Lawmakers still hoping to reduce health costs

"If hospitals and insurers are not able to develop plans to lower their prices to the national average, policy-makers would be wise to consider putting monopoly restraints on the industry."

Hoosiers for Affordable Healthcare

A legislative committee adjourned last week seemingly no closer to answering the thorny question of how to lower Indiana's health care costs.

Prompted by a series of studies showing Indiana hospital costs are among the highest in the nation, state legislative leaders last December directed hospital and insurance executives to submit a plan by the spring to address the issue. After no plan emerged, lawmakers took on the issue in an interim study committee this summer.

High health costs have led 16% of Hoosiers into medical debt, with an average debt of more than $700, according to Hoosiers for Affordable Healthcare, a local organization formed by business leaders advocating for lower health care prices.

The committee, which also discussed issues surrounding maternal mortality and marijuana, held three lengthy meetings in which it talked to health care experts. While numerous studies have found the cost of health care in Indiana is skyrocketing, at the same time some hospitals here say they are struggling financially in the wake of the COVID-19 pandemic, a recent Indiana Hospital Association study found.

Two studies by University of California, Berkeley, professors found that Indiana's rural and urban hospitals also face very different pressures, further complicating the issue. One study, commissioned for the legislative committee, contained no policy suggestions. The other, funded by Houston-based Arnold Ventures, recommended steps for lawmakers to take.

"Every state has variation, but you have to come up with a policy that applies to all," said Richard Scheffler, director of the University of California, Berkeley, Nicholas Petris Center on Health Care Markets and Consumer Welfare and an author of both studies. "Usually the trickier part is in rural areas and poor areas, so we wanted to make that clear in the report."

The focus on hospital pricing has already had some impact both at the legislative and industry level. Last year, IU Health pledged to freeze its prices to put the cost of care there in line with the national average by 2025. Parkview Health has also announced it will reduce the cost of care by that point.

Last session, the Indiana General Assembly passed a measure that requires the Indiana Department of Health to oversee any hospital mergers.

Regulating future mergers, however, would not decrease the current cost of care. Two proposals in the Arnold Ventures report might make the biggest difference, said Gloria Sachdev, president and board chair of the Employers' Forum of Indiana, an employer-led health care coalition: Instituting hospital rate regulation and ending site neutral payments.

Historically, hospitals charged more for outpatient care provided on their campuses than offsite medical clinics did. As health systems started acquiring outpatient facilities, they started charging the same rates in outpatient clinics as though they would on a hospital campus. Hospitals typically charge higher rates to offset the costs of serving as a safety net and providing around the clock access to care.

Recently, however, Medicare started refusing to pay hospital rates for care not provided on a hospital campus or within a 250-yard radius of a hospital location. Two years ago, the legislature considered a similar measure, but the hospital industry balked, saying this change could mean as much as a $2 billion loss, Sachdev said.

Capping prices, much as the state already does for worker's compensation claims, could also make a difference, Sachdev said. Or the state could regulate hospital pricing by limiting how much costs can grow.

Noting that many of the hospital systems have millions in cash reserves for a rainy day fund, Sachdev added, "I just don't understand why all the employers have to figure out how to be more efficient and keep lean."

Study author Scheffler, however, said he's a proponent of states establishing commissions to regulate hospital pricing. California and Massachusetts have embraced this model, creating bodies tasked with deciding how much health care spending should go up each year.

The California commission, which is in its first year, also has a "hammer" that it can use on hospitals that don't curb spending, taking any money made above the growth cap and using it to run the commission or for other health policies, said Scheffler, a professor at the School of Public Health and the Goldman School of Public Policy.

Local employer advocates called on the Indiana General Assembly to find ways to solve the problem, recommending that they look to other industries for models on how to control costs.

"If hospitals and insurers are not able to develop plans to lower their prices to the national average, policy-makers would be wise to consider putting monopoly restraints on the industry just as they do to regulated electric utilities," Hoosiers for Affordable Healthcare said in an emailed statement.

Advocates for hospitals push back on the idea that care in Indiana is abnormally high.

Indiana Hospital Association President Brian Tabor acknowledged that the cost of health care presents challenges but questioned the assumption that Indiana is an outlier.

Average premiums for health care cost only slightly more here as in other states, which the report states. However, when employee wages are factored into the picture, the health care premiums become less affordable because Indiana workers have a lower average wage than those in other states, Tabor said.

"This is yet another attempt to portray Indiana as an outlier for the purpose of advancing a specific policy agenda," Tabor said. "What the Petris Center does is make recommendations that double down on more government control."

After hearing nearly four hours of testimony from insurance, pharmaceutical, and hospital industry leaders, doctors, and employer advocates, lawmakers had no easy answers to address the issue.

Rather, they said, they hoped to continue the discussion.

"I think we have started something," said Sen. Jean Breaux, D-Indianapolis. "I hope that this isn't the end of it, because I think this leaves a big question mark for me."

It's unclear whether lawmakers will consider legislation to curb pricing. The General Assembly will meet in January.

Contact IndyStar reporter Shari Rudavsky at [email protected]. Follow her on Twitter @srudavsky.

"If hospitals and insurers are not able to develop plans to lower their prices to the national average, policy-makers would be wise to consider putting monopoly restraints on the industry."

Hoosiers for Affordable Healthcare