Reed Abelson

“For decades, hospitals, insurance companies, lobbyists and special interests have hidden prices from consumers, so they could drive up costs for you, and you had no idea what was happening,” President Donald Trump said Friday afternoon in the White House’s Roosevelt Room. “You’d get bills that were unbelievable and you’d have no idea why.”

Patients, he said, have “been ripped off for years.”

The federal rule, which would not take effect until 2021, is part of a broader push by Trump officials to make health care markets more transparent to patients. The administration also unveiled a proposed rule to require insurers to allow patients to get advanced estimates of their out-of-pocket costs before they see a doctor or go to the hospital.

Trump rolled out the initiative personally, providing some counterprogramming to the second day of impeachment hearings while showing his willingness to take on powerful interest groups like hospitals and insurers.

Trump was “taking historic action to make health care prices transparent for consumers, yet the coverage on all the cables remains on the impeachment inquiry charade,” his press secretary, Stephanie Grisham, tweeted. “Dems should get back to work — just like our” president.

The hospital industry, which has long kept its negotiations with insurers secret, said it would challenge the rule in federal court. “This is a very radical proposal,” said Tom Nickels, an executive vice president with the American Hospital Association, a trade group.

Hospitals say the administration does not have the authority to compel them to disclose their private negotiations and compared the order to forcing private parties to reveal trade secrets.

But if the rule survives, “it’s a game changer,” said John Barkett, a former Obama administration official who is now a health policy expert at Willis Towers Watson. Knowing the price of a colonoscopy or knee surgery before it takes place “would be hugely helpful,” he said.

The administration’s decision to aggressively tackle the secrecy surrounding hospital prices came amid widespread concern about rising costs for medical care. Democrats have also been campaigning on soaring health care costs, and both parties fear entering the 2020 campaign season with unfulfilled promises to gain control of out-of-pocket health spending.

People “are increasingly exposed to the crazy pricing of health care,” said Chas Rhoades, one of the founders of Gist Healthcare, a consulting firm in Washington. “We are overdue for a public airing of how all of this works.”

While the hospitals’ legal challenge may succeed, they are vulnerable to the increasing public outcry over high prices, Rhoades said. “It’s not a good look for the industry to push back on transparency on prices.”

Trump seemed to relish taking on powerful interest groups. “I don’t know if the hospitals are going to like me too much anymore with this, but that’s OK, right?” he asked. About health insurers, he quipped, “they’ll be thrilled.”

The new rule requires hospitals to make a range of prices easily available, such as prices negotiated within an insurer's network, what hospitals are paid if their care is out of a patient’s insurance network, and what the hospital would accept for the treatment if paid in cash.

Administration officials, employers and others have criticized hospitals and insurers for keeping the deals they strike a secret, making it challenging for patients to seek less expensive care. They argue that by making it easier for people to find the actual prices that insurers pay — and not just the standard list prices for various services, which the Trump administration started requiring hospitals to post earlier this year — hospitals will be under more pressure to compete on prices.

The rule has the potential to roil the health care industry, which critics argue use the secrecy of their negotiations to keep prices high. A recent study showed that private insurers pay some hospitals two to three times more than the federal Medicare program pays for the same care. Even employers say they have little visibility into the prices being paid by the insurers on behalf of their workers.

Proponents of the rule say it will create a working health care market in which hospitals compete on price and quality. People will be able to look for hospitals that give them the best value, said Cynthia Fisher, a health care entrepreneur and the founder of the group Patient Rights Advocate. “It will be aggregated and assimilated in a way that people can have ready access to it,” she said.

Both the hospitals and health insurers say they should not be required to make public what they consider proprietary information, and they are expected to mount legal challenges to any mandated disclosure. In Ohio, a state law requiring price transparency that was passed two years ago is still waylaid in the courts.

Hospitals say that disclosing prices would lead to higher costs, not reduce them, because each institution would know the prices of its competitors and could be reluctant to settle for less.

Health insurers, which have voiced similar concerns, said they were evaluating the rules.

“Transparency should be achieved in a way that encourages, not undermines, competitive negotiations to lower patients’ and consumers’ costs and premiums,” said Matt Eyles, the chief executive of America’s Health Insurance Plans, which represents insurers, in a statement.

Alex M. Azar II, the health and human services secretary, called that “a canard.”

But the legal challenge ahead is real. When the Trump administration tried to require pharmaceutical companies to disclose the list price of their drugs in their television ads, the courts blocked the regulation. A federal judge ruled last summer that the Department of Health and Human Services exceeded its regulatory authority with the rule, which was seen as largely symbolic since list prices are not what patients typically pay.

