

Despite continued savings, MSSP has had an uncertain budgetary impact on the CMS over its tenure. The program was associated with net losses of between $775 million and $2.1 billion from 2013 to 2021, according to research in JAMA Health Forum.

The CMS has also had difficulty prodding providers to join MSSP. Participation has trended down over the past several years, after peaking in 2018 with 561 ACOs.

Regulators recently revamped MSSP in a bid to revitalize provider interest, adding benefits like up-front payments to certain providers and making changes to promote more risk-sharing. In a Medicare payment rule expected to be finalized in October 2024, the CMS also proposed prepaying ACOs a portion of shared savings each quarter to encourage them to invest in staffing and infrastructure.

The Federal Trade Commission finalized changes to a rule in October 2024 that will require healthcare companies, including hospitals and providers, to provide more information to regulators ahead of mergers and acquisitions. 

Under the new policy, merging companies will be required to submit a high-level business plan related to competition, as well as details about their current and developing business lines, supply chains and investors.

The agency says more documentation is needed to help regulators determine which deals require in-depth antitrust investigation. However, the American Hospital Association argued the FTC already collects enough information and that requiring extra will amount to “little more than a tax on mergers.”

The update marks the first time the FTC has revised its Hart-Scott-Rodino Act premerger notification form in nearly 50 years.

The law is intended to alert officials of companies’ intent to merge and offer them a short window to determine whether to conduct a more extensive antitrust review.

The FTC proposed increasing documentation for the premerger notification process in June 2023. At the time, the FTC said it was necessary to glean a “basic understanding of key facts” as mergers became increasingly complex.

Both the FTC and AHA said the final rule, which is set to go into effect 90 days after publication in the Federal Register, is less aggressive compared to the proposed rule.

However, the FTC estimates companies will still need to log 105 hours per response to comply with the final rule — an increase of 68 hours compared to current averages. In June 2024, the agency estimated its proposal would require approximately 107 hours per response.

Provider groups said the new documentation load would unnecessarily burden companies looking to merge. 

“The agency already has more than enough information about hospital transactions, and it has shown no hesitation in challenging them,” said Chad Golder, AHA general counsel and secretary, in a statement. “The final rule will just require hospitals to divert time and resources away from patient care towards needless compliance costs.”

Under the final rule, companies must also begin to submit data about minority stakeholders and investors, reflecting the FTC’s increased focus on reviewing private equity acquisitions as deals have increased.

Private funds served as the acquiring party for nearly 40% of all reportable transactions in 2022. Twenty years ago, they only were involved in about 10% of deals.

In healthcare, private equity investment has varied. Funds poured billions into healthcare investments during 2022 and 2023, however, investment has slowed in 2024 as antitrust scrutiny cools investor interest.

Still, private equity remains an influential player across the sector — approximately 8% of all U.S. private hospitals were owned by PE funds as of January 2024, according to a tracker from the Private Equity Stakeholder Project. PE also owns between 5% to 11% of America’s nursing homes.

Estimates vary because ownership structures are often opaque — something the FTC says it wants to clarify.

“Under the current rules, it has become increasingly difficult to screen transactions because deal structures often have minority investors with significant rights that are not disclosed,” the FTC said.

Companies must also provide details about acquisitions that have occurred within the last five years, as the FTC attempts to get its hands around “roll-ups,” or small serial acquisitions that private equity groups and some companies utilize. Previously, only the acquiring party had to submit this data.

“Often the Agencies are not able to detect these strategies until it is too late, after the serial acquirer has established a dominant position and is able to exercise market power to the detriment of market participants,” the FTC said in its final rule.

The agency pointed to its lawsuit against U.S. Anesthesia Partners, a anesthesia provider, as an example of how a dozen of small acquisitions allegedly diminished competition. The case initially sought to also hold the company’s private equity investor, Welsh, Carson, Anderson and Stowe, responsible for the antitrust harms, however a judge threw out the case against the fund in May 2024.

