[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING STATE EFFORTS TO IMPROVE
TRANSPARENCY OF HEALTHCARE COSTS FOR CONSUMERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JULY 17, 2018
__________
Serial No. 115-151
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
35-432 WASHINGTON : 2019
-----------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail,
[email protected].
COMMITTEE ON ENERGY AND COMMERCE
GREG WALDEN, Oregon
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
FRED UPTON, Michigan BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee GENE GREEN, Texas
STEVE SCALISE, Louisiana DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida PAUL TONKO, New York
BILL JOHNSON, Ohio YVETTE D. CLARKE, New York
BILLY LONG, Missouri DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana KURT SCHRADER, Oregon
BILL FLORES, Texas JOSEPH P. KENNEDY, III,
SUSAN W. BROOKS, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California
RICHARD HUDSON, North Carolina RAUL RUIZ, California
CHRIS COLLINS, New York SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina
Subcommittee on Oversight and Investigations
GREGG HARPER, Mississippi
Chairman
H. MORGAN GRIFFITH, Virginia DIANA DeGETTE, Colorado
Vice Chairman Ranking Member
JOE BARTON, Texas JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas KATHY CASTOR, Florida
SUSAN W. BROOKS, Indiana PAUL TONKO, New York
CHRIS COLLINS, New York YVETTE D. CLARKE, New York
TIM WALBERG, Michigan RAUL RUIZ, California
MIMI WALTERS, California SCOTT H. PETERS, California
RYAN A. COSTELLO, Pennsylvania FRANK PALLONE, Jr., New Jersey (ex
EARL L. ``BUDDY'' CARTER, Georgia officio)
GREG WALDEN, Oregon (ex officio)
C O N T E N T S
----------
Page
Hon. Gregg Harper, a Representative in Congress from the State of
Mississippi, opening statement................................. 1
Prepared statement........................................... 3
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, opening statement..................................... 4
Prepared statement........................................... 5
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 6
Prepared statement........................................... 7
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 17
Prepared statement........................................... 18
Witnesses
Jaime King, Ph.D., Professor, UC Hastings College of Law......... 20
Prepared statement........................................... 23
Michael Chernew, Ph.D., Professor, Department of Health Care
Policy, Harvard Medical School................................. 59
Prepared statement........................................... 62
Submitted Material
H.R. 5547, submitted by Mr. Burgess.............................. 9
Subcommittee memorandum.......................................... 95
Report of Texas Hospital Association, submitted by Mr. Burgess... 106
Blog on Health Affairs, submitted by Mr. Burgess................. 108
Statement of the National Community Pharmacists Association,
submitted by Mr. Carter........................................ 116
EXAMINING STATE EFFORTS TO IMPROVE TRANSPARENCY OF HEALTHCARE COSTS FOR
CONSUMERS
----------
TUESDAY, JULY 17, 2018
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:15 a.m., in
room 2322 Rayburn House Office Building, Hon. Gregg Harper
(chairman of the subcommittee) presiding.
Members present: Representatives Harper, Griffith, Barton,
Burgess, Brooks, Collins, Walberg, Walters, Costello, Carter,
Walden (ex officio), DeGette, Schakowsky, Castor, Tonko,
Clarke, Ruiz, and Pallone (ex officio).
Staff present: Jennifer Barblan, Chief Counsel, Oversight &
Investigations; Lamar Echols, Counsel, Oversight &
Investigations; Ali Fulling, Legislative Clerk, Oversight &
Investigations, Digital Commerce and Consumer Protection;
Jennifer Sherman, Press Secretary; Austin Stonebraker, Press
Assistant; Hamlin Wade, Special Advisor, External Affairs; Jeff
Carroll, Minority Staff Director; Chris Knauer, Minority
Oversight Staff Director; Miles Lichtman, Minority Policy
Analyst; Kevin McAloon, Minority Professional Staff Member;
C.J. Young, Minority Press Secretary; and Perry Lusk, Minority
GAO Detailee.
OPENING STATEMENT OF HON. GREGG HARPER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MISSISSIPPI
Mr. Harper. I call to order the hearing of the subcommittee
on Oversight and Investigations.
Today, the Subcommittee on Oversight and Investigations is
holding a hearing entitled, ``Examining State Efforts to
Improve Transparency of Healthcare Costs for Consumers.'' We
are here today because healthcare costs continue to rise in the
United States and many Americans are struggling to budget and
pay for their healthcare expenses.
According to the Centers for Medicare and Medicaid
Services, we spent $3.3 trillion on healthcare costs in 2016,
which means that nearly 18 percent of the overall share of
gross domestic product was related to healthcare spending.
About 32 percent of healthcare spending in 2016 was on hospital
care, 20 percent was on physician and clinical services, and
about 10 percent of the spending was on prescription drugs.
The Committee has been actively looking at these concerning
trends and has held a number of hearings examining some of the
causes of increased healthcare costs, and increasing healthcare
costs. Last year, the Oversight and Investigations subcommittee
held two hearings on the 340B Drug Pricing Program and issued a
report with the findings from our investigations. In February,
the subcommittee held a hearing examining consolidation in the
healthcare market, and examined the impact of consolidation on
healthcare competition and innovation.
As healthcare costs continue to rise, many Americans still
have no idea how much something will cost them before they
receive care. Oftentimes, they only know their out-of-pocket
costs once they have gotten the care and get their bill weeks,
sometimes months later. The purpose of today's hearing is to
examine state laws and policies that have an impact on
healthcare costs and what can be done to lower costs for all
Americans through more transparency of healthcare costs.
These transparency efforts have generally attempted to
provide consumers information about different types of
healthcare costs, including information about the cost of
healthcare services and the cost of prescription drugs. In our
work, we have heard that there are a number of issues that make
it difficult for some of these efforts to be effective.
For example, sometimes there may be contractual provisions
that limit the sharing of certain price information or concerns
that the sharing of certain price information may be anti-
competitive. Moreover, healthcare billing is complex and it can
be difficult to provide the information to consumers in a
meaningful way that is useful to them. Similarly, only a small
percentage of healthcare services may be ``shoppable.'' I hope
to hear more about some of the barriers to transparency and
what, if anything, Congress can do to help.
Unfortunately, early evidence suggests that some price
transparency tools have not helped facilitate price shopping
and lower consumer costs. I, therefore, look forward to hearing
more from the witnesses about why this is the case, and what
forms of transparency might help consumers as they budget for
their care and make better healthcare decisions. For example,
do we need to pair transparency with some other mechanism for
it to be most effective?
The cost of certain healthcare services can vary
significantly in the same geographic region at different sites
of care. For instance, a 2014 study by the U.S. Government
Accountability Office found that the estimated cost of
maternity care at select, high-quality acute care hospitals in
the Boston area ranged between $6,834 and $21,554, over a 200
percent difference.
A more recent 2018 study found that median price of
magnetic resonance imaging, an MRI, of the spine ranges from
$500 to $1,670 in Massachusetts, also over a 200 percent
difference.
Empowering consumers with more information about the cost
and quality of their care helps to reduce wasteful spending and
save families money.
As we move forward, we have to keep in mind that there is a
delicate balance between beneficial transparency and
transparency that ultimately harms competition and consumers.
The Federal Trade Commission has highlighted that it is
important to give consumers the precise information they need
to make better healthcare decisions. The agency also has
cautioned, however, that it is important to avoid broad
disclosures that may chill competition in the healthcare
market.
I welcome and thank the witnesses for being here today. I
look forward to their testimony.
And I will now recognize Ms. Castor for purposes of an
opening statement.
[The prepared statement of Mr. Harper follows:]
Prepared statement of Hon. Gregg Harper
Today, the Subcommittee on Oversight and Investigations is
holding a hearing entitled, ``Examining State Efforts to
Improve Transparency of Healthcare Costs for Consumers.'' We
are here because healthcare costs continue to rise in the
United States and many Americans are struggling to budget and
pay for their healthcare expenses.
According to the Centers for Medicare and Medicaid
Services, we spent $3.3 trillion on healthcare in 2016, which
means nearly 18 percent of the overall share of gross domestic
product was related to healthcare spending. About 32 percent of
healthcare spending in 2016 was on hospital care, 20 percent
was on physician and clinical services, and about 10 percent of
the spending was on prescription drugs.
The Committee has been actively looking at this concerning
trend and has held a number of hearings examining some of the
causes of increasing healthcare costs. Last year, the Oversight
and Investigations subcommittee held two hearings on the 340B
Drug Pricing Program and issued a report with the findings from
our investigation. In February, the subcommittee held a hearing
examining consolidation in the healthcare market and examined
the impact of consolidation on healthcare competition and
innovation.
As healthcare costs continue to rise, many Americans still
have no idea how much something will cost them before they
receive care. Oftentimes, they only know their out of pocket
costs once they have gotten the care and get their bill weeks,
sometimes months, later. The purpose of today's hearing is to
examine state laws and policies that have an impact on
healthcare costs and what can be done to lower costs for all
Americans through more transparency of healthcare costs.