“We may face litigation, and we feel we are on a very firm legal footing,” said Azar, who emphasized the information is already being made public to patients on what is called an explanation of benefits form — but after they go to the doctor or get a medical treatment.

Nickels from the hospital association said information about all of a hospital’s negotiated prices with individual insurers is not currently available. “That isn’t public information given to everyone, given to competitors,” he said.

This article originally appeared in

To Lower Costs, Trump to Force Hospitals to Reveal Price of Care

The Trump administration on Friday announced it would begin forcing hospitals to publicly disclose the discounted prices they negotiate with insurance companies, a potentially bold move to help people shop for better deals on a range of medical services, from hip replacements to brain scans.

In a statement, the company said he had unexpectedly died in his sleep but gave no other details.

Tyson had worked for Kaiser Permanente, which is based in Oakland, for more than three decades, beginning in the medical records department. He later became a hospital administrator and held a series of executive posts with the company until being named chief executive in 2013 and chairman the year after that.

Kaiser’s board of directors said Gregory A. Adams, executive vice president and group president, would serve as interim chairman and chief executive.

By the time Tyson took it over, Kaiser, founded in 1945, had evolved from a classic health maintenance organization, or HMO, into one of the most respected health care groups in the United States, combining a network of hospitals and clinics with its own nonprofit health plan, in which its doctors track patients closely. With its holistic approach, Kaiser built a reputation for providing consistent high-quality care.

The organization was among the first health systems to invest heavily in technology to better manage the care it delivered, spending billions of dollars to develop electronic health records. Tyson supported this push in the face of opposition within the organization, said George Halvorson, Tyson’s predecessor as chairman and chief executive.

Tyson understood that, as in the early days of the internet, the full uses of these medical records might not be clear at first but would eventually prove to be invaluable. “He had a very, very strong commitment to improving the quality of health care in systemic ways,” Halvorson said.

Tyson expanded Kaiser’s reach, adding another well-respected organization, Group Health Cooperative, to the organization’s fold in early 2017. Until then, Kaiser’s membership had not surpassed the peak it reached in the late 1990s, but under his leadership it rose to 12.3 million members, up from 9.1 million, across eight states and the District of Columbia. Kaiser’s operating revenue reached $82 billion last year.

As one of the nation’s most influential health care executives, Tyson was outspoken about bringing down health-care costs and moving away from the current system that pays hospitals and doctors more when they provide more care, regardless of how much a patient may need it. In an interview with The New York Times last week, Tyson said the industry needed to become more efficient so that more people could afford care.

“We’re working at it every day at Kaiser Permanente,” he said, adding that other health systems were trying to adopt Kaiser’s integrated model.

Tyson was committed to improving the health not only of the group’s members but also of the communities in which Kaiser operates, said Ceci Connolly, the chief executive of the Alliance of Community Health Plans, a trade association in Washington of which Kaiser is a member. He had the organization examine broad issues like housing shortages, food insecurity and gun violence and their impact on health and well-being.

“Bernard had an incredible appreciation for and a passion for on-the-ground tangible improvements to the lives of people,” Connolly said.

As Kaiser’s first African American chief executive, Tyson used his position to call attention to racial issues, writing that his experience as a chief executive was not so different “from a black man who is working in a retail or food service job to support his family.”

“Even as a CEO, the black male experience is my reality,” he said.

“The son of a minister and a homemaker, Bernard never forgot where he came from and always stayed true to his values,” Robert F. Smith, an African-American billionaire who was a friend of Tyson’s, said in a statement, adding that “as an African-American CEO of one of America’s most important companies,” Tyson had “embraced his opportunity to be a change maker.”

Bernard James Tyson was born Jan. 20, 1959, in Vallejo, California, one of seven children of Moses and Billie Tyson. His father was a carpenter as well as being a part-time minister.

Tyson once told Bloomberg News that he traced his interest in health care to his mother’s medical problems.

“My mom was sick from diabetes, so we were in hospitals a lot, and I decided I wanted to run my own,” he told Bloomberg in 2015.

After graduating from Vallejo High School in 1977, Tyson attended Golden Gate University in San Francisco, receiving a bachelor’s degree in health service management in 1982. While pursuing his studies he worked for a time as an administrative analyst for Vallejo General Hospital. He went on to earn a master’s in business administration at Golden Gate in 1984. He joined Kaiser in 1987.

Tyson is survived by his wife, Denise Bradley-Tyson, and three sons, Bernard Jr., Alexander and Charles.

An early proponent of the Affordable Care Act signed into law by President Barack Obama, Tyson supported building on it rather than scrapping it in favor of a sweeping so-called Medicare-for-All plan, as proposed by Sens. Elizabeth Warren and Bernie Sanders in their campaigns for the Democratic presidential nomination. Their plans would do away with private insurance and create a vehicle like an expanded version of Medicare.

