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Takeaway: Price transparency for hospitals arrives at a bipartisan place; insurers' anticompetitive practices will be examined; new power paradigm?

Editor's Note: Below is a brief excerpt from a complimentary Health Policy Unplugged note written by our Health Policy analyst Emily Evans. Click HERE to learn more about Emily's research process and the analysis subscribers receive.

Power Shift: Biden's Executive Order On Healthcare Competition  - 48651174747 d43f882cb9 k

Politics

Health care policy on the right and left have bent so far in their respective directions, they appear to have converged Friday. 

President Biden issued an Executive Order that extends several Trump-era approaches to health policy that, based on the response from trade groups, were unanticipated.

In a departure from the central planning approach that has characterized the pricing and management of health care for the last 50 years, the new EO demands more competition and an examination of the mechanisms that limit it.

For example, the EO suggests that the Federal Trade Commission examine its hospital merger guidelines to limit consolidation. It also asks for a review of drug company practices like “pay-for-delay.” Finally, the EO endorses disclosure of hospital prices, something that was the hallmark of Trump health care policy.

The un-nuanced view of health policy that equates the appeal of one elected official to the quality of his policy priorities, has created a presumption that a return to pre-2016 status quo was inevitable.

At least that has certainly been the case for price disclosure. Anecdotes from health care leaders suggest the low compliance rate was a result of a wait and see approach.

Left behind, but just for the time being as Biden acknowledges them as priorities, are things like Medicare negotiation of drug prices, a public option and inflation caps on drug prices.

Nonetheless, the inescapable fact is that there is more bipartisan agreement on health care than has been the case since the early aughts.

That ain’t nothing.

Policy

The price transparency initiative that began with the Trump White House and now continued by Biden is likely to be one of the most consequential changes to health care in a generation.

I know, I know. It is hard to translate listed prices into a typical procedure or event. Presentation by CPT code is often confusing. You must be a health care billing expert to decipher anything. Hospitals are not complying with the law.

All true but give it some time.

In the near term, the biggest contribution price transparency, such as it is, will make is in generating questions, especially for self-insured plans.

For example, is it not interesting that Vanderbilt University Medical Center, long considered one of the most expensive providers in the region, lists a knee/hip replacement (DRG 470) at $76k while just about 1 mile to the north, HCA’s Centennial Medical Centers discloses a price of around $25k?

The first response to any large regional employer who had the temerity to inquire will be “no one pays that.”

So, ummm why is it called a “standard charge” if no one pays it?”

Employer sponsored insurance’s capacity to absorb/ignore the crazy prices they pay for health care services should not be underestimated. However, post-pandemic realities may conspire in favor of more questions asking than not.

First, the pressure to raise cash wages has increased dramatically in a tight labor market. Second, benefit expense, which is complicated and hence usually ignored by company leaders, made its way into the C-suite in 2020. During COVID SG&A lines declined because of foregone/deferred care often having a material impact on EBITDA.

Lastly, hard, objective data on costs in the form of price transparency and the soon to be implemented drug spend reporting, make it easier to question the pablum that normally issues forth from benefit consultants and third-party administrators.

From asking questions to finding options is a short walk.

Power

Had Congress not repealed the antitrust provisions of the McCarren-Ferguson Act in January, Biden’s push against anti-competitive practices might have put the industry on its back heels in the battle for market power with the insurance industry.

The consolidation of the health care industry in certain markets has been in part due to federal policy that favors health insurance as the payment mechanism for services.

As insurers have gained market power, frequently by engaging in anti-competitive practices, the services industry has moved to balance the scales.

All helped along by non-existent price discovery and niceties like gag orders and information blocking.

OSCR has sued Florida Blue over their broker exclusivity requirements. It remains to be seen if new antitrust policy will apply retroactively but days after the repeal of provisions of McCarran-Ferguson passed, the Department of Justice filed a letter brief arguing that the new law needed to be applied in this case.

Meanwhile, a significant threat has emerged for that go-to growth solution for insurers, Medicare Advantage. Pending Congressional action to expand traditional Medicare benefits to include dental, vision and hearing obviates the need for many seniors to bother with Medicare Advantage.

It seems that, perhaps, Washington has concluded that the insurance industry is not the answer to health care services price inflation.