These transparency efforts have generally attempted to
provide consumers information about different types of
healthcare costs, including information about the cost of
healthcare services and the cost of prescription drugs. In our
work, we've heard that there are a number of issues that make
it difficult for some of these efforts to be effective. For
example, sometimes there may be contractual provisions that
limit the sharing of certain price information or concerns that
the sharing of certain price information may be anti-
competitive. Moreover, healthcare billing is complex and it can
be difficult to provide the information to consumers in a
meaningful way that is useful to them. Similarly, only a small
percentage of healthcare services may be ``shoppable.'' I hope
to hear more about some of the barriers to transparency and
what, if anything, Congress can do to help.
Unfortunately, early evidence suggests that some price
transparency tools have not helped facilitate price shopping
and lower consumer costs. I therefore look forward to hearing
more from the witnesses about why this is the case, and what
forms of transparency might help consumers budget for their
care and make better healthcare decisions. For example, do we
need to pair transparency with some other mechanism for it to
be most effective?
The cost of certain healthcare services can vary
significantly in the same geographic region at different sites
of care. For instance, a 2014 study by the U.S. Government
Accountability Office found that the estimated cost of
maternity care at select, high-quality acute care hospitals in
the Boston area ranged between $6,834 and $21,554--over a 100
percent difference. A more recent 2018 study found that the
median price of magnetic resonance imaging (MRI) of the spine
ranges from $500 to $1,670 in Massachusetts-also over a 100
percent difference. Empowering consumers with more information
about the cost and quality of their care could help to reduce
wasteful spending and save families money.
As we move forward, we have to keep in mind that there is a
delicate balance between beneficial transparency and
transparency that ultimately harms competition and consumers.
The Federal Trade Commission has highlighted that it is
important to give consumers the precise information they need
to make better healthcare decisions. The agency also has
cautioned, however, that it is important to avoid broad
disclosures that may chill competition in the healthcare
market.
I welcome and thank the witnesses for being here today, and
I look forward to their testimony.
OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Ms. Castor. Well, thank you, Mr. Chairman. Thank you for
calling this important hearing. I think it is a worthy topic.
But, I wanted to note at the outset it has been almost 1
month since the Democrats on this committee have requested an
oversight hearing on the Administration's family separation
policy. The Energy and Commerce Committee has primary
responsibility for oversight of the Department of Health and
Human Services. We have had over the last month a number of
hearings on many varied topics, but none are as important as
what is happening as children who are ripped away from their
family. Now, courts have ordered reunification.
It is our responsibility as Members of Congress, especially
in the Oversight Committee of Energy and Commerce, to have an
oversight hearing to get to the bottom of this. We hear
horrifying stories every day about the impact on children.
And so at this time I am going to renew the request of the
Democrats on Energy and Commerce to schedule an oversight
hearing as soon as possible on the family separation policy.
Now, healthcare costs, also a very worthy topic. And if we
were to schedule another important oversight hearing, it
certainly should be on the impact of the Trump administration's
lawsuit that where they claim that preexisting conditions
should not be a right of American families, especially in their
healthcare policy. That would be another very worthy oversight
hearing. But, right now we are here on transparency, so let's
talk about that.
I understand that every family feels a very significant
impact of rising prices. And part of the problem is the fact
that healthcare consumers often have no visibility into how
much services are actually going to cost.
And depending on multiple factors, such as where you live,
your insurance, the type of provider, costs can vary greatly
and are unpredictable. That makes healthcare unlike virtually
any other purchase, and it makes it more difficult to constrain
costs.
There are all sorts of reports out there--many of you all
have experienced this--of outrageously high bills received by
unsuspecting consumers. Plus, it is darn confusing sometimes.
You get a bill and it says this is your responsibility, this is
what is paid, and people simply don't, don't, get it.
There was a couple in California recently who were
reportedly charged over $18,000 for a 3-hour visit to an
emergency room where their baby was examined, took a nap, and
drank formula. And another patient received two CT scans that
varied between $268 and $9,000.
These shockingly high bills are frustrating and can
devastate a family's finances. For that reason, greater
transparency can theoretically provide consumers with more
information to make decisions and to predict the costs that
they are going to incur.
To that end, many states have taken some action to bring
more transparency to healthcare. But it isn't always easy. My
home State of Florida, for example, established a website that
allows consumers to search for healthcare prices at hospitals
and outpatient surgery centers in 2007, but consumers don't
know about it. And one of the problems is it doesn't even
contain all of the hospitals that are in your market, and it
doesn't contain a lot of the leading health insurers'
information in our state.
So there, Florida is currently struggling with trying to
launch another healthcare transparency website but now the cost
is really escalating. It has been $4 million to get that up and
running, and we don't have a lot to show for it.
Other states now require pharmaceutical companies to
publicize and provide information related to large increases in
prices for certain drugs. And here in the House I am a proud
cosponsor of Congresswoman Schakowsky's Fair Accountability and
Innovative Research Drug Pricing Act, which would require drug
companies to report an increase in certain drug prices by more
than 10 percent in a year to HHS, and submit transparency and
justification reports before they increase the price of certain
drugs by 10 percent.
We should move initiatives that can help consumers control
their healthcare costs. But transparency in our healthcare
system shouldn't be the only tool in our tool box. It has to be
accompanied with other improvements to have a meaningful impact
on the actual cost of care.
So, I am looking forward to hearing the witnesses today. I
look forward to hearing from you on how we can use healthcare
transparency to lower costs for our neighbors back home.
Thank you, and I yield back.
[The prepared statement of Ms. Castor follows:]
Prepared statement of Hon. Kathy Castor
Thank you, Mr. Chairman. Healthcare costs continue to
account for a large portion of our economy, and every family
feels the impact of rising prices. Part of this problem is the
fact that healthcare consumers often have no visibility into
how much services are actually going to cost.
Depending on multiple factors such as the geographical
area, a patient's insurance, and the type of provider, costs
can vary greatly and seem unpredictable to the consumer. That
makes healthcare unlike virtually any other commodity, and
makes it more difficult to constrain costs.
We have seen news reports of outrageously high bills
received by unsuspecting consumers. There was the couple in
California who were reportedly charged over $18,000 for a 3-
hour visit to an emergency room, where their baby was examined,
took a nap, and drank formula. And another patient received two
CT scans that varied between $268 and nearly $9,000.
These shocking bills are frustrating and can devastate a
family's finances. For that reason, greater transparency can
theoretically provide consumers with more information to make
decisions and predict the costs they are going to incur.
To that end, many states have taken some action to bring
more transparency to healthcare. My home State of Florida, for
example, established a website that allows consumers to search
for healthcare prices at hospitals and outpatient surgery
centers. Other states now require pharmaceutical companies to
publicize and provide information related to large increases in
prices for certain drugs.
These efforts are well-intended, and we should applaud any
initiative that has the potential to help consumers control
their healthcare costs. That being said, we also must keep in
mind that transparency is not a panacea, and must be coupled
with other improvements to have a meaningful impact on the
actual cost of care.
As we will hear from the witnesses today, transparency
initiatives by themselves are not tremendously effective at
bringing down consumer healthcare costs. What sounds like a
straightforward solution in most markets does not always work
in healthcare, for multiple reasons.
For one thing, when people's health is at stake,
information on prices might not be relevant. People naturally
trust their doctor and want the best care. And when we see
greater consolidation in the healthcare industry, transparency
cannot provide much help to consumers with no leverage to
access lower prices.
So we need to consider what the research says: what types
of transparency reforms can work, what does not work, and how
transparency needs to be combined with more meaningful actions.
For instance, Mr. Chairman, a key part of bringing down
costs for consumers is ensuring access to high-quality and
affordable healthcare, including primary care. We need to give
consumers more than just information--we need to bring relief
from these rising costs in the first place. Without that, these
transparency efforts will be in vain, and we'll just be shining
a spotlight on continuously increasing costs.
That is not to say that transparency does not have a role.
Instead, we should look to combine transparency initiatives
with incentives to provide higher quality care at lower costs.
I hope to hear the witnesses' perspective on that today.
I thank the witnesses for being here today, and I yield
back.
Mr. Harper. The gentlewoman yields back.
The chair will now recognize the chairman of the full
committee, Mr. Walden, for 5 minutes.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Thank you very much, Mr. Chairman. I appreciate
your holding this hearing on the various transparency efforts
at the state level to engage patients in healthcare decision
making processes.
As Chairman Harper mentioned in his opening statement,
healthcare costs are increasing and are expected to continue to
rise. In 2016, the U.S. spent approximately $3.3 trillion on
healthcare, and the Center for Medicare and Medicaid Services,
CMS, estimates that spending will reach $5.7 trillion in 2026.
Healthcare costs are having a substantial impact on the
budgets of American families and individuals. In addition to
health insurance premiums increasing, patients are also
directly responsible for more of their healthcare costs. In
2016, about 11 percent of the $3.3 trillion spent on healthcare
was paid for directly by consumers through out-of-pocket costs,
which was about $352 billion.
