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Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join host Jeff Byers, editors from Health Affairs Publishing, and guests as they discuss health policy’s most pressing news and trends.
Hello, and welcome to Health Affairs This Week. I'm your host, Jeff Byers. We are recording on 09/03/2026. So a couple of quick notes. September 16, I've talked about before.
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Jeff Byers:Y'all wanna know about the independent dispute resolution process within the No Surprises Act. And today, to do that very thing, we have on the program Jack Hoadley from Georgetown University. Jack, welcome back to the program.
Jack Hoadley:Yeah. Thank you. I'm glad to be here.
Jeff Byers:Yeah. So you're based out of DC. Is that right?
Jack Hoadley:That's right.
Jeff Byers:Yeah. So how hot is it there right now?
Jack Hoadley:It's been pretty hot the last couple of days. Today's cloudy, so maybe not so bad.
Jeff Byers:Yeah. It's been brutal down here in Central Virginia. Mhmm. And, you know, that's that type of rapport and, you know, relatability I'm trying to give to our audience when we talk about the weather and how how miserable it is. But, you know, anyways, Jack, you and Kenneth Watts wrote a piece in Health Affairs Forefront about spending on the IDR process and how it pushes the No Surprises Act to cost more than $22,000,000,000 over four years.
Jeff Byers:So at a very, very high level, can you kinda explain your findings and the article to the listeners?
Jack Hoadley:Yeah, happy to do that. So, the IDR process for those who haven't followed this kind of obscure issue but it's becoming a little bit less obscure. The IDR process is a part of the No Surprises Act. So simply put the No Surprises Act really acted to take the consumer out of the middle of disputes between providers and insurers in circumstances where you're getting healthcare services in situations where you have no reasonable expectation that you could make a decision about which doctor to go see. So that includes emergency room scenarios, includes anesthesia for a scheduled surgery or radiology scans that are part of a hospital based service.
Jack Hoadley:And so in those situations, once upon a time before the No Surprises Act, you were vulnerable to being balanced billed. If the insurance company said they wanna pay $200 towards the bill of a thousand dollars, the doctor could come back to you and say, I want the other $800 And that of course would be well beyond anything you normally would expect to pay in those kinds of insured situations. So no surprises, Act said that, no, you can't pay any more than you would normally pay in cost sharing if you were in network. But to do that, they had to set up a means to decide how much the insurance company needed to pay to the doctor or to the hospital. And so the law said that the insurance company has to make an initial payment, but doesn't set any rules about how much that initial payment has to be.
Jack Hoadley:And there's no contract. These are all out of network non contracted situations that we're talking about. So if the doctor doesn't like that amount, thinks it's inadequate, the doctor has the option to first request what's called open negotiation, thirty day negotiation period. Maybe we can reach a reasonable deal. Maybe we can come up with an amount that's acceptable to both sides.
Jack Hoadley:But if that isn't successful, then the physician or the hospital can request arbitration. Enter the independent dispute resolution process or the IDR process.
Jeff Byers:Yeah, real quick, just to jump in. So thanks for that quick background. Yes, before we get into the IDR process, like for anyone that like this might be their first episode of hearing about this, like arbitration when it comes to payment disputes, like what is that?
Jack Hoadley:Yeah, so when arbitration happens, it's a process where both sides, in this case, it's the physician or a hospital or an outpatient department on the one side and insurance company on the other side. They go into this process which is using what's called final offer arbitration or baseball style arbitration. And what that means is that both sides put forward an offer. So the physician might say, want a thousand dollars. That's that's what I normally would bill for this.
Jack Hoadley:Or I'm gonna willing to come down. Maybe I'll make an an offer of $800 as an amount that I would like to get. They then also provide some of the backup for why they offer that amount. The insurance company might say, well, you know, maybe I would normally have paid $200 and that was my initial payment, but now I'm gonna come up with $220. I'm willing to come up a little bit.
Jack Hoadley:And so the arbitrator looks at $2.20 and looks at 800 and they have to pick one number or the other. They can't split the difference. And so that's what's unique about this style of arbitration. It's supposed to be set up in a way that encourages both sides to compromise, to offer modest offers. If I ask for too much, I'm not gonna get it.
Jack Hoadley:The other side is gonna prevail. Unfortunately, that's not what we've seen. We've a proliferation of high offers and high awards.
Jeff Byers:Yeah, thank you. So now we know what arbitration is, we have the setup, what were the main kind of findings of your article?
Jack Hoadley:Yeah, so we found that the total costs that are incurred as a result of the system was about $22,400,000,000 over the period from the time the system started in early twenty twenty two through the end of twenty twenty five, the most recent data we have available. And that's a dramatic increase over the 5,000,000,000 that we previously reported, which was data through 2024. And with just one additional year of data, we're really seeing this massive increase in costs. These costs include really three components. The first is those awards, the awards that come out of the arbitration process.
Jack Hoadley:So it's the fact that that the awards, amount to how much they're awarded over and above what the in network rate would have been. So we sort of use that as a base point and the estimate of the in network rate is through a mechanism that was established in the law called the qualifying payment amount or the QPA. And so we look at the differential. We'll assume that the QPA is what they would have gotten if they didn't request arbitration, but we'll subtract that out from what they actually got through arbitration. So that differential, that addition is a cost that's due to arbitration.
Jack Hoadley:And then we add on to that some of the administrative costs. So the fees that both sides have to pay to operate the system, and to use the system, and then we make our best estimate of internal administrative costs that are incurred by doctors, hospitals and health plans when they're using the system. And when you put all those number together, you get our estimate of 22,400,000,000 over four years.
Jeff Byers:Great, thanks for that. So you mentioned this increase from 5 to 22,000,000,000. That seems like a lot, you know, I'm not a billionaire. I don't know. That seems like a lot of money to me.
