Everyone loves a good conspiracy theory. But as most of us have learned, when it comes to important public policy decisions, conspiracy theories do not tell the true story. Oftentimes, something happens because it is the right result.
Such is the case with the current debate over changes to Michigan's auto no-fault system. This bill, known as SB 248, is currently stalled in the Michigan House of Representatives. In the meantime, commentators like Lou Kitchenmaster (“No-fault auto reform needed for Michigan,” Grand Rapids Business Journal, May 15, 2015) have offered conspiracy theories to explain the plight of SB 248. These commentators suggest that SB 248’s failure is because of a conspiracy between doctors, lawyers and legislators.
Sounds alluring, doesn’t it? But, as with many conspiracy theories, it is just not true. Rather, SB 248 is stalled because Republicans and Democrats agree it is bad policy for our state.
The biggest problem with SB 248 is its inherent unfairness. If passed, it would be a huge legislative subsidy for auto insurance companies — one made at the expense of Michigan's medical providers. The Michigan Hospital Association has estimated SB 248 would result in auto insurance companies being allowed to slash payments to hospitals by approximately $1.2 billion — an estimate that does not include the cuts to our rehabilitation centers or home health care providers.
How is this subsidy accomplished? By eliminating the free market that currently exists in Michigan’s auto no-fault insurance system. Under current law, medical providers are paid “reasonable charges” for auto-accident related medical treatment — nothing more and nothing less. SB 248 would eliminate this free market pricing system and replace it with a government-mandated price control system — one that allows auto insurance companies to pay only 150 percent of amounts paid by Medicare.
On its face, 150 percent of Medicare may sound like a good deal. But Medicare reimbursement rates are often only about 40 percent of medical providers’ actual charges. Under these reimbursement rates, medical providers cannot sustain their practices by treating Medicare patients alone. SB 248 would eliminate medical providers’ right to be paid a market rate for the services they provide to auto accident victims. And it would force those providers to accept payment at rates that are inherently unsustainable.
So how will this legislative subsidy affect the rest of us? First, SB 248 will reduce our access to health care. You don’t need an economist to tell you that when doctors lose money treating one group of patients, they will treat fewer of those patients.
But SB 248 would also be a huge economic blow to our state. Walk through a place like downtown Grand Rapids, and you will see the results of a decades-long effort to create a cutting-edge health care economy in West Michigan. Whether it be new facilities by Michigan State University or Mary Free Bed Rehabilitation Hospital, health care is a stable and growing part of Michigan’s economy. Our auto no-fault’s free market reimbursement model is an important source of revenue for Michigan’s health care economy. But by imposing substantial government-mandated price cuts on auto-accident related medical treatment, SB 248 will likely result in job losses throughout Michigan’s health care economy.
So what do the rest of us get in exchange for this legislative subsidy to insurance companies? A reduction in premiums of $100 for two years. After that, rates can rise as fast as the insurance companies would like. And this legislation does nothing to address the high cost of collision coverage. Pull out your latest auto insurance bill. You will likely see that you pay more to cover damage to your car than you do for no-fault benefits that cover you and your family in the event of a tragedy.
All of us who care about our no-fault system should be ready to discuss smart reforms. That's why groups like the Coalition Protecting Auto No-Fault have proposed amendments that attempt to address deficiencies in our system without destroying it in the process.
So the next time you hear about auto no-fault legislation, don't settle for a conspiracy theory. Ask yourself whether the legislation is good for your family, your doctors and our economy. If it’s not, tell your legislators they need to do better.
Tom Sinas and Steve Sinas are with Sinas Dramis Law Firm, legal counsel to the Coalition Protecting Auto No-Fault (CPAN).