Unsurprisingly, as healthcare costs increase, most patients
want to know more about how much different medical services and
products are going to cost them. We all do. That is why we are
having this hearing. I have heard numerous stories about
individuals who were going to have a medical procedure or lab
work performed, found it nearly impossible, and in some
instances literally impossible, to learn how much it was going
to cost them before they got the care. A lot of doctors don't
even know how much different services are going to cost.
Many states have adopted policies to prohibit some types of
``gag clauses'' and help patients get access to the prices for
prescription drugs. Twenty-two states have passed legislation
prohibiting clauses in contracts that prohibit pharmacists from
telling patients price options for their prescription medicine.
In addition to these recent efforts to encourage price
information sharing with patients at the pharmacy counter,
several states have engaged in efforts to provide patients with
more information about the price and quality of different
healthcare services. Some of these efforts include creating
websites that give patients information about the prices of
different procedures, requiring insurers to provide these tools
to their members, and requiring providers to give patients
information about the estimated prices for their treatment
before they get the treatment. Unfortunately, to date, some of
the preliminary evidence has shown that these tools haven't
been very effective in getting patients to price shop.
If we are going to successfully reduce healthcare costs, we
need to empower patients and we need to engage them in the
decision-making process. So there needs to be greater
transparency so patients can have more information about the
prices for different medical products and services, and that
information needs to be given to them in a meaningful way.
Given that some of the existing price transparency tools
are still able to be improved, I am eager to hear from our
witnesses today about why there are some of these barriers, and
then also what else we can do to empower patients with the
information. I also want to hear about the role the Federal
Government can play in promoting transparency and making
patients more informed about the cost of their care.
Patients should be able to learn about how much something
is going to cost before they get it. This includes having
information about different price options for prescription
drugs at the pharmacy counter, and information about different
procedures and lab work, among other things.
So, we have got a lot of questions for our witnesses today.
We really appreciate your being here. But one of my main
questions is what is the best way for patients to get
healthcare price information, and how can we empower the
consumer?
I am also interested in hearing about any market behaviors
that work against transparency and ultimately harm any attempts
to bring down healthcare costs.
So, thanks for being here. This is a big priority for me
and for the committee to look into all the costs of healthcare.
With that I will just warn you, I have got another hearing
going on downstairs so I have to bounce back and forth. But I
will yield the balance of my time to Dr. Burgess, who chairs
our Health Subcommittee.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
Thank you, Mr. Chairman, for holding this hearing on the
various transparency efforts at the state level to engage
patients in the healthcare decision-making process.
As Chairman Harper mentioned in his opening statement,
healthcare costs are increasing and are expected to continue to
rise. In 2016, the U.S. spent approximately $3.3 trillion on
healthcare, and the Centers for Medicare and Medicaid Services
(CMS) estimates that spending will reach $5.7 trillion by 2026.
Healthcare costs are having a substantial impact on the
budgets of American families and individuals. In addition to
health insurance premiums increasing, patients are also
directly responsible for more of their healthcare costs. In
2016, about 11 percent of the $3.3 trillion spent on healthcare
was paid for directly by consumers through out-of-pocket costs-
which was about $352 billion dollars.
Unsurprisingly, as healthcare costs increase, most patients
want to know more about how much different medical services and
products are going to cost them. We all do. I've heard numerous
stories about individuals who were going to have a medical
procedure or lab work performed and found it nearly impossible,
and in some instances impossible, to learn how much it was
going to cost them before they got the care. A lot of doctors
don't even know how much different services are going to cost.
Many states have adopted policies to prohibit some types of
``gag clauses'' and help patients get access to the prices for
prescription drugs. Twenty-two states have passed legislation
prohibiting clauses in contracts that prohibit pharmacists from
telling patients price options for their prescription medicine.
In addition to these recent efforts to encourage price
information sharing with patients at the pharmacy counter,
several states have engaged in efforts to provide patients with
more information about the price and quality of different
healthcare services. Some of these efforts include creating
websites that give patients information about the prices of
different procedures, requiring insurers to provide these tools
to their members, and requiring providers to give patients
information about the estimated prices for their treatment
before they get the treatment. Unfortunately, to date, some of
the preliminary evidence has shown that these some of these
tools haven't been very effective in getting patients to price
shop.
If we're going to successfully reduce healthcare costs, we
need to empower patients and engage them in the decision-making
process. There needs to be greater transparency, so patients
can have more information about the prices for different
medical products and services, and that information needs to be
given to them in a meaningful way.
Given that some of the existing price transparency tools
are still able to be improved, I'm eager to hear from the
witnesses today about why there are some of these barriers and
then also what else we can be doing to empower patients with
information. I also want to hear about the role that the
federal government can play in promoting transparency and
making patients more informed about the cost of their care.
Patients should be able to learn about how much something
is going to cost them before they get it. This includes having
information about different price options for prescription
drugs at the pharmacy counter and information about different
procedures and lab work, among other things.
I have a lot of questions for the witnesses today, but one
of my main questions is what is the best way for patients to be
getting healthcare price information and how can we help
empower patients? I also am interested in hearing about any
market behaviors that work against transparency and ultimately
harm any attempts to bring down healthcare costs.
I'd like to thank our witnesses for being with us today,
and look forward to their feedback on those questions and
others. There is clearly a lot to be discussed in regards to
today's topic, and I look forward to a robust dialogue.
Mr. Burgess. Well, thank you, Mr. Chairman. And, Mr.
Chairman, it is my fondest wish that one day I will come into a
hearing in the Energy and Commerce Committee and there will be
five doctors at the witness table, and they are going to
expound for us on how much economists should be paid. I am
still waiting for that hearing. We haven't had it yet.
Thanks to our witnesses for being here today. And, Mr.
Chairman, to you I have a couple of things that I would just
like to place into the record.
This is a copy of H.R. 5547, a bill that was introduced in
the last Congress by Mr. Green and I that dealt with
transparency. And, in fact, Mr. Green and I have been working
on transparency for the past several years. And a version of
this was actually included as an amendment in the Affordable
Care Act, but I think it got lost on its way to the Senate.
Mr. Harper. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. Also, I would like to place for the record, I
printed off some sheets from a website called txpricepoint.org.
Texas PricePoint is a website that is at the least sponsored by
the Texas Hospital Association, and it is useful information
for your county or for your city, for the hospital in your
county or for your city.
For example, I printed off a sheet that I will, I will
leave for the record that deals with the cost of an
uncomplicated cesarean section in the hospital where I used to
practice. And I note that although my hospital is a little
lower than some of the other hospitals in the area, it is
higher than other hospitals in the State.
And as a physician, I also will submit to you that is
useful information. And if recognizing the decision that a
patient makes to go to a hospital is likely driven by the
physician, making this type of information more available to
physicians perhaps could help with physician behavior as far as
directing the course for hospital care.
So, I ask unanimous consent to place this into the record,
and look forward to hearing from our witnesses.
Ms. DeGette. Mr. Chairman, I reserve the right to object
till I review the documents, although I am sure they will be
fine. If I could just review the documents.
Mr. Harper. Well, as we review that we will come back to
approving the entering that into the record as soon as Ms.
DeGette has had an opportunity to review that.
I will now recognize Mr. Pallone, the Ranking Member, for
purposes of an opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman.
The cost of healthcare is consistently a top concern for
American families. But all too often, consumers face an initial
problem before they even receive care, knowing how much a
certain healthcare service is going to cost them. And that is
because there are so many players in the healthcare industry
making it difficult to bring clear cost transparency to the
consumer.
Two different patients can receive the same service from a
doctor but end up being charged starkly different prices. And
this makes it difficult for a patient to make an informed
decision about their care.
There are multiple factors contributing to this lack of
transparency in healthcare. For example, a provider may have a
set of rates it changes for private-pay customers, but
depending on a person's insurance and deductible, their price
could vary greatly.
This differs from most other markets the consumer has a
clear understanding of how much a product or service will cost,
and can shop around to obtain the best deal. The nature of
healthcare makes this more complicated. And it is particularly
noticeable in emergency situations where a patient's top
concern is receiving the lifesaving care they need, rather than
what the care will cost. In other expensive specialties such as
oncology, patients trust their doctors to provide them with
referrals based on quality of care.
With that being said, consumers can certainly benefit from
more information, and there are opportunities to bring more
transparency to the healthcare industry. As we will hear from
the witnesses today, just about every state has implemented
some type of transparency initiative. For instance, my home
State of New Jersey recently passed a law requiring providers
to notify patients if they are out-of-network, helping to avoid
surprise bills for patients.
Many states have also created websites that post the prices
of common procedures, and allow consumers to browse the prices
of various providers. And this kind of reform can empower
consumers just by giving them greater access to information.
So, I look forward to hearing from the witnesses what the
research says about these efforts, and what other reforms are
being attempted in other states. However, we should be
cautiously optimistic about greater transparency, as we have
seen only modest results in actually bringing down costs. Some
studies have found an increase in prices with more
transparency, so we should be mindful of these results before
considering any reforms.
