Counterpoint: Drug price controls would cost plenty
With the deck stacked against people who need new drugs, let's not dismiss them because their interests happen to align with the drug industry.
This week the Minnesota House Health Finance and Policy committee heard three bills aimed at increasing price transparency across Minnesota’s health care system. I provided testimony highlighting the merits of each of these bills. My written testimony can be read here.
Hidden pricing is a key contributor to the high and rising cost of health care in America. That’s because keeping prices hidden substantially lessens the competitive pressure to keep prices down. Therefore, American Experiment strongly supports federal and state efforts to increase price transparency in health care.
At a time when partisanship and political polarization keeps rising, price transparency is one of those rare policy initiatives that tends to garner broad bipartisan support.
I worked for the Centers for Medicare & Medicaid Services (CMS) in the Trump administration and helped lead the work that established new requirements on health plans to make the prices they negotiate with providers public. The Trump administration also finalized rules requiring hospitals to public post their prices. These are historic rules that finally overcame decades of stiff opposition from health plans, hospitals, and drug companies.
When President Biden took office, his administration quickly set to work to dismantle much of the rulemaking the Trump administration put in place. But there are some exceptions where Biden is actually carrying forward Trump-era policies, and price transparency is one of them. Not even six months into office, Biden issued an Executive Order directing the Secretary of Health and Human Services to “support existing price transparency initiatives for hospitals, other providers, and insurers.”
Despite this bipartisan work happening across two presidential administrations in D.C., the federal price transparency initiatives have limits. Federal law only allows the federal government to regulate hospitals and health plans. Federal law does not reach other medical entities like ambulatory surgery centers and oncology clinics. The federal government also has limited enforcement resources to ensure compliance.
States lawmakers are uniquely positioned to overcome these limitations with the federal rules. Each of the bills heard in committee yesterday take aim at some of these specific limitations to get us closer to a health care system with fully transparent pricing.
HF 293 would empower the state to enforce the federal hospital rule and add requirements to strengthen it. This bill aligns with recommendations that American Experiment offered in a policy brief last year and updated last month. State enforcement is important because hospitals have been very slow to comply. One review released last August found only 10 percent of the 40 Minnesota hospitals it reviewed were in full compliance. On top of state enforcement, the bill would also expand the requirements on hospitals to other medical and dental practices and require the pricing to data to be reported in a standardized format. Currently, the lack of standardization has made it incredibly difficult for even highly skilled data analysts to sort through.
A second bill, HF 294, proposes several policies to increase prescription drug price transparency. This effort would help address another weakness with the federal rules. Namely, CMS has delayed enforcement of the requirement on health plans to public post prescription drug pricing and it’s not clear when they will be enforced or how they might change. This bill would require drug manufacturers to post their list prices. While this price does not reflect what a patient actually pays, it provides what CMS calls an “anchor price” to help guide decisions.
Finally, HF 926 would add new requirements on health plans and third-party administrator to report information on value-based payment arrangements to the state’s all payer claims database. Many health care services are now paid by the value or outcomes they deliver versus a set price. The contracts and mechanisms used to determine value are generally hidden. Yet patients deserve to know the incentive structure driving their care decisions.
Together these bills will greatly expand the pricing information available to patients to and provide valuable information to consumers as they shop for health plans. Most important, with this pricing information, patients will finally be able to force providers to compete on price.
It may take some time to develop the shopping tools and health plan designs that can take best advantage of this pricing information. However, long-term, price transparency holds the best promise to finally gain control over the high and rising cost of health care.
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