|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
The White House is preparing to blow the lid off healthcare prices
The Wall Street Journal reported Friday that President Trump is planning to issue an Executive Order, as soon as next week, that will force hospitals, insurers, and others in the healthcare industry to reveal their privately-negotiated prices for services. As part of its ongoing campaign to increase price transparency, the White House has been working on a plan for months that would give consumers their first look into the secret discounts that hospitals, doctors and insurance companies negotiate with each other. According to the Journal, the plan envisions using authority given to the Executive branch under a number of different laws, including the Affordable Care Act (ACA) and the Employee Retirement Income Security Act (ERISA), to force full provider price disclosure. The executive order is also expected to mandate greater antitrust scrutiny of consolidation among hospitals and health systems. Although industry groups are expected to strongly oppose the planned order, it would bear the force of law and comes at the same time that bipartisan forces are aligning around the need to address high healthcare prices and their impact on individual consumers. We’ll know more details when the Executive Order is announced, but it’s clear that the Trump administration views expanding price transparency and combating the rising out-of-pocket cost of healthcare as a potent political issue, and one that can mobilize voters in their favor in the upcoming elections. The devil will be in the details, but we believe increasing transparency in healthcare can only be a good thing in the long run, and is likely inevitable given the enormous cost challenges our country faces.
Sweeping new legislation to address healthcare costs
Meanwhile on Capitol Hill, Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) released a detailed discussion draft of sweeping new bipartisan legislation to address the rising cost of care. The “Lower Health Care Costs Act of 2019”, introduced by Alexander and Murray, who are chairman and ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, respectively, is a massive bill that addresses a range of topics including surprise medical billing, cost and quality transparency, prescription drug pricing, vaccine hesitancy, maternal mortality, and more. To address the hot-button issue of surprise billing, the bill would rely on a mechanism known as “network matching”, which makes hospitals responsible for ensuring that emergency and ancillary physicians who deliver care to their patients participate in the same insurance networks as the facility itself, and limits patient financial responsibility to the in-network rates for those services. Hospitals and insurers would also be required to give consumers a good-faith estimate of expected out-of-pocket costs for services on 48 hours’ notice. On prescription drugs, the plan would ban so-called “spread pricing” by pharmacy benefit managers (PBMs) and would require PBMs to pass 100 percent of the rebates they negotiate along to their clients. The bill would also mandate the creation of a national, all-payer claims database, administered by a newly-created nonprofit entity, to enable greater transparency into healthcare costs and quality. A similar bipartisan bill is being drafted by Senate Finance Committee chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR), and the two bills could eventually be merged. Sen. Alexander announced his intention to work toward a vote on the bill by the full Senate by July. There is growing bipartisan consensus around the need to address the issues of surprise billing, drug costs, and transparency, and we wouldn’t be surprised to see much of this legislation enacted this year.
The staggering burden of healthcare spending on households
A new report from the Commonwealth Fund released this week lends support to the growing national focus on out-of-pocket healthcare spending. The report examines spending by individuals and families covered by employer-sponsored insurance, a group which includes 158M Americans. According to the report, the median household with employer-sponsored insurance spends $2,200 on employee premium contributions, and another $800 on out-of-pocket costs for healthcare goods and services not fully paid for by insurance. Those numbers vary widely across households and from state to state, however: households in the 90th percentile of spending pay $8,000 in premium, and $5,000 in out-of-pocket costs; those in the West have relatively high out-of-pocket costs compared to household income, while people in the South have both high premium and out-of-pocket spending relative to income. In six states, meanwhile (Maine, Connecticut, Minnesota, Nebraska, New Hampshire and South Dakota), median combined spending on premium and out-of-pocket costs was in excess of $5,000. In comparison, median household income in the US is $57,652 according to the Census Bureau. And a recent report on household economic well-being from the Federal Reserve indicates that 40 percent of Americans would have difficulty covering an unexpected expense of $400 or more. According to that same report, in 2018, 24 percent of Americans went without some form of medical care due to inability to pay. Little wonder that the White House, Congress, and policymakers from across the political spectrum are increasing scrutiny on the cost of care and proposing aggressive new measures to confront the issue.