Tyson argued that these proposals had failed to move the country away from a discussion of health insurance to one focused on reducing costs and improving the quality of care.

“We would spend the next decade blowing up the commercial marketplace,” he said, and policymakers would be wasting time that they could otherwise spend on more important issues. “It will continue to be a narrative about coverage,” he said.

Bernard J. Tyson, Chairman of Health Care Giant, Dies at 60

Bernard J. Tyson, the chairman and chief executive of Kaiser Permanente, the large and influential California health care organization that many view as a model for the rest of the country, died Sunday. He was 60.

McCormick, 27, who has a heart condition, had an opportunity to move from part time to full time in her job at a small nonprofit in Washington. Working full time would qualify her for the firm’s health plan.

But she calculated that her out-of-pocket costs would be at least $1,200 per month, about double the money she had left after paying her rent and utilities.

Instead, she quit her job last summer so her income would be low enough to enroll in Medicaid, which will cover all her medical expenses. “I’m trying to do some side jobs,” she said.

Employers remain the main source of health insurance in the United States, covering about 153 million people. But premiums and deductibles are pushing employer-based coverage increasingly out of reach, according to a new analysis released Wednesday by the Kaiser Family Foundation, which conducts a survey of employers every year.

The average premium paid by the employer and the employee for a family plan now tops $20,000 a year, with the worker contributing about $6,000, according to the survey. More than a quarter of all covered workers and nearly half of those working for small businesses face an annual deductible of $2,000 or more.

The new data on employer coverage come as the Democratic presidential candidates debate sweeping reforms to diminish the role of private insurance in the U.S. health system, including expanding the federal Medicare program to everyone or giving people the option to enroll in a government-run plan.

Many of the arguments for both systems center on expanding health insurance to more of the estimated 27 million people who lack it. But millions of people who already have coverage are deeply dissatisfied with the current system as well.

“For some reason, we like to focus on coverage when the issue for workers, people and the public generally is cost,” said Drew Altman, chief executive of the foundation. About 2,000 small and large businesses responded in detail to the survey.

Small employers in particular, and their workers, are struggling.

“Health insurance in the United States is incredibly prohibitive for small businesses,” said Shalin Madan, founder of a small investment advisory firm in Florida. He is not required to provide health insurance to his workers, because his business is too small and he outsources much of the work.

A policy for his own family, he said, runs about $2,000 a month ($24,000 per year), with a $13,000 deductible. “I’m out $37,000 before I see a return on investment, if you will,” Madan said.

A recent Wall Street Journal/NBC News poll found that a majority of registered voters, 56%, are opposed to the idea of a government-run system like Medicare-for-all that would replace private insurance. But Madan said the current system results in a schism between those who have good employer coverage and those who do not.

“I had phenomenal health insurance being employed,” said Madan of his time working for a larger corporation.

One of Sen. Elizabeth Warren’s applause lines on the Democratic presidential campaign trail is that no one likes their insurance company. But employer coverage “isn’t monolithic,” said Altman.

While some people, usually higher-paid professionals or union members, enjoy generous coverage from their job, people making $25,000 or less — about 36 million Americans — are the most likely to be priced out of coverage, he said.

People who work at companies where a large share of the employees are low-wage workers pay an average of $7,000 annually for a family plan, according to the survey, about $1,000 more than those working at companies made up of better-paid workers.

Only one in three of these workers is enrolled in an employer’s plan, about half the rate at better-paying companies. “This is a group that really deserves a lot more attention,” Altman said.

While some low-wage workers may qualify for Medicaid in states that expanded it under the Affordable Care Act, those with private insurance who are not eligible for government help are having a more difficult time affording care, said Benjamin Sommers, a health economist at the Harvard T.H. Chan School of Public Health.

“The arc of the ACA really tried, and largely succeeded, in leaving the employer market as is,” he said.

For many businesses, it’s a Sophie’s choice between raising an employee’s share of premiums or increasing the size of the deductible.

“I try to keep the benefits pretty much the same,” said Joel Sturm, chief operating officer of the New York College of Podiatric Medicine. The majority of workers are in a plan that comes with a deductible of $1,000 for an individual and asks them to pay about 10% of their medical bills. “It doesn’t kill them if they go,” Sturm said.

But employees must pay a hefty share of the overall premiums, about $950 a month for a couple. Some employees have quit as a result of having so much taken out of their paycheck and still having to cover some out-of-pocket costs, Sturm said. “They’d rather be unemployed than have very little take-home pay,” he said, adding that Medicaid can seem like a more attractive option.