I also think it is important that we keep the big picture
in mind here. It is one thing to bring more transparency to
healthcare, and give consumers information on what they are
being charged, but we should also encourage meaningful efforts
to actually reduce healthcare costs for American families.
And one of the primary ways to do that is by ensuring
access to affordable health coverage. Whether it be Medicaid,
essential health benefits in private insurance, or a robust
marketplace for individuals who shop for insurance,
transparency matters only if consumers have access to high-
quality, affordable healthcare.
And, finally, while I appreciate the efforts of this
subcommittee to explore these issues, I would be remiss if I
did not note that there is an emergency taking place right now
within HHS that this committee should be holding an oversight
hearing on. Today, there are still more than 2,500 children in
the custody of HHS who have yet to be reunited with their
families after being forcibly separated by the Trump
administration. This committee has a responsibility to conduct
vigorous oversight of the Federal Government, and today would
have been a perfect day to have HHS Secretary Azar and Scott
Lloyd, the Director of the Office of Refugee Resettlement to be
here.
So, I again urge the Republican majority to schedule a
hearing as soon as possible so we can work to fix this crisis,
and so we can finally get some answers.
I don't know if anybody wants my time. If not, I will yield
back. Thank you, Mr. Chairman.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
The cost of healthcare is consistently a top concern for
American families. But all too often, consumers face an initial
problem before they even receive care, knowing how much a
certain healthcare service is going to cost them. That's
because there are so many players in the healthcare industry
making it difficult to bring clear cost transparency to the
consumer.
Two different patients can receive the same service from a
doctor but end up being charged starkly different prices. This
makes it difficult for a patient to make an informed decision
about their care.
There are multiple factors contributing to this lack of
transparency in healthcare. For example, a provider may have a
set rate it charges for private-pay customers, but depending on
a person's insurance and deductible, their price could vary
greatly.
This differs from most other markets, where the consumer
has a clear understanding of how much a product or service will
cost, and can shop around to obtain the best deal. The nature
of healthcare makes this more complicated. And it's
particularly noticeable in emergency situations where a
patient's top concern is receiving the lifesaving care they
need, rather than what that care will cost. In other expensive
specialties such as oncology, patients trust their doctors to
provide them with referrals based on quality of care.
That being said, consumers can certainly benefit from more
information, and there are opportunities to bring more
transparency to the healthcare industry. As we will hear from
the witnesses today, just about every state has implemented
some type of transparency initiative. For instance, my home
State of New Jersey recently passed a law requiring providers
to notify patients if they are out-of-network, helping to avoid
surprise bills for patients.
Many states have also created websites that post the prices
of common procedures, and allow consumers to browse the prices
at various providers. This kind of reform can empower a
consumer just by giving them greater access to information.
I look forward to hearing from the witnesses what the
research says about these efforts, and what other reforms are
being attempted by the states. However, we should be cautiously
optimistic about greater transparency, as we have seen only
modest results in actually bringing down costs. Some studies
have even found an increase in prices with more transparency,
so we should be mindful of these results before considering any
reforms.
I also think it is important that we keep the big picture
in mind here. It is one thing to bring more transparency to
healthcare, and give consumers information on what they are
being charged, but we should also encourage meaningful efforts
to actually reduce healthcare costs for American families.
And one of the primary ways to do that is by ensuring
access to affordable health coverage. Whether it be Medicaid,
essential health benefits in private insurance, or a robust
marketplace for individuals to shop for insurance--transparency
matters only if consumers have access to high-quality,
affordable healthcare.
Finally, while I appreciate the efforts of this
subcommittee to explore these issues, I would be remiss if I
did not note that there is an emergency taking place right now
within HHS that this Committee should be holding an oversight
hearing on. Today, there are still more than 2,500 children in
the custody of HHS who have yet to be reunited with their
families after being forcibly separated by the Trump
Administration. This Committee has a responsibility to conduct
vigorous oversight of the Federal Government, and today would
have been a perfect day to have HHS Secretary Azar and Scott
Lloyd, the Director of the Office of Refugee Resettlement.
I again urge the Republican Majority to schedule a hearing
as soon as possible so we can work to fix this crisis, and so
we can finally get answers.
Mr. Harper. The gentleman yields back.
Ms. DeGette. Mr. Chairman, I withdraw my right to object. I
have no objection to these documents from Mr. Burgess.
Mr. Harper. The documents are so entered.
[The information appears at the conclusion of the hearing.]
Mr. Harper. I ask unanimous consent that the members'
written opening, opening statements be made part of the record.
Without objection, they will be entered into the record.
Mr. Harper. I would now like to introduce our witnesses for
today.
Today we have Dr. Jaime King, Professor at UC Hastings
College of Law; and Dr. Michael Chernew, Professor at the
Department of Health Care Policy at Harvard Medical School.
Unfortunately, our third witness, Dr. Kavita Patel, was
unable to be here today due to a family emergency. And Dr.
Patel and her family will remain in our thoughts and prayers as
we send them our best wishes.
You are both aware that the committee is holding an
investigative hearing, and when doing so has had the practice
of taking testimony under oath. Do either of you have any
objection to testifying under oath?
Mr. Chernew. No objection.
Ms. King. No objection.
Mr. Harper. Both witnesses have stated no.
The Chair then advises you that under the rules of the
House and the rules of the committee you are entitled to be
accompanied by counsel. Do you desire to be accompanied by
counsel during your testimony today?
Mr. Chernew. No.
Ms. King. No.
Mr. Harper. Both witnesses have responded no.
In that case, if you would please rise and raise your right
hand and I will swear you in.
[Witnesses sworn.]
Mr. Harper. You may be seated.
You are now under oath and subject to the penalties set
forth in Title 18, Section 1001, of the United States Code. You
may now each give a five-minute summary of your written
statement. And Dr. King, we will recognize you for 5 minutes.
STATEMENT OF JAIME KING, PH.D., PROFESSOR, UC HASTINGS COLLEGE
OF LAW; AND MICHAEL CHERNEW, PH.D., PROFESSOR, DEPARTMENT OF
HEALTH CARE POLICY, HARVARD MEDICAL SCHOOL
STATEMENT OF JAIME KING
Ms. King. Thank you. Committee Chairman Walden,
Subcommittee Chairman Harper, Committee Ranking Members Pallone
and DeGette, Subcommittee Chairmen Griffith and Castor, and
members of the Subcommittee on Oversight and Investigations, I
very much appreciate the opportunity to testify on price
transparency in the healthcare market today.
As you know, the cost of healthcare in the United States
currently threatens the economic stability of our citizens, our
businesses, and our nation. A 2018 Gallup poll found that more
Americans worry about the availability and affordability of
healthcare than any of the 14 other major social issues, like
crime, the economy, and the availability of guns.
Economic theory suggests that if consumers had better
access to price information prior to choosing providers and
receiving healthcare services that they would choose less
expensive options, thereby lowering overall healthcare
spending. As a result, states have been very active in this
endeavor, introducing 163 price transparency bills so far in
2018.
Historically, most state price transparency initiatives
have focused on changing consumer behavior to encourage them to
select providers and services that offer the greatest value at
the lowest cost. Yet, health services research examining the
impact of these efforts suggest that most of them have not
engaged patients in a sufficient way to curb healthcare
spending. Controlling healthcare spending requires engagement
not just form patients but from all actors in the healthcare
market: providers, payers, and policy makers.
Twenty states, including Oregon, Maryland, Maine, and New
Hampshire, have all developed All Payer Claims Databases which
collect information on both healthcare services Americans use,
and amounts paid for those services. States can use these
healthcare claims data to report better reporting to an All
Care Claims Database, to inform patient and provider decisions
regarding care; to allow payers to compare their rates to make
sure that they are getting, you know, close to average or
somewhere in there; and to allow policy makers to examine the
drivers of healthcare costs over time; evaluate the
effectiveness of various reform efforts; and measure the impact
of mergers and acquisitions on healthcare price and quality.
However, legal barriers including contractual provisions,
ERISA preemption, and trade secret laws currently hinder the
utility of many existing price transparency initiatives.
So, what can Congress do? For transparency initiatives to
achieve their full effect at the state level, changes are
needed at the Federal level. And, fortunately, Congress has the
ability to address some of the most significant barriers to
price transparency. There are five things Congress can do to
improve healthcare price transparency:
Number one, and most important, address the ERISA
preemption challenges. The main goal of ERISA is to promote
uniformity in state regulations governing employee benefit
plans. But over time, ERISA's preemptive reach has expanded in
ways that put this goal of uniformity for employers over
transparency, competition, and affordability of healthcare for
all Americans.
The Supreme Court decision in Gobeille v. Liberty Mutual
Insurance held that ERISA preempted state All Payer Claims
Databases, preempted their reporting requirements as applied to
self-insured employer plans. And this decision left state All
Payer Claims Databases without healthcare claims data for about
a third of their population, which greatly limits their
accuracy and their utility.