The final rule was announced as the Biden administration has increased scrutiny around mergers. In December 2023, the FTC and Department of Justice finalized stricter guidelines for mergers, which experts told Healthcare Dive would give the agency a “broad” mandate to investigate deals.

With federal healthcare politics deadlocked, two states are inching closer to making universal coverage a reality.  

In 2023, California and Oregon legislatures passed laws setting deadlines for developing publicly financed, universal healthcare coverage systems. Proponents of the laws say the systems could save billions in healthcare costs and improve access, while opponents argue they would disrupt care and could increase costs.

Both bills represent incremental steps toward creating state systems similar to Medicare for All, the universal government health insurance program popularized by Sen. Bernie Sanders’ 2016 and 2020 presidential primary campaigns.  

Medicare for All is a version of single-payer healthcare under which the government would cover everyone with an expansive benefit package and minimal cost-sharing. By contrast, the Affordable Care Act relies on voluntary consumer purchase of private insurance. 

Success of the state laws ultimately depends on a White House and federal government willing to agree to healthcare policy proposals that go farther than those approved by the federal government to date, experts told Healthcare Dive. 

The next steps for both states lead directly back to Washington, where these local policy proposals could reignite the dormant debate over national healthcare coverage.

State bills require federal support

Both laws set up state governance systems to implement universal coverage, but they also require approval from the federal government. 

Oregon’s restructuring proposals are more fully developed than its neighbor to the south. Oregon’s Senate Bill 1089 gives a nine-member Universal Health Plan Governance Board two years to develop a plan to implement a single-payer proposal recommended by an earlier Joint Task Force on Universal Health Care. The proposal would eliminate private risk-bearing insurance and cover all residents with a comprehensive benefit package. Oregon will seek what it calls “groundbreaking waivers” from the federal government that allow the state far more flexibility to administer Medicaid and Medicare funds than what Washington has allowed in past state experiments.

California’s SB 770 also instructs the state government to negotiate federal waivers to allow the state to combine Medicare, Medicaid and state money, but the funds would be used for a more vaguely defined “unified financing” system. 

California Gov. Gavin Newsom ran on single-payer in 2018, but the legislature declined to pass it, instead establishing the Healthy California for All Commission in 2019 to make recommendations for a future system to cover everyone with comprehensive benefits. 

The state’s commission split on whether to make payments through private insurers and how to pay providers. In a preliminary report, commission researchers reported that “more than 60% of Californians covered by health insurance are enrolled in an HMO.” Some commissioners felt getting rid of third-party intermediaries was impractical and made payment reform impossible, while single-payer supporters believed allowing private contractors to accept insurance risk creates incentives for them to deny needed care, according to the HCFA’s final April 2022 report. 

Newsom signed Senate Bill 770 into law in October 2023. Following the commission’s lead, it calls for a unified financing system to pay for a broad benefit package for all state residents, while eliminating the distinctions between Medicare, Medicaid, ACA and employer-sponsored coverage. However, it leaves open big questions about the structure of a major overhaul, including the future role — if any — of private insurers. 

The bill sets a deadline in 2025 for California to develop a “waiver framework” through informal negotiations with the federal government to allow the state to merge federal insurance programs into a single funding stream. However, applications for federal waivers must include detailed descriptions of proposed reforms, so by 2025, the Newsom administration will have to present California lawmakers with a formal waiver application to the federal government for a universal coverage plan that answers some of the hard questions avoided by SB 770.

With or without private insurers, merging federal health insurance programs into a single unified financing system requires federal approval, either by Congress or waivers from the executive branch for multiple federal laws.

Congress hasn’t elected to expand health coverage since the ACA. Soon, California and Oregon could be asking the government for approval to do what hasn’t been done before.

States seeking cost savings

Proponents of the bills in both states — including labor unions, progressive physician organizations and healthcare consumer NGOs — say universal coverage is critical to solving high U.S. healthcare costs.

According to data from the Organization of Economic Cooperation and Development, total U.S. healthcare costs per person remain twice the average of other wealthy nations.  