Many businesses have opted to increase deductibles instead of premiums. “A lot of employers with lower-paid employees want to offer a low-cost option that is typically a high-deductible plan,” said Chris Bartnik, a senior vice president at Lockton Cos. who advises businesses on their coverage.

But some of his clients who once embraced high deductibles have changed their minds, worried their workers can’t afford to go to the doctor.

Some large employers are adjusting premiums and deductibles based on an employee’s income. JPMorgan Chase pays 80% of the premiums for workers making under $60,000, and the company lowered the annual deductible by $750 to $2,000 or less, depending on the plan they choose.

(JPMorgan Chase is also part of the trio of big corporations behind Haven, a new venture trying to reinvent employer-based coverage.)

H.A. Cover &amp; Son Lumber, in Thayer, Missouri, has decided to pay the bulk of premiums for workers, but the plans come with a deductible of $2,500 for an individual and $5,000 for a family. The company is paying about $16,000 a month to cover the 11 people enrolled in the plan.

The deductible “is higher than we wanted to go,” said Marion Cowen, who oversees benefits for the business, but the cost for more comprehensive coverage was prohibitive. “We don’t know what we’re going to do if it goes up much more,” she said.

She is intrigued by the idea of being allowed to buy into a government plan, like Medicaid or Medicare, that is being floated by some of the candidates. “We would consider it, yes, we would,” she said, if the option saved money and provided employees with high-quality coverage.

The Wall Street Journal/NBC News poll found that about two-thirds of voters supported the idea of allowing people to buy into Medicare. “Some states are looking at a public option,” said David Chase, who leads the national outreach efforts for Small Business Majority, an advocacy group that supported the Affordable Care Act. He said the group is talking to various states about allowing small businesses the option of buying into a government program.

“There are a lot of hypothetical proposals out there,” said Neil Trautwein, vice president of health care policy at the National Retail Federation who said his members are increasingly concerned about rising health care costs. Companies are not as keen on offering less generous plans, he said, but would be open to other alternatives.

At Bagel Grove in Utica, New York, most of the 20 employees are now covered by Medicaid, said Anne Wadsworth, one of the owners. She took advantage of the tax credits available to small businesses that helped pay for the cost of coverage under the Affordable Care Act, but the credits ran out. While she still covers 45% of the premiums, all but one of her employees, herself included, have found better plans on their own.

“I was all on board for Obamacare,” she said, but it proved not to be “a long-term solution. It doesn’t lower the costs for people.”

Wadsworth is wary of the sweeping plans now proposed by Democratic presidential candidates, which she worries will become a political football, like the Affordable Care Act, and fail to address the underlying issues.

“I just think health care costs need to go down,” she said.

Employer Health Insurance Is Increasingly Unaffordable, Study Finds

Jessie McCormick had to quit her job to afford health care.

Former Vice President Joe Biden is one of the Democratic presidential contenders who favor this kind of buy-in, often called the public option. They view it as a more gradual, politically pragmatic alternative to the “Medicare for All” proposal championed by Sen. Bernie Sanders, which would abolish private health insurance altogether.

A public option, supporters say, is the logical next step in the expansion of access begun under the Affordable Care Act, passed while Biden was in office. “We have to protect and build on Obamacare,” he said.

But depending on its design, a public option may well threaten the ACA in unexpected ways.

A government plan, even a Medicare buy-in, could shrink the number of customers buying policies on the Obamacare markets, making them less appealing for leading insurers, according to many health insurers, policy analysts and even some Democrats.

In urban markets, “a public option could come in and soak up all of the demand of the ACA market,” said Craig Garthwaite, a health economist at Northwestern University.

And in rural markets, insurers that are now profitable because they are often the only choices may find it difficult to make money if they faced competition from the federal government.

Some insurers could decide that a smaller and uncertain market is not worth their effort.

If the public option program also matched the rates Medicare paid to hospitals and doctors, “I think it would be really hard to compete,” Garthwaite said. Even leading insurers do not have the leverage to demand lower prices from hospitals and other providers that the government has.

Whether to implement a public option or Medicare buy-in has become a defining question among Democratic presidential candidates and is likely to be a contentious topic at this week’s debates.

On Monday, Sen. Kamala Harris took an alternate route, unveiling a plan that would allow private insurers to participate in a Medicare for All scheme, akin to their role currently offering private plans under Medicare Advantage.

The recent spate of proposals reprises some of the most difficult questions leading up to the passage of the ACA, in many ways a compromise over widely divergent views of the role of the government in ensuring access to care.

After a shaky start, the federal and state “Obamacare” marketplaces are surprisingly robust, despite repeated attempts by Republicans to weaken them. They provide insurance to 11 million customers, many of whom receive generous federal subsidies to help pay for coverage.