Jeff Byers:What account you know, what is driving this increase? What's the account for that?
Jack Hoadley:The biggest two drivers of that increase are the rapid growth in the volume of disputes. So disputes from 2024 to 2025 went up by 77%. So close to doubling. So we see a lot more disputes. That's not enough to explain that differential by itself.
Jack Hoadley:So the other big thing that's happening is sharply increasing payment amounts in those awards and decisions by the arbitrators. And the size of awards has gone up by 264% in 2025 compared to 2024. That's those two increases together are what's driving that big increase in total costs.
Jeff Byers:We've been talking for about eight minutes or so. That's a lot of information. If you're able to, like, give a tagline to this of like the idea, like a two sentence tagline of what's happening.
Jack Hoadley:I would say what's happening is that we really are seeing a massive growth in use of the IDR system and that massive growth in use is driving costs considerably higher. And those are costs that potentially have an impact eventually on insurance premiums.
Jeff Byers:So the No Surprises Act was largely a consumer protection effort and kind of a way to some tamp down some some healthcare spending, but it sounds like no good deed goes unpunished. So, you know, with your research shows that maybe this was a surprise where some cost shifts, you know, what's your reading of all this?
Jack Hoadley:I mean, I think that the successful part has been the consumer protection. Consumers are being protected from these surprise bills that they used to get in those emergency room situations, radiology, anesthesia situations. What is a surprise is how much the costs have been. Congressional Budget Office actually estimated this would be a savings overall and would actually help to lower premiums. That still may turn out to be true eventually, but at the moment we're concerned that these higher costs are gonna lead to higher premiums and higher overall health system costs.
Jeff Byers:Yeah, I guess like that's great to know that you're like, still could be saving money down the line. So like, this is just one point in time. I guess I find it interesting when looking at your article of like, this is meant to save money, but then the costs of balloon from is it administrative costs? Would you would you call them administrative costs?
Jack Hoadley:It's partially administrative costs and it's partially higher costs for medical services.
Jeff Byers:So going back to the article, in the article, you mentioned that providers win about 85% of disputes in 2025. So like, do you have any sense of what explains such high consistently provider win rates?
Jack Hoadley:It's something that's hard to explain and we really need to have more transparency into the black box of that arbitration decision making process.
Jeff Byers:Okay.
Jack Hoadley:We do know there's variation across the entities, the arbitration entities, when we call them the IDR entities, and there's one such arbitration entity that is producing results in favor of providers 99.4% of the time. And there's another one that's providing wins to providers only 54.5% of the time. So there's big variation and it's something we'd like to understand better. We do think that the process may have been thrown off the rails a bit by court decisions over the last couple of years which ruled against some of the guardrails that we believe were intended to be part of the process as it was written by Congress.
Jeff Byers:Okay. And I'm sure, you know, we only have about so much time, so I'm sure if someone is interested in those guardrails and more information, they can check out the article on Health Affairs Forefront. So you noted that potentially on the IDR process could have implications on costs down the line. You mentioned that volumes continue to surge for these arbitrations. So like, you know, can you go into a little bit more depth about what the implications for these costs are in the future?
Jack Hoadley:Yeah, I mean, costs are being attached to a relatively small subset of the emergency room visits that people make, the services that they get, the anesthesia, the radiology services that they get. Most services are still being handled the old fashioned way where the insurance company picks an amount to pay and the provider accepts that amount. But when this subset of cases goes to arbitration and we see these very high awards coming out of that process, that's something that could be leveraged for providers when they're negotiating rates down the road for contracted rates. And so if they say we can leave the network and go out of network and go to IDR and get what we think we deserve, then we're not gonna accept the rates that you've been giving us in the past. So if that happens, that's where we're gonna see the big growth in healthcare costs and the effects on premiums.
Jeff Byers:Yeah. So more to come. This article got a decent amount of press, in the, you know, health care b to b space at least, in my neck of the woods. It also got some pushback. So the American Society of Anesthesiologists, the American College of Emergency Physicians, and the American College of Radiology argued that your article was flawed.
Jeff Byers:You know, are not representatives of those organizations are not here to defend themselves, but you are, So I was curious, do you have any response to their response?
Jack Hoadley:One of the critiques they've made is that, we use the QPA as sort of our baseline and there was a recent court case that ruled against some of the methods used to calculate QPAs and so the providers claim that the QPAs are underestimates of the true in network rate. We address that by saying, what would happen if we just use 150% of the QPA as a comparison or even double the QPA as a comparison point? And we did show that those would lower our estimates by as much as about $2,000,000,000 but even if we took our 24,000,000,000 down by 2,000,000,000, it's still a big number. And so we feel like we stand by our results which are based what we found out of the publicly available data.
Jeff Byers:So Jack Hoadley, final question. I didn't mention the article title, so I will now. The article on Health Affairs Forefront is called spending on IDR process pushes no surprises act costs to more than 22,400,000,000 over just four years. You can find a link in the show notes. Jack, anything to add before we head out?
Jack Hoadley:I think I would just reiterate that the No Surprises Act still works quite well in protecting consumers from balance bills, surprise bills that might come in these particular scenarios like emergency room visits. But we're concerned that the leverage of using the IDR process could lead to higher costs down the road and those could show up in consumers premiums and really affect the affordability of healthcare.
Jeff Byers:Well, Hoadley, thank you for that. More to come, I'm sure, on this process and hopefully some more work from you and your colleagues on this. Thank you again for joining Health Affairs This Week. And to you, the listener, if you enjoyed this episode, please send it to the laborer in your life. Thanks, and we will see you not next week.
Jeff Byers:Bye.