Proposal to Reform the State’s IDR Process Will Help Patients & Taxpayers; Lawmakers Should Embrace It
Imagine if it cost $150 to fix a leaky faucet, but the plumber charged you $15,000 instead and said New York’s laws allows them to do it. Wouldn’t it make sense to fix the law rather than continuing to overpay?
That’s what’s happening in Medicaid, where many high-priced providers are exploiting the state’s Independent Dispute Resolution (IDR) process to charge excessive reimbursement rates for patients covered by Medicaid – a program intended for low income and vulnerable people. This loophole is costing the state and taxpayers hundreds of millions of dollars. Governor Hochul’s FY2027 Executive Budget proposes reforming the process.
In 2014, New York was one of the first states to adopt a law to protect patients from emergency and surprise out-of-network bills and hold them harmless from having to pay exorbitant bills. The law established the IDR process to resolve payment disputes between providers and health plans by tasking an independent arbiter to determine whether 1) the provider’s fee or 2) the health plan’s payment is more reasonable for an out-of-network service, which is done by comparing the amount charged for the particular service in the same specialty in the same geographical area. In determining the comparison, the arbiter will consider how closely each side’s proposed amount is in relation to the 80th percentile of amounts charged for similar services in that region.
For insurance coverage provided through an employer or the individual market, the IDR process will reflect the rates providers charge the commercial market. However, this approach makes little sense in Medicaid where patients are already protected from surprise bills and out-of-pocket costs. Additionally, Medicaid’s lower reimbursement reflects that this is a taxpayer-funded program intended to expand coverage to vulnerable populations, but the IDR process does not take that into account when determining whether what the provider has billed is reasonable.
This loophole creates an incentive for certain providers to remain out-of-network and charge excessive rates to care for Medicaid patients. The number of Medicaid claims providers submitted to the IDR process has been increasing dramatically, growing from 778 in 2021 to more than 14,000 in 2024, an increase of over 1,700%. A few examples of case decisions highlight the exorbitant payments:
- An individual needed emergency back surgery at a downstate hospital, which was performed by an out-of-network surgeon. While the Medicaid fee schedule reimbursed for the surgery at nearly $3,000, the provider disputed the amount, submitting a bill in excess of $566,000 – almost 200 times the Medicaid rate. The independent reviewer determined the surgeon should have been reimbursed over $514,000, which became the ultimate cost to the taxpayers.
- A patient with spinal nerve compression that was causing muscle weakness was admitted to a downstate hospital and required surgery. An out-of-network orthopedic surgeon performed the procedure, charging over $563,000, well above the Medicaid fee schedule of roughly $1,300. The independent reviewer rendered a decision that the provider was owed over $507,000.
- A downstate neurosurgery group that was out-of-network performed spinal fusion surgery on an individual at an in-network hospital. The Medicaid fee schedule set a rate of $1,757, while the group charged nearly $81,000, with the independent reviewer determining that the neurosurgery group’s requested amount to be more reasonable.
The providers abusing the IDR process aren’t primary care physicians but rather those in high-cost specialties, such as radiologists, anesthesiologists, neurosurgeons, and orthopedists. If these providers have issues with the rates Medicaid reimburses, they should seek other solutions and not misuse state law to get paid more.
By exempting Medicaid from the IDR process, the Governor’s proposal would address the egregious rates some providers charge. This is a sensible reform that would be an important step to reining in spending, providing savings for the state and taxpayers, while ensuring vulnerable New Yorkers have access to critical services. It should be included in this year’s final budget.
Eric Linzer is President and CEO of the New York Health Plan Association, which represents 20 health plans across the state that provide comprehensive health care services to more than eight million New Yorkers.
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