The ACA is now a solidly profitable business for insurers, with several expanding options after earlier threats to leave. For example, Centene, a for-profit insurer, controls about a fifth of the market, offering plans in 20 states. It is expected to bring in roughly $10 billion in revenue this year by selling Obamacare policies.

Despite stock drops because of investors’ concerns over Medicare for All proposals, for-profit health insurers have generally thrived since the law’s passage.

But a buy-in shift in insurance coverage could profoundly unsettle the nation’s private health sector, which makes up almost a fifth of the U.S. economy. Depending on who is allowed to sign up for the plan, it could also rock the employer-based system that now covers some 160 million Americans.

In a recent ad, Biden features a woman who wants to keep her current coverage. “I have my own private insurance — I don’t want to lose it,” she said.

A spokesman for Biden argued that a public option can extend the success of the Affordable Care Act.

“Joe Biden thinks it would be an egregious mistake to undo the ACA, and he will stand against anyone — regardless of their party — who tries to do so,” Andrew Bates, a spokesman for Biden, said in an email.

Major insurers and hospital chains, pharmaceutical companies and the American Medical Association have joined forces to try to derail efforts like Medicare for All and the public option. Sanders denounced these powerful interests in a recent speech.

“The debate we are currently having in this campaign and all over this country has nothing to do with health care, but it has everything to do with the greed and profits of the health care industry,” he said.

Other critics of the public option, including Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, argue that Democrats’ programs will lead to a “complete government takeover.”

“These proposals are the largest threats to the American health care system,” she said in a speech this month.

Some experts predict that private insurers will adapt, while others warn that the government could wind up taking on the sickest customers with high medical bills, leaving the healthier, profitable ones to private insurers.

It’s uncertain whether hospitals, on the other hand, could thrive under some versions of the public option. If the nation’s 5,300 hospitals were paid at much lower rates by a government plan — rates resembling those of Medicare — they might lose tens of billions of dollars, the industry claims. Some would close.

One variant of the public option — letting people over 50 or 55 buy into Medicare — is often depicted as less drastic than a universal, single-payer program. But this option would also be problematic, experts said.

This consumer demographic is quite valuable to insurers, hospitals and doctors.

Middle-aged and older Americans have become the bedrock of the Obamacare market. Some insurers say this demographic makes up about half of the people enrolled in their ACA plans and, unlike younger people who come and go, is a reliable and profitable source of business for the insurance companies.

The aging-related health issues of people in this group guarantee regular doctor visits for everything from rising blood pressure to diabetes, and they account for a steady stream of lucrative joint replacements and cardiac stent procedures.

The 55-to-64 age group, for example, accounts for 13% of the nation’s population, but generates 20% of all health care spending, according to the Kaiser Family Foundation.

Several experts said that designing a buy-in program that is compatible with the existing public and private plans could be daunting.

“You’d have to do it carefully,” said Rep. Donna Shalala, D-Fla., who was secretary of health and human services under President Bill Clinton.

Linda Blumberg, a health policy expert at the Urban Institute, a nonpartisan think tank, agreed. “The idea of Medicare buy-ins was taken very seriously before there was an Affordable Care Act,” she said. “In the context of the ACA, it’s a lot more complicated to do that.”

Many dismiss concerns about whether insurers can compete.

“Any time a market shrinks in America, insurers don’t like it,” said Andy Slavitt, the former acting Medicare administrator under President Barack Obama and a former insurance executive. Slavitt noted that insurers raised similar concerns about the federal law when it was introduced. “They’ll figure it out,” he said.

In Los Angeles County, five private insurers that sell insurance in the ACA market already compete with L.A. Care Health Plan, which views itself as a kind of public option, said John Baackes, the plan’s chief executive.

The insurer offers the least expensive HMO plan in the county by paying roughly Medicare rates. “We’ve proved that the public option can be healthy competition,” he said.

But the major insurance companies, which were instrumental in defeating the public option when Congress first considered making it a feature of the ACA, are already flexing their lobbying muscle and waging public campaigns.

In Connecticut, fierce lobbying by health insurers helped kill a state version of the public option this spring. Cigna resisted passage of the bill, threatening to leave the state. “The proposal design was ill-conceived and simply did not work,” the company said in a statement.

Blue Cross plans could lose 60% of their revenue from the individual market if people over 50 are shifted to Medicare, said Kris Haltmeyer, an executive with the Blue Cross Blue Shield Association, citing an analysis the company conducted. He said it might not make sense for plans to stay in the ACA markets.

Siphoning off such a large group of customers could also lead to a 10% increase in premiums for the remaining pool of insured people, according to the Blue Cross analysis. More younger people with expensive medical conditions have enrolled than insurers expected, and insurers would have to increase premiums to cover their costs, Haltmeyer said.