Essentially, trying to analyze the healthcare landscape
using data from an All Payer Claims Database without the self-
insured employer population is kind of akin to Google Maps,
trying to use Google Maps without a third of the road; right?
Enabling All Payer Claims Databases to collect the full set
of healthcare claims data would dramatically increase the
utility and reliability of these initiatives. While addressing
ERISA preemption of state health reform laws is the most
important thing that Congress can do to promote price
transparency and bring down healthcare costs, additional
actions by Congress could also help illuminate healthcare
prices, which brings me to number two.
Congress should seek to encourage price shopping incentives
like reference pricing, rewards, and shared networks, through
demonstration and pilot projects.
Number three, Congress should create a public interest
exemption to Defend Trade Secrets Act of 2016. Healthcare
providers and insurers currently invoke trade secrets
protection to avoid disclosing negotiated healthcare prices and
other information to consumer, employers, researchers, and
state officials.
Trade secrets protections were designed to encourage and
protect innovation, like the Coca-Cola formula, not to permit
Coca-Cola and restauranteurs to hide its price on the menu and
then after you eat your meal give you a bill for a $25 Coke.
Right?
Number four, Congress should require manufacturers of
electronic medical records and insurance companies to establish
uniform standards of interoperability and standard bundles of
care for billing purposes so that providers and patients can
access meaningful and actionable information about the cost to
the patient, who and what is in the patient's network, and the
quality of providers and services being offered to them when
the provider is making referrals during appointments.
And, number five, they should develop billing codes for a
physician's time spent in these efforts.
Thank you.
[The prepared statement of Ms. King follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Harper. Thank you very much, Dr. King.
And the chair will now recognize Dr. Chernew for 5 minutes
for purposes of his opening statement.
STATEMENT OF MICHAEL CHERNEW
Mr. Chernew. Thank you very much, Chairman Harper, Ranking
Member DeGette, members and staff. Thank you for the
opportunity to speak with you today about price transparency in
healthcare.
Before I launch into the main thrust of my comments I would
like to emphasize that as an economist I believe strongly in
markets. Well-functioning markets require buyers to effectively
shop for the combination of price and quality that best meets
their needs. And in the market for medical services, buyers, in
this case patients, do not have the necessary information.
For that reason, one would think that efforts to promote
price transparency in healthcare would be able to significantly
lower the cost and perhaps improve the quality of care. In
fact, this logic has spawned the creation of numerous
transparency initiatives and tools, launched several innovative
companies. All of the major insurers that I'm aware of have
some price transparency tools--not all are great--as do many
other vendors in several states who are pursuing transparency-
related programs.
Although there are a few studies that suggest transparency
initiatives may be helpful, such as the one in New Hampshire,
they've only had a modest impact on the spending for some
services, at best. Overall, the evidence, unfortunately,
suggests that the impact of transparency has been minimal.
This reflects several institutional features of healthcare.
First, healthcare is complex. Any course of treatment or
diagnostic pathway is comprised of many individual services. An
accurate price quote requires knowing the exact service. This
is complex.
For example, there are over 50 codes for CT scans. In some
cases it is even unknowable because the exact service delivered
may change during the course of treatment based on clinical
information that arises during that treatment. Moreover, the
fees to the hospital and the physician are often separate. To
get an accurate price, they have to be combined. This makes it
hard, particularly for providers, to provide the information.
Imagine when shopping for a car consumers could only get
the average price of a specific car, and that the actual price
that they would pay depended on who put them together and the
customer's employer. The information would be of limited value.
Most transparency tools seek ways around this, but so far
there have not been great successes.
Second, physicians are central to almost all consequential
decisions in healthcare. Physician recommendations about where
to seek care appropriately carry enormous weight. As a result,
few patients shop for care. In our work, we find around 10 to
15 percent of patients use transparency tools when offered.
This result seems pretty standard in the literature. While it's
certainly true that patients can question or even ignore their
physician's referral recommendations, few do.
Third, consolidation in healthcare markets limits choice
and, thus, competition in some markets. Specifically,
competitive forces can only work when there are competing
firms. As markets have consolidated, the potential for
transparency or shopping more broadly diminishes.
Finally, insurance distorts choices. Patients fundamentally
care about what they pay out of pocket. The out-of-pocket price
will depend on the details of the patient's insurance plan and
will change over time depending on things like whether they've
met their deductible. As a result, one cannot accurately quote
an out-of-pocket price without knowing details about the
patient's health plan and how much they've often already spent,
often for specific services. This implies that insurers are
best suited to provide transparency information and, as noted,
many do, although, as we've mentioned, with relatively little
impact.
I do not mean to imply that transparency, or more generally
price shopping for medical services, cannot work. Very
simplified indicators such as flagging high-priced providers,
as happened in some tiered insurance products can help,
particularly when tied to benefit design. Moreover,
transparency can have an impact even if it does not alter
consumer behavior. The widespread availability of data may
shame high-priced providers to lower their prices, particularly
when journalists have access.
There's some evidence that this can be salient in
healthcare. However, one has to proceed with caution, caution
because it's also possible that widespread availability of
information could alter the negotiation dynamics in other ways,
leading to higher prices for some patients. Because payers
negotiate price discounts with providers, if forced to reveal
those discounts the providers may be more reticent to offer
them. And there's some evidence of that in markets outside of
healthcare.
So, where does this leave us? I'm generally supportive of
the initiatives, particularly the private sector ones that
simplify the information and focus on out-of-pocket prices. I'm
more skeptical about public sector initiatives that entail new
mandates on providers to provide data because it's particularly
hard to get that data right. I worry it will not substantially
improve the system, and may impose administrative costs.
There is certainly a lot we do not know. And while there
may be deleterious unintended consequences, most evidence is
either neutral or positive, and I think the shaming effect may
be important in the most egregious cases. Moreover, states are
experimenting in many ways, which should be allowed to play
out.
So, there are a few fundamental things the Federal
Government could support those efforts.
The first, as was mentioned, support the ERISA exemption or
get rid of the ERISA exemption.
Providing financial support for All Payer Claims Databases
could be a wise investment.
And providing more funding to AHRQ or other federal
agencies to study what is actually working.
We have a lot of problems in healthcare, and I very much
applaud your efforts to seek a solution. But please do not let
transparency distract you from other strategies such as
supporting alternative payment models or addressing adverse
selection in the individual markets of healthcare that may be
more impactful.
Thank you.
[The prepared statement of Mr. Chernew follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Harper. Thank you both for your testimony. It is now
the opportunity, the moment that you have waited for, our
members get to ask questions of each of you. That will help us
very much in that process. And I will now recognize myself for
5 minutes for the purpose of that. And I will start with you,
if I may, Dr. King.
Obviously, it is clear that a lot of Americans struggle
greatly with how to pay for their healthcare costs. And part of
that is they never know how much it is going to cost until they
see a bill sometime later. And as you noted in your testimony,
a lot of transparency initiatives have focused on changing
consumer behavior to encourage them to select lower price
providers and services.
But can you elaborate on why these initiatives seem to have
limited usage and have mixed results?
Ms. King. Yes. So, I think there are largely four reasons
why consumers don't tend to use these as much as we would like
them to. And the first is that insurance often, the structure
of insurance often insulates consumers from feeling the price,
different prices for different providers.
If you pay a $20 copay every time you go to the doctor, it
doesn't really matter to you what type of doctor you go to;
right? So there is some function of that.
The second is that the provider relationship is really
important to patients. And it turns out where we have seen
price transparency work is exactly on the thing that you noted
before, Chairman Harper, is on shoppable goods. We have seen
some movement there, where things that people find
interchangeable. Right?
So, you might go, you don't care where you go to an MRI, to
have your MRI tested or have your CT scan done. Those seem
likely to go to this lab or that lab, unless this lab or that
lab automatically supplies the results into your electronic
medical record and it goes directly to your provider. That
might make a difference to you.
But, generally, those are places where people are more
willing to shop.
Where they're less willing to shop is on provider, right?
They want a recommendation. Let's say that you, your child, or
your spouse, or your loved one just got diagnosed with cancer.
Are you really going to look at a list of providers and their
charges to decide where you're going to go? You're not. You're
going to go to a trusted primary care physician, or a family
member that's had experience with cancer and ask them who they
went to and who they had a good experience for.
So, I think the reality is is that healthcare is so
important that patients really want to get advice from someone
they trust and not the provider. And that's really why price
transparency initiatives that put pricing information that is
relevant to the patient in terms of their out-of-pocket costs
in the hands of the provider so it's there when they're making
that decision, I think have the most, the greatest possibility
of a shifting choice on the provider side.
Mr. Harper. OK.
Ms. King. And the last thing is that there's very, as Dr.
Chernew pointed out, there's very little standardization in
healthcare pricing; right? So, if you look at one, if you look
at one sheet and it says, well, you can get an MRI for $300,
but then you don't know if the MRI needs specific dyes or other
things accompanying it, it's very hard for a patient to
navigate that and to figure out what the overarching price will
be for that.