On a state level, the California Healthcare Foundation’s 2023 annual survey found that 52% of Californians skipped needed care due to costs, and 50% of people who skipped care said their condition worsened.  

In its final April 2022 report, the California commission said unified financing would fund full coverage and still reduce the state’s projected $517 billion in costs over the next decade by controlling prices for hospitals, physicians and drugs, and capturing savings from reducing excess administrative costs common to the current healthcare system. The analysis is consistent with most studies of single-payer, including a 2020 analysis of federal options by the Congressional Budget Office.

State Sen. Scott Wiener said the impact of high health costs on California’s labor market prompted him to author SB 770.

“I’ve seen this ridiculous system where access to health care is tied to a job,” said Wiener. “If someone’s thinking of taking a job, instead of thinking, ‘What’s the salary, will it be rewarding, is it a step up in my career and skill development?’ they also have to think about, ‘Will I have health insurance?’” 

In Oregon, constituents like nursery owner Ben Verhoeven hope universal healthcare will bring down high health costs for his business. Verhoeven spent $196,000 to cover the full premium cost of individual coverage for the 26 year-round employees at Peoria Gardens, his family’s wholesale greenhouse and nursery, from April 2023 to April 2024

Even so, the plan’s $2,000 deductible leaves employees with out-of-pocket costs. A few years ago, Verhoeven’s daughter broke both arms climbing a tree. In the process, Verhoeven got a $2,000 medical bill in the mail. 

“I care about my employees and want them to be healthy, but I don’t want to be spending a lot of my time trying to figure out the healthcare business,” Verhoeven said. “My job is to grow plants, not navigate health insurance.”  

Insurers, hospitals line up against bills

Major health insurers and hospital systems in both states have pushed back on universal coverage.

The California Association of Health Plans — a trade group representing 47 plans — criticized the state’s commission for using flawed data to calculate projected cost savings.

In comments submitted to the California commission, CAHP said the state’s projected cost savings hinged on a number of assumptions that “simply don’t square with reality or come with severe but glossed-over trade-offs for access to health care.” If inaccurate, those assumptions could “leave taxpayers on the hook for hundreds of billions of dollars,” CAHP wrote.

Other groups — including the California Chamber of Commerce and America’s Physician Groups — have opposed the law. The groups joined CAHP in an opposition letter sent to the state’s Senate Health Committee in 2023, which said that a single-payer system in California would cost over $500 billion per year in public spending and require tax increases.

California’s largest health plan and hospital owner, Kaiser Permanente, opposes single-payer. In an internal email obtained by Healthcare Dive, Kaiser called it costly, disruptive and detrimental to Kaiser and its members.

The email described SB 770 as a “modest proposal” to explore the federal steps necessary for single-payer.

“While this bill was not ideal, it could help answer some important questions about whether the federal government fundamentally would or could ever take some of the quite radical actions likely needed to move single-payer forward in California,” the email said. 

Insurers and health systems, including Kaiser, have also pushed back against universal coverage in Oregon.

State health insurers said in written testimony sent to the Oregon legislature that single-payer envisioned by SB 1089 “attempts to do too much, ignores the significant legal and financial challenges, and has no precedent of success by any individual state in the Union.” 

The Oregon Hospital Association did not weigh in, but the state’s two largest hospital owners, Providence Health and Kaiser Permanente, which also operate health plans, signed the testimony. 

While health plans and the largest hospital systems have opposed the laws, there has been silence in other corners. Notably the states’ American Medical Association chapters neither supported nor opposed the bills. 

The Oregon Medical Association confirmed to Healthcare Dive that it took a neutral position on SB 1089. Nationally, membership of the AMA — the nation’s largest physician organization with 270,000 members — has been divided over single-payer policies.

The California Hospital Association, a trade association representing more than 400 hospitals, told Healthcare Dive it “didn’t take a position on SB 770.”