Tricia Neuman, a senior vice president at the Kaiser Family Foundation, which studies insurance markets, said a government buy-in that attracted older Americans could indeed raise premiums for those who remained in the ACA markets, especially if those consumers had high medical costs.

But some experts countered that prognosis, predicting that premiums could go down if older Americans, whose health care costs are generally expensive, moved into a Medicare-like program.

“The insurance companies are wrong about opposing the public option,” Shalala said.

Dr. David Blumenthal, president of the Commonwealth Fund, a foundation that funds health care research, said a government plan that attracted people with expensive conditions could prove costly.

“You might, as a taxpayer, become concerned that they would be more like high-risk pools,” he said.

Jonathan Gruber, an MIT economist who advised the Obama administration during the development of the ACA, likes Biden’s plan and argues there is a way to design a public option that does not shut out the private insurers.

“It’s all about threading the needle of making a public option that helps the failing system and not making the doctors and insurers go to the mat,” he said.

Many experts point to private Medicare Advantage plans, which now cover one-third of those eligible for Medicare, as proof that private insurers can coexist with the government.

But the real value of a public option, some say, would stem from the pressure to lower prices for medical care as insurers were forced to compete with the lower-paying government plans, like Medicare.

Washington state recently passed the country’s first public option, capping prices as part of its plan to provide a public alternative to all residents by 2021.

“It’s couched in this language in expanding coverage, but it does it by regulating prices,” said Sabrina Corlette, a health policy researcher at Georgetown University.

The hospital industry would most likely fight just as hard to defeat any proposal that would convert a profitable group of customers, Americans who are privately covered, into Medicare beneficiaries.

Private insurers often pay hospitals double or triple what Medicare pays them, according to a recent study from the nonprofit Rand Corp.

While Shalala supports a public option as an alternative to Medicare for All, she is clear about how challenging it will be to preserve both Obamacare and the private insurance market. “You can’t do it off the top of your head,” she said.

This article originally appeared in <a href="https://www.nytimes.com/2019/07/29/health/medicare-public-option.html" id="9f8dea4d-330b-38d0-a300-8d7adf619cff">The New York Times</a>.

How a Medicare Buy-In or Public Option Could Threaten Obamacare

It seems a simple enough proposition: Give people the choice to buy into Medicare, the popular federal insurance program for those over 65.

In urban markets, “a public option could come in and soak up all of the demand of the ACA market,” said Craig Garthwaite, a health economist at the Kellogg School of Management at Northwestern University.

Colorado employers were shocked to learn they were paying nearly eight times what the federal government did for outpatient services like an emergency room visit, an X-ray or a checkup with a specialist at Colorado Plains Medical Center, northeast of Denver.

Across the nation, hospitals treating patients with private health insurance were paid overall 2.4 times the Medicare rates in 2017, according to the RAND analysis. The difference was largest for outpatient care, where private prices were almost triple what Medicare would have paid.

“It’s eye-opening, really, not just for the employers,” said Gloria Sachdev, chief executive of the Employers’ Forum of Indiana, a coalition that helped with the study. “It’s eye-opening for the hospitals.”

The RAND study underscores the widening chasm between what the federal government and the private sector pay the nation’s hospitals.

The disparity shows how competition has faltered in an opaque market where the costs of care are secret and hospital systems are increasingly consolidated, gaining outsize clout in price negotiations with employers, some experts say.

This yawning spread in hospital rates will likely fuel the debate over “Medicare for All” proposals that would give the federal government authority to decide what to pay hospitals and that have proved popular with many Democratic voters on the presidential campaign trail. The plans, especially one championed by Sen. Bernie Sanders, I-Vt., would provide universal coverage by replacing employer-based insurance with a government-run program.

Some proponents of Medicare for All argue that employers and private insurers have failed to control costs. About one-third of all health care spending in the country goes to pay for hospital care. Many supporters point to the billions of dollars that could be saved annually if hospitals and doctors were paid at the much lower Medicare rates.

“The shadow of single payer hangs all over this,” said Katherine Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation, which helped fund the RAND research.

Because rates are normally a closely held secret between insurers and hospitals, the RAND study reveals a startling first glimpse of how much — and how steep a price — a broad swath of hospitals are charging private insurers. The lack of transparency, coupled with public outrage over rising hospital bills, has spurred calls for disclosure of the rates negotiated. This is the first time pricing information on a large group of individual hospitals has been made public.

Nationwide, employers provide coverage for most Americans under age 65, about 181 million people. And hospital care accounts for 44 cents of every personal health care dollar spent on those with private insurance.

The RAND study shows “market forces are clearly not working,” said Richard Scheffler, a health economist at the University of California, Berkeley. “Prices vary widely and are 2 1/2 times higher than Medicare payment rates without any apparent reason,” he said.