Mr. Harper. All right. Thank you very much.
Dr. Chernew, in your testimony you noted that there are
several institutional features of healthcare that make it
difficult for transparency alone to have a significant impact
on the market. You do highlight however, that the transparency
initiatives are important as we move to a newer innovative
benefit designs that attempt to help patients shop.
Can you please elaborate on that point?
Mr. Chernew. Of course. So, let me say for those of you
that don't know or may not care, I chair the Benefits Committee
at Harvard University, which means I advise the provost on what
we, as an employer, should do for the benefits for our workers.
And we've been very worried about the variation of prices
within Massachusetts, which was pointed out. And so that was
painful, thank you.
So, when we think about what to do we start with how we
might change our benefit designs to incent our workers to make
more informed choices about providers. One cannot do that
without having the relevant information available. So, if you
want to do tiered network, if you want to do reference pricing,
if you want to do any type of benefit design that involves
incenting patients beyond a flat, say, $20 copay, it's
important that you have the tools to provide information to
them. In that way I think transparency is important. And you
should know all of our vendors will provide such transparency
tools should you decide to do that.
Mr. Harper. Are the right to shop laws that also provide
the financial incentives for consumers to choose the lower cost
options perhaps, are they likely to have an impact do you
think, a bigger impact on spending?
Mr. Chernew. I'm not familiar enough with all of all the
laws, so I would defer to Dr. King. But I think that the
general sense that allowing patients to shop and supporting
their ability to shop when they want to I think is valuable.
But because of all of the institutional features I think that
alone is not really what's going to be helpful.
What we really care a lot about is even if you're not
shopping you just may want to know up front what you're going
to have to pay. And just getting that, which seems incredibly
reasonable, is hard to do. And we're working through that.
Mr. Harper. Thank you very much.
The chair will now recognize the ranking member of the
subcommittee, Ms. DeGette, for 5 minutes.
Ms. DeGette. Thank you. Mr. Chairman, just to show how
bipartisan this subcommittee can be, you just asked my
question. So I am going to follow up on what you were talking
about. And I will start with you, Dr. King.
And what I want to ask you is what percentage of healthcare
costs are these things that would be negotiable to most
patients, the MRI, the lab tests, issues like that? And what
percentage is the things they are less likely to want to
negotiate on, like physician services?
Ms. King. I think it's a great question. And I am not, I am
not a health economist. I'm not studying, somebody who studies
all of that percentage, so I don't know exactly.
I know that in studies, there was a study done that looked
at Anthem, and United, and some other big health insurers, and
it suggested that if they used reference pricing for their
shoppable items, for their laboratory tests, that they would be
able to bring down costs. I think it was on the order of around
10 to 15 percent.
So I don't know the exact number of laboratories. So maybe
Dr. Chernew knows that.
Ms. DeGette. Well, he is a health economist.
Ms. King. Yes. He may know.
Ms. DeGette. So I think I will ask him that.
Mr. Chernew. In great humility, there's a lot of things I
don't know.
Ms. DeGette. Even though you are at Harvard?
Mr. Chernew. Especially because I'm at Harvard.
Ms. DeGette. Good answer.
So, so you don't have any idea what the percentage would be
reduced?
Mr. Chernew. Advocates of shopping will give you a very big
number, 60, 70 percent.
Ms. DeGette. Yes.
Mr. Chernew. In for realistic numbers about what really
could be shopped, I think you're probably talking closer to 10
to 15 percent of services.
Ms. DeGette. That is the same thing Dr. King just said.
Now, now if you, if you did have increased transparency and
if you could encourage patients to actually look at the
sources, with physician costs even though, even though people,
I mean I am not going to pick the cut-rate physician over the
more expensive one that might have gotten a good reference, or
whatever. But would there be some incentive for physicians to,
on their own, maybe tamp down some of their rates?
Mr. Chernew. So, the answer is if the markets were working
well there would be an incentive for physicians to change and
facilities to change their prices. And you've seen some of
that. I really don't associate that with transparency, I
associate that with benefit design, things like reference
pricing.
I also think there's evidence, we've done a lot of work on
alternative payment models, which I know is not the specific
subject of this hearing, but when physicians are in payment
models that give them an incentive to shop----
Ms. DeGette. Right.
Mr. Chernew [continuing]. They are much more active in
shopping because they will change their referral patterns if
they get to keep some of the savings if they're more efficient
in their referral patterns.
So, really I think transparency should be thought of as a
tool that supports other impactful things as opposed to an end
in and of itself.
Ms. DeGette. Dr. King, did you want to add to that?
Ms. King. Yes. So, on the reference pricing point, so the
way that reference pricing works is that an insurer will pick a
fee that it decides that it's an amount that it's willing to
pay for a particular service. And then any provider that
charges above that, the patient has to pay that out of pocket.
And what the studies have shown with respect to that is
that a number--there's been a decent amount of savings from
patients saying they don't actually want to go to a higher-
priced provider, but there's been a 30 percent reduction in
provider costs overall, that they have dropped their prices to
be under the reference price to get a broader volume of
patients. And so that might be, that might prove to be helpful.
Ms. DeGette. Dr. Chernew, do you want to?
Mr. Chernew. I think Dr. King's referring to a study by
Jamie Robinson and colleagues about a program that CalPERS did
in California Anthem. There's a lot of things they did besides
just reference pricing. So it's a very complicated thing. And
they were a very big purchaser, which is helpful.
I think we looked at reference pricing for our employees.
And one of the problems we had was if you pick a price and then
the patient's responsible for the amount above that price, you
actually have a lot higher bills that they have to pay.
Ms. DeGette. Right.
Mr. Chernew. Substantially higher bills. And the whole
reason you're here is because you're upset, I'm upset that the
patients are facing very substantial bills.
So, we are trying to find ways in our benefit design to
support shopping without going through the full risk that
reference pricing might impose on patients should they not
shop. So, it's a complicated tradeoff.
Ms. DeGette. So, what did you do?
Mr. Chernew. We decided not to recommend reference pricing.
Ms. DeGette. OK.
Mr. Chernew. And you should know, going in I really wanted
to recommend it because as an economist I thought it would be a
victory.
Ms. DeGette. Yes. And so what it is sounding like to me is
that while we can, we can work on some of these transparency
issues--Dr. King, you mentioned your five items and, don't
worry, they are in your testimony, too, so even though you were
kind of cut short--but, but we should also look at other ways
of structuring these insurance plans which may make incentives
for providers versus just the patients.
Thank you. Thank you, I yield back.
Mr. Harper. The gentlewoman yields back.
The chair will now recognize the vice chairman of this
subcommittee, the gentleman from Virginia, Mr. Griffith, for 5
minutes.
Mr. Griffith. Thank you very much. Appreciate you all being
here today. And obviously this is a very complicated subject,
and I do appreciate it.
I wish there was some way people could go in and say I have
got to have this procedure and, like a car, you could say if
you are getting this, the fancy wheels, then you pay more, et
cetera. But it seems that that is outside of our realm right
now. Although one would hope that with all these young computer
whizzes coming on that somebody might be able to figure out how
to plug all that in.
And I do agree that there are some things, I am going to
pay more for the doctor that I know. Happy to do that, and able
to do that, fortunately. Some people aren't. And so we have to
try to look at some of the things that you all already talked
about in relationship to insurance and getting the ability to
say how much is this going to cost me out of pocket before you
go forward I think is important. And you all touched on that as
well.
So, you all are dealing with this huge, complicated matter.
And my questions are much simpler. I have just been really
concerned. We had a hearing in the Health Subcommittee where we
had all the providers lined up. And it was shocking, I had
heard rumors but they actually confirmed that because of the
way the system currently works there are cases where you could
go to your pharmacist with your insurance company and your PBM
and say, I want to get this drug, how much will it cost me if I
don't use my insurance? And sometimes it is less if you don't
use your insurance than it is if you do use your insurance
because of the complicated formulas, and so forth.
And Delegate Todd Pillion in my district out of Abingdon,
Virginia, got a bill through the Virginia legislation--I heard
there were 22 others this morning--that said you can't have
those gag orders anymore.
Dr. King, do the states eliminating those gag orders, do we
find that that make a whole lot of difference when they go to
the pharmacy? Do they sometimes figure out that they are better
off nothing using their insurance because of the PBMs, et
cetera?
Ms. King. Thank you. It's a great question.
So, I think a lot of these laws are new and so we haven't
been able to really do the studies on them. But I think in
terms of allowing pharmacists to actually say to the client at
the desk, by the way, if you go outside your insurance or you
get this generic you can save a lot of money, I can't, because
pharmaceutical drugs in a large respect are those kinds of
interchangeable drugs, interchangeable products, and so I think
that that should have some substantial effect. And the idea
that they were prevented from doing so by contract before is
unconscionable to me. So, I think it's great.