California’s largest nurses union, longtime sponsors of single-payer, opposed SB 770 as an unnecessary half measure. In a letter to Newsom, Carmen Comsti, lead regulatory policy specialist for the California Nurses Association, said the bill is dangerous because it avoided endorsing single-payer. The vague unified financing term “may include a multi-payer system of health insurance, which falls far short of single-payer.”

A narrow path forward

Both California and Oregon would prefer to implement broad reforms without needing any approval from a deadlocked Congress.  

Various federal laws allow the HHS and Treasury Department to waive Medicare, Medicaid and ACA laws to expand coverage, control costs or improve quality in individual states.  

Medicaid, for example, allows states to establish themselves as the sole Medicaid managed provider for the state, which receives a capitated payment per enrollee. Vermont currently operates such a system, and the California Commission’s outside counsel — attorneys Caroline Brown, Phil Peisch and Julia Seidenberg of Brown and Peisch — argued in a legal appendix to the commission’s final report that the structure could pass federal muster for unified financing.  

However, folding Medicare into a state system is more legally and administratively complex than Medicaid. Seniors and disabled adults have an individual federal entitlement to Medicare benefits, which are administered without a direct state government role.  

The HHS can allow states to develop payment and service delivery models that reduce costs or enhance quality.  

Brown and Peisch advised the California Commission that the best legal avenue for states to roll Medicare funds into a unified financing or single-payer system would be to create an entity that could act either as a state-wide Accountable Care Organization, the state’s exclusive Medicare Advantage provider, or both —  similar to the Medicaid structure. However, in their memo for the commission, the lawyers cautioned that such a move “would be unprecedented and politically charged.” 

Even innocuous-seeming federal rules can be obstacles, according to Anthony Wright, a HCFA commissioner and executive director of the California NGO Health Access. Although waiver rules for ACA subsidy funding are the most flexible of the federal laws, states may violate current rules requiring budget neutrality if a proposal simply gets more people who are eligible to enroll in ACA coverage. 

“Relatively small reforms are being stymied” because states won’t waste time applying for them, Wright said, and there are many similar hurdles to unified financing. 

To complicate matters further, the federal law governing employer-sponsored health insurance, the Employees Retirement Income Security Act, includes a pre-emption clause that prohibits nearly all state regulation of self-insured health plans. 

Professors Elizabeth McCuskey, of Boston University, and Erin Fuse Brown, of Georgia State College of Law, reviewed ERISA’s impact on 66 state single-payer proposals for the University of Pennsylvania Law Review in 2020, and concluded that ERISA was a “trap” that “threatens to thwart [states’] transformative experiments” in healthcare reform. 

But hope may remain for Oregon’s healthcare plans.  

As consultants to Oregon’s task force, McCuskey and Fuse Brown found the state’s proposal is “likely to survive ERISA challenges.” The proposal relies on economic incentives for employers to have workers receive benefits from the state rather than an outright prohibition. However, an unfettered multi-payer approach sacrifices potential administrative savings, so the lawyers recommend either allowing employers to reimburse the state for payments on behalf of their workers or vice versa.

Hinging on political will

According to the final California commission report, achieving the state’s goals without Congress “will depend in significant part on the current federal administration’s interest in supporting a state-based unified financing system.”

President Joe Biden and former President Donald Trump have expressed concerns about single-payer healthcare.  

The Trump administration’s head of U.S. healthcare policy — CMS head Seema Verma — cast doubt on universal reforms during a question-and-answer session after a 2018 speech at the Commonwealth Club.

“I think a lot of the analysis has shown that it’s unaffordable,” Verma said. “It doesn’t make sense for us to waste time on something that’s not going to work.”  

Biden expressed similar financial concerns about federal Medicare for All during his 2020 primary contest, asking how supporters would find the money.  

These issues will be simmering for the rest of 2024. California’s HHS has time to gather stakeholder input on the issues that weren’t addressed in SB 770 and prepare to open negotiations with the White House in January 2025.

In Oregon, policymakers are optimistic that universal state coverage could become a reality soon. 

