House Education & Workforce Subcommittee Issues Testimony From Center on Health Insurance Reforms Assistant Research Professor
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Good morning Chairman Good, Ranking Member DeSaulnier, and members of the Subcommittee on Health, Employment, Labor, and Pensions.
My name is
I am honored to be invited to testify today regarding competition and transparency in our health care markets. In my testimony, I will briefly address the growth of consolidation across our provider and insurance markets, and the effects this is having on consumers and employers, the users of and ultimate payors for health care in the commercial market. I will then turn to opportunities for
Please note that these views are my own. They do not necessarily reflect the views of the Center on Health Insurance Reforms, the
Consolidation in health care markets is growing, to the detriment of everyone who uses and pays for health care
Both horizontal and vertical consolidation are increasing across our health care system, and have been for years now. In health care provider markets, health systems have been allowed to merge with each other and further expand their reach by acquiring physician practices and other ambulatory care settings. Today, the majority of physicians, including those that help diagnose and treat everyday conditions like family doctors, are employed by hospitals and other corporate entities.1
These changes to ownership in our health care provider markets are driving up costs for consumers and employers. One cause behind this increase is that hospitals charge and insurers typically pay more for the same care when it is provided in a hospital setting, like a hospital outpatient department, than an independent practice. While this may be appropriate when the care being provided is more complex and the patient may need additional services only a hospital can safely provide, these higher payments currently extend even to the most routine, everyday services that can be safely and effectively provided outside of a hospital. As hospital acquisitions expand the scope and volume of services that are delivered in hospital-owned or -affiliated
settings, we end up paying much more than we previously were paying or need to be paying for ambulatory care.2
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1
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Another reason consolidation among health care providers increases costs is that large, conglomerate systems gain significant leverage in negotiations with commercial insurers. They become must-have-providers to any insurers seeking to build a provider network, and can extract greater reimbursement rates because of that status.3 They can also impose anticompetitive contracting clauses on insurers, for example requiring insurers to contract with all the providers in their system under the same terms, regardless of factors like the cost or quality of care they may provide.4
Compounding these issues, we have a commercial insurance market dominated by just a handful of major insurers.5 Often, insurance markets pit only two or three major insurers against each other, and these insurers frequently are following the same business models under which constraining health care prices and spending is not necessarily a priority.6 As experts writing for the
Some also point out that the Affordable Care Act's (ACA's) medical loss ratio requirements discourage insurers from containing costs because the amount of profits they can take home is capped to a percentage of spending.9 However, the ACA's subsidy structure can incentivize cost containment when multiple insurers compete to be one of the two lowest cost plans in the individual marketplace, as these plans tend to get large percentages of enrollment.10 On the other hand, the bulk of major insurers' commercial business comes from administrative-services-only (ASO) contracts with employers,11 for which they may have little incentive to negotiate competitive rates due to their relative market power and information monopoly vis-a-vis most employers.12 These perverse incentives are only worsening as the major insurers engage in vertical consolidation themselves, including ownership of all the major pharmacy benefit management (PBM) companies,13 and growing acquisitions of health care provider practices and other suppliers of health care.14
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2 See, e.g.,
3 See, e.g.,
4 See, e.g., Gudiksen et al., MILBANK MEM'L FUND, supra note 3 at 3, 5-7; Gudiksen et al., THE SOURCE, supra note 3 at 22-23, 39-41.
5
6
7 Berenson et al., supra note 3, at 2.
8 Gudiksen et al., THE SOURCE, supra note 3, at 11-13.
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The effects of all of this consolidation is the continued rise in the prices that consumers and employers pay for health care. This, in turn, translates to increased premiums and out-of-pocket costs for employees and individual market consumers, which many are ill-prepared to take on. A recent study by the
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9 See, e.g.,
10 See
11 Inside Big Health Insurers' Side Hustle, TRADEOFFS (
12 CONG. BUDGET OFF., POLICY APPROACHES TO REDUCE WHAT COMMERCIAL INSURERS PAY FOR HOSPITALS' AND PHYSICIANS' SERVICES 11 (2022), https://www.cbo.gov/system/files/2022-09/58222-medical-prices.pdf; TRADEOFFS, supra note 11;
13
14 See, e.g.,
15
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Reducing the harms of consolidation through greater transparency and further interventions
The American public recognizes that health care provider pricing for people with commercial insurance is too high, too variable, and makes little sense. For example, a recent poll shows that a majority of voters, across political affiliation, believe that hospital prices are unreasonable (80%) and that it is important for the current
(1) Moving towards more transparent and rational payment practices in commercial insurance
Health care claims are a valuable source of information for payers, regulators, and policymakers, in addition to the broader research community. But consolidation in provider markets has obscured information about who provides care where. This lack of clarity undermines the ability of payers to make informed payment decisions and hinders our collective ability to understand the extent and effects of consolidation and target appropriate policy and legal interventions.
When health care is provided in a hospital-based setting, both the physician or other health care practitioners providing care and the hospital or health system typically will submit claims to the patient's insurer. These claims are submitted on separate forms. Currently, neither the physician form nor the hospital form needs specify the actual location where care was provided. Although the forms include address lines, providers typically will list the address for where payment should be sent--which may be a billing office in a different state--rather than the care setting.
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16 New Poll: Majority of Voters Support Aggressive Congressional Action to Lower Hospital Prices, ARNOLD VENTURES (
17 Id.
18 Id.
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Providers will also include a national provider identifier (NPI), a ten-digit, federally assigned identification number that providers use for administrative and financial transactions. But hospital claims often include the NPI for the hospital main campus or whatever entity in the system is assigned to collect payment, while the physician claim will include the individual physician's NPI (or that of whoever is responsible for billing in a group practice), even though they may practice out of several different locations. To those on the receiving end of these claims or who rely on public and private claims databases, the actual physical location of care is often a mystery. What's more, because of these and other discrepancies between the claim forms submitted by hospitals and physicians, it is challenging to reliably associate separate claims and know the total cost of care for a given outpatient service.