Mr. Griffith. Mr. Carter has a bill I am glad to be a
cosponsor of to make that a Federal policy. And it is really
interesting. I was discussing it back home and lady said, yes,
that happened to my sister by accident. Her insurance company
initially stated that they wouldn't pay. And so she paid for
the prescription herself. Then when it came time to renew they
said, oh, we changed our minds, we will pay for that particular
prescription, and she found out it was more.
She called her pharmacy and said, what is this, it cost me
more when I am using my insurance?
Ms. King. Yes.
Mr. Griffith. He says, yes, I can't tell you about that but
if you will ask me to do it outside of your insurance you will
only have to 17 instead of paying 50.
Ms. King. Right.
Mr. Griffith. And so, I think it is something we need to
pass. And there are a fair number of patrons on that.
But it was clear to me that we need to look at the PBMs
along with all the other things that you all are mentioning as
part of the transparency. I know they serve good purpose.
But, again, Virginia on this, and it is my home State, that
is why I keep referencing, but we had Delegate Keith Hodges out
of Gloucester directed the State Bureau of Insurance to report
to the General Assembly about how PBMs charge for their
services and whether they save money or make healthcare
costlier. Among the findings of the first PBM transparency
report as a result of his work, mandated by that language, last
year there were 152,250 payments, with total PBM markups of 3.5
million between July 1 and September 21.
The differential or spread on each claim ranged from 1
penny to $4,932.
Do you think that having more transparency and more
oversight over PBMs and what they are doing--I know they work
hard in some cases and save money, but in other cases they are
actually costing the consumer--do you think that would help?
Ms. King. Yes, I do.
Mr. Griffith. Dr. King, you do.
Dr. Chernew, do you have an opinion?
Mr. Chernew. You can call me Michael, please.
Mr. Griffith. Michael.
Mr. Chernew. I think as a matter of principle people should
be able to get the information that they need. So, just on the
pure principle of it.
In terms of the market demand, that gets much more
complicated. I, I didn't talk about prescription drugs because
a lot of the situation that you're discussing arises because of
the complicated rebate rules that are going on in the
prescription drug market. And those rebates both in some ways
they help markets work, but in other ways, and I think more
dominantly, they make it much more complicated and much more
difficult to have markets work well in healthcare.
And so, I think that while we could debate conceptually
what the ability, you should have the ability to negotiate, I
think the fact though we live in an environment where it's just
so complex for people to get the price and get simple
information, they're told that by contract they're not allowed
to tell them, I think it's just a matter of principle that the
situation shouldn't arise, even though it may well result in
some people paying more because the discount that currently the
PBMs can get might be less because they don't want everybody to
know when they're getting the discount. That's basically what
the problem is.
Mr. Griffith. All right, I appreciate it. And I think that
for a lot of our folks back home, they don't understand all the
big stuff. But they understand when they go to their pharmacist
and they feel like they are being overcharged.
I appreciate it, and yield back.
Mr. Harper. The gentleman yields back.
The chair will now recognize the gentlewoman from Florida,
Ms. Castor, for 5 minutes.
Ms. Castor. Thank you, Mr. Chairman.
I want to return to what providers and insurers can do to
help lower the costs through their transparency efforts.
Because I think you correctly stated how folks feel, that if
their doctor recommends something, I mean, it is pretty rare
that a patient, a neighbor is going to go shop and do something
else.
So, Dr. Chernew, you, you said, OK, alternative payment
models can be one way. What else on physicians, because they
play such a central role on consumer behavior?
Mr. Chernew. So, first let me say I really wish I could
come here with some silver bullet and solve the problem. And I
can't. Because anything I'm about to say is going to have
potential deleterious consequences.
Most of the insurers I know, all of the insurers I actually
know, are struggling to find ways to address the healthcare
cost problem. It is not that insurers want healthcare spending
to be high or they're not working on it.
Essentially what matters is the interaction between the
patient and the physician, the treatment that's given, and the
price that we pay for that. The way to address that is some
combination of payment reform and benefit design. And you're
seeing a ton of private sector initiatives to do that. And
where we are right now is employers in the market sorting
through which ones work for them in which particular ways, and
we're trying to learn what works better than not.
So, alternative payment models honestly is my favorite. I'm
a big believer in benefit design changes. So the evidence on
high deductible health plans that are HSA coupled isn't as
strong as I would like as an economist in general. There are
some things that I would recommend, like the way chronic care
medications are treated in the HSAs is something I think are
probably a good thing to help people being able to shop. Things
like that.
But there is not a specific Federal thing that one can do.
And the challenge that you will face--and again I say this in a
totally non-partisan way--is where the regulations should step
in and stop at least the most egregious cases. Because there
are some really out-of-network billing things, there are some
really egregious cases that are just unconscionable that should
probably be stopped by regulation. And I honestly think that
transparency is not the mechanism to get at those types of
things.
To the extent that the private sector can build
transparency tools, which I am supportive of, and the States
can try different ways through their All Payer Claims
Databases, I think that is wonderful. But I think fundamentally
my advice would be focus on rules to prevent the most egregious
situations where people in an emergency room are paying some
huge out-of-pocket thing.
Ms. Castor. Right.
Mr. Chernew. And telling them that matters. But, honestly,
I would say just prevent that.
Ms. Castor. So and, Dr. King, your number one
recommendation was on ERISA. And ERISA was a law passed in the
1970s that said, across the country you have to have certain
standards.
Ms. King. Yes.
Ms. Castor. So, why would that be so important for us to
get into to help lower healthcare costs? You want to empower
the states to do additional things I guess?
Ms. King. So, basically ERISA, the way that it is written
because it's trying to promote uniformity and place benefit
plan regulation across all 50 states has a very broad
preemption scheme. Which means that it will come in and negate
any state law that relates to an employee benefit plan,
including all the employer health plans.
Now, there is a savings clause as a part of ERISA which
says that any state insurance law that directly regulates
insurance will be saved from ERISA preemption. But there's the
next part of ERISA says that it doesn't deem self-insured
employer plans to be insurance, even though that's the way that
the vast majority, or at least half of our employees get their
insurance is through self-insured employer plans. Right?
So, any law that's passed by a state to regulate health
insurance or employer-based insurance is going to be preempted
by ERISA as it applies to about half of our employees. And ----
Ms. Castor. Who would oppose it?
Ms. King. I think industry would oppose it. Right? They,
they like not having regulations apply to them in that way. But
it is crippling state All Payer Claims Databases, which have
demonstrated that they can do a lot.
They're doing a lot with the information they have. But if
they had all the claims, healthcare claims in a particular
state, they could really get a handle on what's driving cost,
where is competition not working, what thing, what mergers and
acquisitions should or shouldn't go through.
And it also provides the foundation for every, like, for
the majority of other, the other solutions we're talking about,
so, allowing individuals to have better price information for
what it would cost them, for putting that information into the
hands of providers, I mean providers and insurers. Like, it
would just sort of seed a lot of other efforts. Reference
pricing would be based on that, and other things.
So, I think addressing the ERISA problem--and I have a
number of ways, a number of ideas of how you could do that--I
think is foundational to any sort of transparency initiative
that you would propose.
Ms. Castor. Thank you very much. I yield back.
Mr. Harper. The gentlewoman yields back.
The chair will now recognize the gentleman from Texas, Mr.
Barton, for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman. And it is always good
to have hearings like this to try to, through bipartisan basis,
get facts on the table.
My first question is just kind of a general question. I
have been on this committee 32 years. I have been involved with
some of the major healthcare issues over a number of times. One
of the most vexing issues we face is pricing drugs. And to my
mind, except for the long-time over-the-counter drugs like
aspirin and things of this sort, there is no rational
explanation for how we price drugs.
I think the over-the-counter drugs that have been on the
market for decades, in some cases hundreds of years, they are
pretty much priced like any other commodity and it is cost-
based, distribution-based, advertising. You pay more for Bayer
aspirin than you do for the Walmart generic brand, but they are
basically aspirin.
But I would like you, Dr. Chernew, to go back to the
Harvard Business School and have them come up with a flow chart
and explanation of how we price Lipitor, or how we price
Plavix, or how we price the new stem cell-based drugs. Do
either one of you want to defend the current pricing system for
these, these new drugs that are coming on the market, or even
try to explain it?
Mr. Chernew. When you said comment, I thought you were
going to say comment, I was going to jump in. When you said
defend I had to back off.
But I will do my best. The----
Mr. Barton. Do it in about 30 seconds because I have got
two or three questions. Give me the executive summary.
Mr. Chernew. New drugs provide great value. I think that is
indisputable.
Mr. Barton. I agree with that.
Mr. Chernew. We have a patent system that supports them.
And the drug companies charge what the market will bear. And
that, fundamentally, both gets us really good drugs and creates
huge amounts of problems.
And that was my 30 seconds. I'm happy to talk more.
Mr. Barton. Well, that is pretty rational. The drug
manufacturers charge what they think the market will bear. But
you go through these convoluted, average wholesale pricing and
340B discount drug program.