Bruce Goldberg, who chaired the Oregon Task Force and was recently appointed by Gov. Tina Kotek to the new Universal Health Plan Governance Board, hopes the state is on the path to become the first to guarantee comprehensive insurance to everyone with federal support. 

“You can read all the regs you like. In the end, there are regulatory paths, so it’s really more about political will,” Goldberg said. “That’s why I think it’s important to have a strong, broad grassroots coalition instead of a group of policy wonks. We all know we have a complicated, unjust system.”

Commissioners on the Medicare Payment Advisory Commission expressed broad support last year for linking annual changes to physician reimbursement to inflation, a measure which — if approved by Congress — would give U.S. doctors more financial predictability and stability.

The backing of the influential congressional advisory board is a cause for optimism for the industry. Doctors have long lobbied Washington to increase Medicare reimbursement, citing lackluster pay as a driver behind practice consolidation and closures.

And insufficient payment could threaten access to care for the 68 million Americans, mostly seniors, on Medicare, according to MedPAC and other program experts. Those concerns have risen as the gap between annual payment updates and doctors’ costs grows.

“We need to keep up. I am more concerned than a couple of folks in here about falling behind, because I think once we do and once it becomes apparent it becomes really, really difficult to fix,” said Commissioner Gregory Poulsen, senior vice president at Utah-based health system Intermountain Healthcare, during MedPAC’s meeting in November.

Medicare reimbursement for physician services has declined 29% from 2001 to 2024 when adjusted for inflation, according to the American Medical Association.

That’s due to how Medicare reimburses outpatient physicians: an annual payment rule called the physician fee schedule, or PFS, which pays for about 9,000 different clinician services across doctor’s offices and hospitals nationwide.

PFS doesn’t include an adjustment for inflation, unlike other Medicare payment systems. And, a statutory requirement requiring changes to PFS remain budget neutral makes it impossible for regulators to increase reimbursement to the levels physicians say they need.

In November, MedPAC commissioners bandied about different solutions with one theme in common: tying physicians’ annual payment update to the Medicare Economic Index or MEI, a measure of cost inflation for physician services.

“I really agree with this notion of an MEI-based update,” said Commissioner Amol Navathe, associate director of the Center for Health Incentives and Behavioral Economics at the Perelman School of Medicine.

“It’s hard to perfectly read the tea leaves, but I think this is striking a good balance between what we understand from the evidence and what we’re worried about from the perspective of access for beneficiaries,” Navathe said.

In previous reports to Congress, MedPAC has suggested an annual conversion factor update linked to 50% of the MEI; or to the MEI minus 1 percentage point, with a minimum floor for the update.

Multiple commissioners said they supported the latter change.

“The MEI minus one ... is a great threading of multiple needles. It puts some predictable increases for physicians who are going to be hurt realistically by unpredictable inflation year to year. And I think there’s fiscal prudence in the minus one, so it’s an excellent compromise and approach,” said Commissioner Scott Sarran, the chief medical officer of dementia care startup Harmonic Health.

However, some commissioners raised concerns that linking payments to inflation would significantly raise costs with uncertain effects on access. That’s because — despite physicians slamming Medicare pay as unsustainable — a large majority of U.S. doctors accept Medicare.

Medicare beneficiaries’ access to clinician care is as good as or better than that of privately insured individuals, despite commercial rates being roughly 40% higher than those of Medicare, according to Brian O’Donnell, a principal policy analyst with MedPAC.

“The problem we’re trying to solve in terms of access to me seems very hypothetical. And it’s expensive to solve,” said Commissioner Tamara Konetzka, a professor of public health sciences at the University of Chicago.

Physician associations want Congress to go even further than MedPAC’s suggestions. The AMA and other clinician groups have argued Congress should adopt a 100% MEI update, which would result in even higher annual rate hikes.

But commissioners agreed any reforms should be conservative. Some floated the idea of including a ceiling, as well as a floor, for annual rate updates to avoid runaway costs.

