Consumer Rage Spurs Government Action To Tame Healthcare Costs

Do something about the high cost of health care or else! says Indiana. Otherwise legislative leaders say they may have “no choice but to pursue legislation to statutorily reduce prices.”

Fix high hospital costs or we will act, Indiana legislators warn healthcare systems

Shari RudavskyKaitlin Lange – Indianapolis Star


Indiana lawmakers have inserted themselves into the ongoing conversation over health care prices in the state, which are among the highest in the nation, asking hospital and insurance leaders to work together to develop a plan to lower the cost of medical care.

Saying that they have the “utmost respect” for health care workers, Senate President Rodric Bray and Speaker of the House Todd Huston direct about 20 letter recipients to work together to match Indiana’s health care costs to the national average by 2025. The legislative leaders say if the letter’s recipients have not come up with a viable plan by April, they will have “no choice but to pursue legislation to statutorily reduce prices.”

Indiana’s high cost of care has been a subject of debate for years. About five years ago the Employers’ Forum of Indiana commissioned a study on outpatient care that revealed prices here are comparatively high. A follow-up study found that hospital prices far outstrip those in other states.

Recently the state’s largest health care system, Indiana University Health, announced plans to freeze prices to come in line with the national average in three years.

But the state’s legislative leaders in a rare move said they would like to see more progress faster from the Indiana’s health care industry.

‘The best solution will come from you’

Earlier this month, Huston told IndyStar that he and Bray wrote the December letter to encourage the health care and insurance industries to take action themselves.

“Our goal…is to say to people inside the industry look, fix it, the best solution will come from you,” Huston told IndyStar. “In some ways we’ve been ahead of the curve, but , we’ve got to continue to make progress on this. I would prefer they make progress on it than us have to do legislative things.”

The letter references two studies, one by the Rand Corporation that found that Indiana’s hospital facilities fees are the fifth highest in the nation and one by Harvard researchers that placed Indiana in the top three most expensive states for inpatient facility fees.

Business owners and individuals have contacted lawmakers to complain that the high costs of care impacts business and individuals’ budgets. Indiana is not alone in such concerns and the state has taken some steps in the right direction, Huston said. He cited legislation passed in recent years that created an all-payers claims database as well as a bill that requires hospitals and insurers to hold a public forum annually in the interest of further transparency.

Rather than taking additional action legislative action this session, Huston said the lawmakers wanted to give the two industries a chance to develop their own solutions. But he added that they are serious about wanting to see some action by the deadline.

“I don’t think we’ve ever been as clear as we needed to be, we want to be very clear on what our expectations are,” he said. “Hopefully there’ll be a lot of progress this year.”

Hospital, insurance industries respond

Insurance and hospital leaders say, however, that finding solutions will not necessarily be so easy.

The Insurance Institute of Indiana and the Indiana Hospital Association have been discussing forming a working group to address inefficiencies within the system and to improve communication, said Marty Wood, president of the insurance institute.

“This obviously heightens the speed with which we need to get that done,” he said.

Having an all-payers claims database will provide better information on just how much health care in Indiana costs and where that ranks in comparison with other states that have similar databases, said Brian Tabor, president of the Indiana Hospital Association.

Other sources suggest that some Indiana health care costs may not differ that much from other states, Tabor said.

For instance, the Kaiser Family Foundation says families here who have employer-sponsored coverage pay a premium not statistically different from the national average.

Looking at just hospital pricing gives an incomplete picture of the total out-of-pocket costs for consumers and employers, he said, questioning whether health care costs in Indiana actually do differ so dramatically from those elsewhere.

“I don’t think it’s a good thing for Indiana for us to promote that we are an outlier in terms of the total cost of care,” he said. “If we’re going to make progress, we’ve got to focus on the total cost of care for employers, out of pocket affordability for consumers and everybody has to be at the table.”

That includes representatives from pharmaceutical companies and pharmacy benefits managers, the middle managers of drug benefits, as well as employers, Tabor said. In other states hospitals work directly with employers who provide care for their employees and the hospitals would like to see that happen here, he said.

Savings could also be realized if hospitals work with insurers to reduce administrative costs in the system, he said.

Legislators should also take a seat at the table, Wood said, as their actions can impact the cost of health care. For instance, regulatory reporting requirements can drive up costs as can universal mandates for coverage of certain services rather than allowing more personalized insurance policies.

At times, the Indiana General Assembly has prohibited insurers from taking steps to save money, Wood added. Senate Bill 136, which is moving through the legislature this year, would prevent insurers from negotiating a cap on how much dentists can change for non-covered services, likely increasing the patients’ out-of-pocket cost. Lawmakers could also encourage the practice of white-bagging in which hospitals buy specialty drugs from a pharmacy rather than mixing them in house, which tends to be far more costly, he said.

“While we applaud the legislative leaders for wanting to be aggressive about this, they need to recognize there’s a third party in all of this and that is the legislature itself,” he said. “Ultimately when April 1 hits, can they (the legislative leaders) step back and say maybe we don’t have all of the answers that we’re looking for, but we have some and can we continue working as three partners on this.”

‘Most monopolized industry’

Others involved in the debate argue, however, that the two industry players have had ample time to make meaningful change.

A key factor driving up health care prices here lies in the lack of competition in much of the state, said Michael Hicks, director of the Center for Business and Economic Research at Ball State University.

In recent years, Indiana hospital systems here have brought up many local physician practices, further solidifying their grip on the market, Hicks said. Were the state to pass anti-trust legislation, Hicks said, that would help decrease prices.

“I do think the General Assembly gets it and to some degree, the evidence is so overwhelming that it’s really difficult for the health care industry not to participate with this,” he said. “It is the most monopolized industry other than utilities.”

Hospitals’ non-profit status is also problematic, Hicks said. That leaves them unaccountable to potential stakeholders and allows them to avoid taxes despite the fact that they generate billions of dollars a year.

For more than two years the grassroots effort Hoosiers for Affordable Healthcare has been advocating for legislative changes that would result in increased transparency and lower prices.

Last session, the legislature passed a measure that requires every hospital and insurer in the state to hold annual public forums to discuss costs. Businessman Al Hubbard, chair of the group’s board, hailed the legislators’ letter, saying more needs to be done.

“The hospitals are remarkably insensitive to their high prices and what it’s done to standards of life for Hoosiers,” he said.

The letter puts the industries on notice that lawmakers are watching and expect to see some action on their part, Huston said. He and Bray decided that they would give the industries a shot at solving the problem on their own.

But if that does not come to pass, he said, lawmakers could get involved.

“We’re trying to say to them, this is your chance to lead and fix the problem. We’d prefer you do it,” he said. “If not we’ll be back here next year and probably an approach that’s a little more heavy handed.”

Contact IndyStar reporter Shari Rudavsky at Follow her on Facebook and on Twitter: @srudavsky.