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Senator Vitale’s S-1285 will not lower health care costs

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Dr. Jonathan Lustgarten is the past president of the New Jersey Neurosurgical Society
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Sen. Joseph Vitale and his supporters have promised our citizens substantial cost savings if his out-of-network bill, S-1285, becomes law.  He claims that by restricting how much emergency and trauma specialists get paid for saving human lives, New Jersey can save up to a billion dollars a year.

The entire medical profession in New Jersey, including our hospitals, opposes this legislation because it would result in dangerous shortages of these specialists. The health of our citizens would be jeopardized.
Elsewhere, legislators have promised cost savings by artificially lowering payments to doctors.  Have their promises been kept?  Not even in one case.  

Here are examples:  

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In 2011, Illinois adopted severely restrictive legislation that capped out-of-network billing to in-network rates. Legislators and advocates in that State promised cost and premium reductions as a result. In reality, however, costs continue to soar.  This year, insurers in Illinois have purposed rate hikes of 45 percent.

In 2010, Maryland adopted out-of-network restrictions at 140 percent of Medicare. This year, Cigna has proposed a 37 percent increase in premiums.  CareFirst, Maryland’s largest insurer, will increase rates by 50.4 percent.

In New Jersey, as of Jan 1, 2017, plans sold in the Small Group markets were allowed by the state Department of Banking and Insurance to abandon the Usual, Customary, and Reasonable (UCR) standard for elective out-of-network reimbursement.  

As a result, these plans now pay out-of-network at 110 percent of Medicare.  Despite this massive reduction in physician reimbursement, premiums for these plans have already increased 10 percent in the first six months of 2017.

Reductions in physician reimbursement, wherever attempted, have never led to the promised reductions in premiums or total costs. Why?  Because physician reimbursement represents only a small fraction (approximately 8 percent) of health care spending. Put another way, even if you paid physicians nothing, costs would continue to spiral out of control.

In contrast, the insurance industry has diverted attention away from their own practices that drive up costs for all New Jersey citizens. By eliminating the hidden fees and commissions that insurers charge when they act as third party administrators to self-funded plans, the State Health Benefits Plan could potentially save $121 million per year. So can the union plans and large employers, amounting up to $1 billion in saving to New Jersey.

Eliminating these hidden fees will save our State money without the negative public health consequences of S-1285.  Other States have already done so.

Sen. Vitale promises large savings to the New Jersey health care budget by passing S-1285. Hold him accountable to this false promise. Make him produce even one example of where this kind of dangerous policy has worked in the past.

Jonathan Lustgarten, MD, is the past president of the New Jersey Neurosurgical Society.
 

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