From dozens of interviews I and my team conducted this winter and spring, the absence of this information is an immense frustration to those in private and public spaces trying to understand and respond to hospital outpatient facility fee charges and other outcomes of vertical integration.
For example, a growing number of states are seeking to prohibit hospital-controlled facilities from charging facility fees in certain types of settings, like off-campus facilities or physician offices. Outpatient facility fees can significantly and unexpectedly increase the amount patients pay in out-of-pocket costs for routine medical care, while also contributing to overall premium growth. But states may have difficulty enforcing facility fee prohibitions if insurers and regulators alike cannot tell the actual location care was provided. 19 I also worry that insurers not having this information will undermine the benefits of ongoing efforts at the state and federal level to prohibit anti-competitive clauses in contracts between providers and insurers. An insurer may, for example, want to pay lower prices to or simply not contract with certain practice locations owned by a health system that have poor quality ratings. But if they cannot tell what care was provided at which location, they may be unable to effectively implement such changes.
Fortunately, there are very simple, minimally burdensome reforms that
This reform comes with another potential benefit: The NPI application form currently includes fields asking an applicant to provide the Legal Business Name (LBN) and Taxpayer Identification Name (TIN) of its parent organization on the application form. To ensure this information is consistently captured,
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19 See
20 Colo.
21 Neb. L.B. 296 Sec. 12 (2023).
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From here, it will also be important to take additional steps to limit hospitals' and health systems' ability to charge outpatient facility fees and ultimately move towards site neutral payments for care that can be safely and effectively provided in independent practice settings. As I previously discussed, major insurers often lack the financial incentives and market leverage to take these actions on their own. Several states, from
(2) Exposing and eliminating inappropriate spending in the employer-sponsored insurance market through increased transparency
The employer-sponsored insurance market is rife with excessive and wasteful spending, from wildly disparate reimbursement rates, many of which are far above levels that would enable hospitals to "break even,"23 to hidden fees and overpayments to third-party administrators (TPAs) and PBMs,24 to massive commissions for employer benefit consultants and brokers recommending and arranging contracts on behalf of employers.25 This occurs despite the fact that employers, as plan sponsors, have a legal duty under ERISA to act "solely in the interest of the participants and beneficiaries of the plan" when administering their employee benefit plans,26 and ensure the compensation they pay service providers (including health care providers) is "reasonable."27
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22 See Monahan et al., supra note 19.
23 See
24
25 EP379: How Much Money, Really,
26 29 U.S.C. Sec. 1104(a)(1).
27 Information Letter 02-19-1998,
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The incongruity between the expectations on employers as plan fiduciaries and the reality of spending under employer plans today is driven by several factors discussed above, including the market dominance of hospitals, health systems, and major insurers vis-a-vis individual employers. A lack of transparency into the health care system also significantly undermines employers' ability to investigate and meaningfully engage in negotiations over plan spending and the terms of their contracts. This factor, however, has begun to become less of a barrier than it once was, thanks to efforts by
(a) Codifying and strengthening federal price transparency rules
The first reforms to go into effect were the federal price transparency rules requiring various disclosures by hospitals and insurers and health plans. Implementation of these rules has been challenging, from court battles, to administrative delays, to outright noncompliance and obstruction by hospitals. And although insurers and health plans released their data more readily than many hospitals, the format and volume of their files were largely inaccessible to anyone without a supercomputer.28 Work by private organizations--like the
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28 See generally
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(b) Revisiting the ban on gag clauses
(c) Clarifying and expanding service provider disclosure requirements
In the CAA,
As one example, many stakeholders highlight a
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29 Transparency in Coverage: Recommendations* for Improving Access to and Usability of Health Plan Price Data, and Usability of Health Plan Price Data, https://georgetown.app.box.com/s/1ezsggz1c7smsaexkr8rght15sokgusl.
30 29 U.S.C. Sec. 1185m.
31
32 Memorandum of Law in Support of Defendants' Motion to Dismiss Plaintiffs' Complaint at 25, Trs. of Int'l
33 29 U.S.C. Sec. 1108(b)(2)(B).
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As this Committee already is familiar, however, some service providers--including PBMs and TPAs--maintain that this requirement does not apply to them. In
Beyond this, it is worth exploring what additional information TPAs, PBMs, and other service providers should disclose to current and potential plan sponsors to ensure plan sponsors have adequate information to fulfill their fiduciary duties. In doing so, it is important to balance several considerations. Information must be sufficiently specific to be actionable. One concern is that many disclosures are in the form of formulas, percentages, and other metrics that do not necessarily convey the extent of compensation (and, thus, potential conflicts of interest). PBM and TPA contracts are immensely complex, and identifying the specific metrics that matter most may be challenging. What's more, PBMs and TPAs may adapt to any new disclosure requirements, shifting where and how they maximize revenue and profits to areas that remain secret. A flexible approach that focuses on articulating the goal of disclosures, such as better informing plan sponsors of how their plan assets are being spent and potential conflicts of interest among their service providers, may be more effective in the long term than an overly detailed law that focuses only on the problems we already know exist.
Alternatively,
There are likely to be some answers that are obvious, like not charging hidden fees or retaining recovered overpayments, and others that may be desirable but prove trickier, such as negotiating reimbursement rates that would apply across multiple plans.
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34 Amended Complaint 36, Sch. Bd. of
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Original text here: https://edworkforce.house.gov/uploadedfiles/monahan_testimony.pdf
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