The RAND researchers gathered information on 1,598 hospitals, about a third of the total number in the United States, using 4 million insurance claims from 2015 through 2017, a fraction of the total filed nationwide. The information was collected from employers, some insurers and state agencies. The study did not identify the employers, but researchers named individual hospitals through the information they obtained, a rare public listing.

The claims included a variety of services, ranging from a hospital stay for heart surgery to an outpatient visit to the emergency room. The researchers compared the claim as it would have been reimbursed by Medicare and what the private insurer paid to determine the overall difference in prices. The hospitals did not see the study before it was released.

In New York and Pennsylvania, private prices were less than two times the Medicare rates. Indiana, which has the highest private prices among the 25 states analyzed, pays roughly three times what Medicare does.

The Indiana system, Parkview, says it is adopting new kinds of contracts. “At Parkview Health, we think the most important conversation is around what we can do moving forward, in strategic alignment with employers and insurance companies, to provide the highest quality care at the best cost,” said the company’s chief executive, Mike Packnett, in a statement.

Colorado Plains Medical Center did not respond to requests for comment.

Many businesses that contract with insurance companies have no idea what their insurers are paying individual hospitals in their plan’s network. “We’ve never seen what was agreed upon,” said Jennifer Fairman, the benefits manager for people who work for Larimer County in Colorado. “We’ve been signing these blank checks.”

But soaring hospital costs have become a significant burden, and many businesses have off-loaded more of the expense onto their employees through higher premiums and deductibles. Families have struggled to cope with surprise medical bills and increasing out-of-pocket costs. The trend toward consolidation in the last several years has also spurred higher costs, as hospitals merged into bigger, more powerful systems that dominated their local markets, demanding ever-higher prices.

Unlike Medicare, which sets the price it will pay for a type of care, insurers often try to negotiate discounts with hospitals over charges, especially for outpatient services, said Chapin White, an adjunct senior policy researcher at RAND and one of the authors of the study.

The insurers don’t have a strong incentive to demand the lowest prices because many, working for employers that are self-insured, are “literally spending someone else’s money,” he said. Insurers are also frequently paid based on how much the employer spends; they take in more revenue when the employer spends more.

Insurers say they are motivated to keep hospital prices low and point to the battles they sometimes have over whether a high-priced system will be in their networks.

One outlier was Michigan, where private prices run about 1.5 times Medicare rates. The auto industry and unions that represent autoworkers have put pressure on the major Blue Cross plan to hold hospital prices down. “To keep the market in check, you need a plan to throw its weight around and employers to back them up,” White said.

Hospitals prices are not always linked to overall costs, however. In Michigan, for example, insurance premiums are relatively high, even though hospital prices are low.

In contrast to private insurers, “Medicare has been much more zealous about keeping its payments down,” said Sherry Glied, dean of the Robert F. Wagner Graduate School of Public Service at New York University.

Hospitals argue that they lose money under Medicare, and many say they are aggressively trying to lower costs. Paying the hospitals at Medicare rates would have a significant effect on the industry, causing many hospitals to close, according to some experts.

“Medicare payment rates, which reimburse below the cost of care, should not be held as a standard benchmark for hospital prices,” said Melinda Hatton, general counsel for the American Hospital Association, an industry trade group, in an emailed statement. “Simply shifting to prices based on artificially low Medicare payment rates would strip vital resources from already strapped communities, seriously impeding access to care.”

Policy experts say the hospitals have come to rely on higher payments from employers and insurers.

“The whole system is symbiotic,” Glied said. If private insurers paid the hospitals less, they “would look different and have a different cost structure.”

But some critics say hospitals are clearly flush and that private insurers are paying too much.

“It explains some of the market behaviors we’ve seen,” said Robert J. Smith, executive director of the Colorado Business Group on Health, which represents employers. Although the hospitals in his state are only two-thirds full, they are building new facilities and buying physician practices.

The purpose of the research, Hempstead said, was to arm employers with information about prices. While previous efforts focused on giving consumers information so they could be smarter shoppers, employers are the ones that can benefit, she said. “The real consumers are the employers,” she said.

Employers can use Medicare as a starting point for how much they should be paying the hospitals, for example, or combine information about the quality of individual hospitals with the prices they charge to steer workers to those facilities that offer the best value. “What was missing was price,” said Sachdev of the Indiana employers group.

In Indiana, where a pilot study on hospital prices led to the RAND research, the realization that insurers were paying so much has already altered how insurers are contracting with hospitals. Anthem, the for-profit insurer headquartered there that operates the state’s Blue Cross plan now uses Medicare as a basis for how much it will agree to pay the hospitals.