Instead of MEI minus 1 percentage point, Congress could elect to tie annual changes to a percentage of the index, like 75%, said Poulsen.

“If [inflation gets to a] really high number, 1% minus [0.10 percentage points] is a lot less than 1% minus one [percentage point],” Poulsen said. “It seems to me that 75% of MEI or something like that may be an easier and less troubling mechanism over time, because we don’t know what MEI is going to be next year or five years from now.”

Despite a back-and-forth over specifics, most commissioners agreed it’s not an option to wait until the PFS is even more out of step with physician costs. It’s an opinion shared by lawmakers in Congress, with members on both sides of the aisle expressing support for reforming doctor reimbursement in hearings and in public letters.

“This whole aspect around, ‘Because there’s not necessarily an access problem compared with commercial, is there an urgency to problem-solve this’? I don’t think we want to wait until there’s an access problem because when there’s an access problem it’s going to be really difficult to course correct,” said Commissioner Robert Cherry, the chief medical and quality officer at UCLA Health.

“We want to really start thinking about this much more proactively,” Cherry said.

The CMS’ first audit of an insurer for compliance with a law preventing surprise bills for consumers found some evidence to support provider allegations that insurers are gaming the system to lower or delay payments for out-of-network medical services.

That’s in part because insurers set the initial payments to providers for out-of-network care, which are often tied to a metric called the qualifying payment amount, or QPA. The QPA is also used by third-party arbiters to decide on a final reimbursement for providers if they can’t agree with insurers on an amount.

Interestingly, regulators’ newly published audit of CVS-owned Aetna in Texas found the insurer was both overestimating and underestimating its QPAs for certain air ambulance services. That’s because Aetna was using the wrong methodology to calculate the metrics, the audit found.

The CMS also found Aetna wasn’t sending providers required disclosures under the No Surprises law, including the window for kicking off third-party arbitration and the insurer’s QPA for a claim.

That lack of clarity could make it more difficult for providers to enter arbitration, while further delaying the already backlogged dispute process, according to Jeffrey Davis, health policy director at law firm McDermott Will & Emery’s healthcare consultancy.

The audit is relatively small in scope, analyzing Aetna’s dealings with air ambulances in one state for the first half of 2022 and finding only a handful of errors. Aetna also came back into compliance with the law after the audit’s findings.

But “I think this is a big deal,” Davis said. Aetna “did not follow some major requirements that are essential to ensuring that the IDR process runs smoothly.”

No Surprises’ first insurer audit

The No Surprises Act, which went into effect January 2022, set up a process for payers and providers to resolve payment disputes when a patient receives unavoidable out-of-network care. When billed by an out-of-network provider, insurers offer an initial payment meant to reasonably cover the service.

If the provider doesn't accept that amount and the two sides can’t agree to a compromise during an open negotiation period, they can enter independent dispute resolution. IDR is a baseball-style arbitration process where each side submits a payment offer to a third-party mediator, who then selects one amount. Mediators can consider the QPA in their decision.

Neither insurers nor providers are entirely happy with the setup. Payer groups argue a small group of providers are weaponizing IDR in order to increase their profits, while providers say the process is weighted in favor of insurance companies.

Providers report that insurers have artificially lowered QPAs and paid below market rates for out-of-network services since No Surprises began.

The CMS’ audit found the former might be true for Aetna Health of Texas — but only for two air ambulance QPAs in the first six months of 2022. For two others, Aetna’s miscalculation actually resulted in higher QPAs, according to the audit.

The QPA is meant to be an average of median in-network rates for an item or service in a specific geographic area.

However, Aetna was using actual claims paid amounts instead of contracted rates to calculate the QPA, according to the audit.

Aetna also counted each claim as its own contracted rate, even when the claims were the same exact amount for the same item or service — and to the same air ambulance provider, the audit found.

After being informed of its error, Aetna recalculated the QPAs using contracted rates. Still, the CMS is requiring the payer to self-audit all QPA calculations for air ambulance services from 2022 to July 2024 to make sure they’re accurate.

