Lawmakers on Thursday continued to grapple with Indiana’s high health care costs, determining which state actions would effectively strengthen the free market.
Two state experts testified virtually before the committee, sharing what other states are doing and reviewing options, but lawmakers seemed frustrated by the need to take action.
“… In a (real) free market, we wouldn’t have to do (this). In a free market, people would know why they paid for what they paid… We don’t,” said Sen. Chris Garner, R-Charlestown. Chris Garten said. “It sickens me that we have to step in from a regulatory perspective and legislate transparency.”
Garten pointed out at the meeting that Indiana was recently ranked 10th in the nation for health care by Forbes, demonstrating the need for continued research and analysis.
“This study should remind us why we are here; Indians deserve better,” Garten said.
cost of monopoly
Brent Fulton, a research professor from California, shares policy recommendations to address Indiana’s “highly” concentrated health care and insurance markets, building on his October speech on monopolies in the state as a basis.
“In the United States, the number one issue with health care is price. We actually see the doctor less often and we go to the hospital less often than other countries… (but) when we go to the doctor, when we go to the hospital, We’re paying a very high price,” Fulton told the committee.
Lack of competition occurs when systems buy smaller chains (called horizontal mergers) or buy physician networks in vertical mergers.
The state could enhance its merger review authority—Massachusetts, for example, has a commission to review mergers and the attorney general also plays a role in ensuring competition. After the merger, Fulton discussed ways to limit anticompetitive contracts, increase price transparency and establish hospital rate regulation.
He acknowledged there are other options, including creating a state health care affordability commission, site-neutral payments and reassessing the tax-exempt status of nonprofit corporations, but Fulton stopped short of broadening the scope because he said those are already covered elsewhere. That last issue in particular is the focus of Indiana economist Mike Hicks, a frequent critic of Indiana’s largest nonprofit system making billions in profits that he says are invested in the stock market , instead of returning it to the locals.
But each move has its own drawbacks. When it comes to price transparency, Fulton noted that providers can coordinate prices, and those that offer affordable procedures may see an opportunity to increase prices.
“The government’s role in the markets is to make sure the markets are functioning; these markets are not functioning,” Fulton said. “There’s not a large number of sellers competing on price…or quality.”
As explored in a bill earlier this year, states would set prices at 285% of Medicare rates, a common practice in Europe to lower health care costs. But Fulton said choosing a price can be “complicated” and can easily go wrong if not done correctly.
Pricing still leaves room for profit
Instead of setting the price at 285% of Medicare rates, lawmakers tasked the Family and Social Services Administration with studying hospital locations — though at least one state expert thinks that’s a good move.
“I do think this is, in my opinion, a good opportunity for hospitals to make a profit because they certainly need to make some level of profit,” said Maureen Hensley, senior director at the National Institute for Health Policy. Maureen Hensley-Quinn said.
“However, we do see … across the country, not just in Indiana, that some hospitals are being paid as much as four to five times the Medicare rate from private plans, but we don’t know if that’s true. Does it help improve quality, or does it affect the quality of care.” Just raise prices. “
The Institute for National Health Policy is an organization of government policymakers and stakeholders focused on national solutions to common problems. Hensley-Quinn shared the types of solutions and reforms other states have tried.
High market concentration leaves employers and consumers with few tools to address health care costs, Hensley-Quinn said, sharing model legislation her organization developed. She specifically discussed the site-of-service language — a bill that was ultimately weakened by industry pressure in the most recent session after hospitals said it would force them to close or reduce services.
“(Procedures) like colonoscopies or MRIs can be done off the hospital campus. But typically after integration happens, the provider sends the patient to the hospital campus…” Hensley-Quinn said. “Then those services are more expensive.”
Lawmakers were intrigued by data she presented showing no correlation between hospitals caring for publicly insured patients and their private insurance costs, questioning arguments that have come up several times during the legislative session.
Indiana hospitals argue they need to charge private insurance policies more to offset the loss of care for poor Hoosiers covered by government insurance programs like Medicaid, which they say has reimbursement rates that are unsustainable and outdated.
But research from the National Bureau of Economic Research included in the speech found that hospitals were more likely to invest in new technology or increase wages after rate adjustments.
“When hospitals’ Medicare payment rates unexpectedly increased by 10 percent, they did not lower prices,” the presentation quoted the National Bureau of Economic Research as saying.
Hensley-Quinn said this has been confirmed in other states: Adjustments to Medicaid and Medicare have not always been associated with decreases in private health care costs, but have remained the same.
But she and lawmakers highlighted problems across multiple sectors of the industry, including insurance companies that pass costs on to employers while reaping profits, and pharmacy benefit managers obfuscating drug prices.
“There is a lack of transparency across the health system; this is not unique to hospitals,” Hensley-Quinn said.
The Health Care Cost Oversight Task Force, led by Garten, will meet again on Nov. 13 to discuss the final report recommendations.
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