Anthem says it is now developing new networks made up of significantly fewer hospitals and will steer people to places that deliver the best quality at lower prices, said Paul Marchetti, a senior vice president at Anthem. “That’s where we are headed as a company,” he said.

But employers are still paying much higher prices than the government. “We should not be allowing this,” said Smith, with the Colorado employer group. It plans to combine pricing information with quality data so businesses can better judge the value of care at individual hospitals.

It will be up to the employers to prove that they can exert discipline on controlling health care costs, which he called an open question: “Can the U.S. market become more effective or more efficient or do we need a single payer?”

This article originally appeared in <a id="88c7ea76-e3d9-35d8-ac8a-d92c452218f8" href="https://www.nytimes.com/2019/05/09/health/hospitals-prices-medicare.html">The New York Times</a>.

Study Finds 'Eye-Opening' Gap in Hospital Bills

In Indiana, a local hospital system, Parkview Health, charged private insurance companies about four times what the federal Medicare program paid for the same care, according to a study of hospital prices in 25 states released Thursday by the nonprofit RAND Corp.

Study finds 'eye-opening' gap in hospital bills

Across the nation, hospitals treating patients with private health insurance were paid on average 2.4 times the Medicare rates in 2017, according to the RAND analysis. The difference was largest for outpatient care, where private prices were almost triple what Medicare would have paid.

The RAND researchers gathered information on 1,598 hospitals, about a third of the total number in the United States, using 4 million insurance claims from 2015 through 2017. The information was collected from employers, some insurers and state agencies. The study did not identify the employers, but researchers named individual hospitals through the information they obtained, a rare public listing.

In Indiana, where a pilot study on hospital prices led to the Rand research, the realization that insurers were paying so much has already altered how insurers are contracting with hospitals. Anthem, the for-profit insurer headquartered there that operates the state’s Blue Cross plan now uses Medicare as a basis for how much it will agree to pay the hospitals.

This article originally appeared in <a href="https://www.nytimes.com/2019/05/09/health/hospitals-prices-medicare.html" id="88c7ea76-e3d9-35d8-ac8a-d92c452218f8">The New York Times</a>.

Many Hospitals Charge Double or Even Triple What Medicare Would Pay

In Indiana, a local hospital system, Parkview Health, charged private insurance companies about quadruple what the federal Medicare program paid for the same care, according to a study of hospital prices in 25 states released Thursday by the nonprofit RAND Corp.

Because rates are normally a closely held secret between insurers and hospitals, the RAND study reveals a startling first glimpse of how much a broad swath of hospitals are charging private insurers. The lack of transparency, coupled with public outrage over rising hospital bills, has spurred calls for disclosure of the rates negotiated. This is the first time pricing information on a large group of individual hospitals has been made public.

The claims included a variety of services, ranging from a hospital stay for heart surgery to an outpatient visit to the emergency room. The researchers compared the claim as it would have been reimbursed by Medicare and what the private insurer paid to determine the overall difference in prices.

One outlier was Michigan, where private prices run about 1.5 times Medicare rates. The auto industry and unions that represent autoworkers have put pressure on the major Blue Cross plan to hold hospital prices down.

“Misleading vulnerable consumers who are desperate to find a treatment for serious and painful medical conditions is unacceptable, unlawful and immoral,” James said in a statement. “We will continue to investigate these types of clinics that shamelessly add to the suffering of these consumers by charging them thousands of dollars for treatments that they know are ineffective.”

The lawsuit is part of the attorney general’s broader look at dubious medical claims being made by stem cell clinics in New York. It comes on the heels of repeated attempts to crack down on the stem cell industry by the Food and Drug Administration, which warned nearly two dozen clinics earlier this week to stop selling treatments that could harm patients.

The clinics have proliferated around the country, despite a lack of evidence that would support claims that stem cell injections can repair aging joints or regenerate tissue.

Situated in midtown Manhattan, Park Avenue Stem Cell is operated by Dr. Joel B. Singer, a plastic surgeon who has previously run afoul of state regulators, according to the state attorney general’s office. Phone calls and emails to Singer and his lawyer were not returned.

According to state regulators, Park Avenue Stem Cell also had ties to a California business, Cell Surgical Network, with roughly 100 affiliates around the country, that was sued by the FDA last year. The federal agency is seeking a permanent injunction against Cell Surgical Network, according to state officials, who say the clinic followed the network’s procedures until its affiliation ended last December

Attorney General Letitia James of New York said Thursday that she had filed a lawsuit against a for-profit stem cell clinic, Park Avenue Stem Cell, claiming it performed unproven, rogue procedures on patients with a wide range of medical conditions, from erectile dysfunction to heart disease.

Reed Abelson

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