Insurers improperly calculating QPAs also has ramifications on consumers. The QPA is the benchmark for determining patients’ payment obligations for out-of-network care, so higher QPAs could equate to higher cost sharing.

As such, the CMS is also requiring Aetna to refund members any overpayments it might owe them based on the correct QPAs.

A spokesperson for Aetna did not comment on how many members this affects or how much money it might need to refund.

The audit also found that Aetna didn’t always inform providers that they could initiate IDR within four days after the end of open negotiations, and didn’t always tell providers the QPA when informing them of a claim’s payment or denial.

Regulators are making Aetna upgrade its disclosure language to meet the requirements.

A spokesperson for the insurer called the audit “routine” in an emailed statement.

“We addressed all the report’s findings to CMS’ satisfaction,” the spokesperson said.

Controversy over the methodology for calculating QPAs has underpinned a series of court cases in Texas. Judges have generally ruled in favor of providers, leading regulators to pause and revamp the arbitration process before billing negotiations could resume.

Partially as a result of those pauses, IDR has been bogged down by a growing backlog of billing disputes. The government has also received significantly more requests for arbitration than it expected.

Employers and private insurers continue to pay hospitals more for inpatient and outpatient services than Medicare would have reimbursed, according to a new study from policy think tank the Rand Corporation.

In 2022, private insurers and employers paid on average 254% of what Medicare would have paid for the same care services — up from 224% two years prior. 

Health systems often argue they hike up commercial rates to offset losses from government underpayments, according to the study. However, a hospital’s market share, rather than population of Medicare or Medicaid patients, more accurately predicted pricing, with larger health systems charging higher prices.

Since 2021, health systems and insurers have been required to post pricing information for their 300 most common procedures as the government pushes to make healthcare prices more transparent.

However, researchers have accused hospitals and insurers of failing to fully comply with the regulations. 

Only 34.5% of 2,000 hospitals reviewed by nonprofit watchdog organization Patient Rights Advocate were deemed fully compliant with price transparency rules as of January. But, the CMS had only issued 14 civil monetary penalty notices to noncompliant hospitals as of February 2024, according to the nonprofit.

The Rand study found inpatient prices for hospital services were 255% above what Medicare paid in 2022 while outpatient hospital service prices averaged 289%, according to the report, which was based on an analysis of 4,000 hospitals across 49 states. 

Prices for services at outpatient ambulatory surgical centers was slightly lower at 170% of Medicare payments.

There were also differences in pricing by geography. Arkansas, Iowa, Massachusetts, Michigan and Mississippi kept relative prices below 200% of Medicare prices during the study period. However, others had relative prices above 300% of Medicare. Hospitals in Florida and Georgia negotiated the highest relative rates.

Price transparency could be a tool for administrators of employer-sponsored plans to better negotiate employee benefits. Although employer-sponsored plans cover 160 million Americans, researchers said employers operate at a disadvantage when negotiating prices with providers and insurers due to a lack of detailed pricing information.

“The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided,” said Brian Briscombe, lead researcher for the Rand hospital price transparency project, in a statement. “However, price transparency alone will not lead to changes if employers do not or cannot act upon price information.”

State and federal policymakers could rebalance negotiations by cracking down on noncompetitive healthcare markets, placing limits on payments for out-of-network hospital care or allowing employers to buy into Medicare or other public options, the report said.

The nation’s largest hospital lobby, the American Hospital Association, has rejected previous analyses of pricing data — including reports from Patient Rights Advocate.

In May 2024, Molly Smith, AHA's vice president for policy, pushed back against the Rand study, saying it was “suspiciously silent on the hidden influence of commercial insurers in driving up health care costs for patients, as evidenced by issues like the recent concerning allegations against MultiPlan.”

Also in May 2024, Community Health Systems filed suit against MultiPlan alleging it had colluded with insurers to raise prices for patients and lower payments to providers. The lawsuit is the third against MultiPlan in under a year.