Mr. Chernew. That's all just a distraction. They're
basically charging what the market would bear. And because of a
bunch of rules, it's much more complicated than that. And the
question is how we want to support innovation and
pharmaceuticals, which we want to support because it----
Mr. Barton. We do.
Mr. Chernew. And that's where the problem comes in.
Mr. Barton. Dr. King. Then I have got two more questions.
Ms. King. I just want to interject that I think Dr. Chernew
is totally right that we get, we tend to get good value for new
drugs, for most of them. Where we're really not getting good
value is where we've already had a drug that has been on
patent, expired its patent life, and then they change a tiny
little bit of this drug, get an entirely new patent, run prices
up for 20 more years. There's a lot of things that we are not
getting good value for that remain in patent.
And if you want to look strongly at how to fix drug
pricing, I would look at how drugs are patented and what we
allow a whole re-upping on the patent.
Mr. Barton. I think that is valid.
All right, I want to go to the very bottom line here. I
have a constituent in Texas, a real estate agent who is on
Medicare. And her doctor gave her a coupon for a prescription
drug covered by Medicare. She took it to her pharmacist and the
pharmacist said, ``Great, but I can't, I can't take this coupon
because you are on Medicare.'' Medicare doesn't take coupons.
So I got with the Congressional Research Service and some
other groups and found out that for some reason when we
established Medicare we don't allow senior citizens--and we
started covering prescription drugs--we don't allow senior
citizens to use coupons if they are under Medicare.
So, Congressman Doyle and I have got a bill, we are going
to introduce it either this week or next week, that says if you
are on Medicare and you have got a coupon from your doctor, you
can't use them for generic drugs, but for any other drug you
can. Good idea, bad idea?
Mr. Chernew. So, I appreciate your constituent's problems.
I think the challenge is most of the time in the patent system
what the market will bear is not distorted by insurance. In
healthcare it's distorted by insurance. So the problem is if
you take any consumer incentive away by the coupon, the actual
price for the drug the market will bear goes up. And that's
what the tension is, is that if you want the consumers to----
Mr. Barton. Well, then the manufacturer doesn't have to
give the coupon. If they don't give the coupon to the doctor,
the doctor doesn't give it to the patient.
Mr. Chernew. No, the manufacturer likes giving coupons
because then they charge a higher price and the insurer can't
use the cost function.
Mr. Barton. Then we should just stiff the Medicare
recipients?
Mr. Chernew. Is my time up? I hope so.
[Laughter.]
Mr. Barton. It is not complicated if you are an elected
member of Congress and all of a sudden Medicare recipients
start showing up at their town, town hall.
Mr. Chernew. Yes. I, I totally agree. The challenge at the
core is you want the market to discipline the providers, which
requires people having to pay. And when people have to pay, it
turns out they don't like having to pay. And therein lies the
problem with coupons and a bunch of other distortionary things.
So, I agree with you. And we'll have to have a longer
conversation on how to deal with it.
Mr. Barton. I think that is yes, he agrees with me.
Mr. Harper. The gentleman yields back.
The chair will now recognize the gentlewoman from New York,
Ms. Clarke, for 5 minutes.
Ms. Clarke. I thank you, Chairman Harper, Ranking Member
DeGette, for convening this important hearing examining state
efforts to improve transparency of healthcare costs for
consumers. Additionally, I want to thank our witnesses for
providing your expert testimony here this morning.
This is a critical issue that is most deserving of
Congress' attention as we work with industry to ensure
consumers have a positive experience on their healthcare
journey. In my home State of New York, since 2015 we have an
out-of-network law that protects patents from surprise billing
when services are performed by non-participating providers.
This same law also protects New Yorkers from bills for
emergency services.
The focus on transparency and consumer protection are
needed so that consumers will not have to continue paying more
than their usual in-network cost sharing and/or copayment
amounts.
So, I have a couple of questions. Dr. King, how effective
have state efforts been to ban surprise out-of-network hospital
bills? And what more should we be doing to prevent this?
Ms. King. Thank you. It's a great question.
I think surprise billing is a really important issue for
just consumer protection in general. So I think that we have
seen a number of different types of laws to protect consumers
from surprise billing. So there are those that, as Dr. Chernew
said, ban the practice outright, just say you will not be
exposed, especially in emergency services, you will not be
exposed to prices that are higher than your in-network copay
for emergency services and other things.
And I think those are very effective. At least they're
protecting the consumer. And then we allow the bigger fish in
the game, the insurance companies and the providers, to hash it
out over what are reasonable reimbursement rates. And that's
what we have in California.
But there are others, there are lots of states that are
passing laws right now that just say that a person should be
informed that they may be being seen by an out-of-network
provider, or that they, when they arrive at the emergency room,
someone who takes care of them might be an out-of-network
provider and they might experience other charges.
And I think that these laws, while well-intentioned, don't
reflect accurately the reality of the patient experience. If
you show up at the emergency room, you are in an emergency
situation. You are signing whatever it is that you're signing
and then you're going to get help. And I think that someone
telling you that you may be subject to out-of-network law, out-
of-network bills at that point is not that helpful for you.
So, I think we need to focus on the laws that seven states
have passed that really just make it very clear that patients
in these specific situations will not be subject to copays that
are higher than what their in-network charges would be, and
then let everybody else hash it out.
Ms. Clarke. OK. And, Dr. Chernew, in your written testimony
you note that efforts in New Hampshire have had a modest impact
on healthcare spending. What was it about the reforms in New
Hampshire that have enabled costs to go down, albeit slightly?
Mr. Chernew. So, the study by Zach Brown in Columbia is
what I, who is at Columbia is what I was referring to. And they
found by looking at MRIs what I consider to be a modest impact
on a service where you often see impacts, like MRIs.
So I think there were some things about that. They had
insurer-specific prices. They knew whether you were in your
deductible or were not in your deductible, things like that.
So, I think as those laws go that's a reasonable law. I
think it's a mistake to believe that doing things like that are
going to solve the basic problems. And as far as I know, New
Hampshire has not really solved all of the problems. Maybe
there's someone here from New Hampshire.
But I think in the end of the day through their All Payer
Claims Database they were able to do some things that were
valuable. And to the extent that you can support the All Payer
Claims Databases, I think you might be able to help on the
margins the system get a bit better.
I still think private sector initiatives could have the
potential to be more impactful.
Ms. Clarke. So, Dr. King, could you describe any other
promising state efforts to improve transparency of healthcare
costs for their citizens?
Ms. King. Yes. I'll comment just really briefly on New
Hampshire and then I'll talk a little bit about Massachusetts
as well.
So, one of the things that New Hampshire did through their
All Payer Claims Database is they have a website called New
Hampshire Health Costs which you can go into. And I checked it
out this morning because I had heard good things about it. And
basically as a, as a patient you can go there and check off
this is the health insurance plan that I am in, I am in Anthem
and I want to get this kind of procedure, and I want to do it
with this particular provider. And they'll tell you, they'll
run down the cost. And they'll run down the cost for that
provider and they'll show you how it, how it compares to other
providers.
Now, that doesn't tell you your specific out-of-pocket
costs and it doesn't tell you where you are in your personal
deductible, but I think that is more helpful than what we've
seen in a lot of other states' price transparency initiatives.
Now the other state that I want to highlight here is
Massachusetts. And Massachusetts has gone a long way with their
All Payer Claims Databases. But they also have their Health
Policy Commission, which is an arm that is designed to analyze
that information and really mine the All Payer Claims Database
for a whole host of policy reasons. And they've been able to
interject and produce reports, annual reports on spending,
annual reports on the drivers of costs, but also interject in a
number of different places where, where that information would
not have otherwise been available to inform policy decisions,
but also to inform patients in that case.
So I think there are consumer-facing things that are very
useful, although I do agree that some of the private
initiatives from insurers are better. But I do think that
having the Health Policy Commission there to really analyze
that data has been a very useful step as well.
Ms. Clarke. Thank you. I yield back.
Mr. Harper. The gentlewoman yields back.
The chair will now recognize the gentleman from Texas, Dr.
Burgess, for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman. And I have got way
more questions than I can package into 5 minutes, but we will
do our best. And I may submit some for the record.
I do appreciate both of you being here today. Let me just
ask you a question, Dr. Chernew, since you brought up about the
private sector initiatives versus the All Payer Claims
Databases.
I pointed out in my opening statement, Texas has Texas
PricePoint. I believe it is Texas Hospital Association that has
done that. So, good on them for having done that. But is that
not helpful for them to have done it? Does that delay getting
an All Payer Claims Database set up in the state? What are some
of the tensions there?
Mr. Chernew. I think it is at the end of the day probably
marginally helpful as opposed to not. I don't think it delays
All Payer Claims Databases.
I think because all healthcare is local and the states are
going to do different things, I'm sort of a state
experimentation kind of person in this space. I wish I could
tell you I knew what would work. I don't like sounding as
skeptical as I am. So I think the more we can allow states to
do different things and then study what they're doing, I think
the better.
Mr. Burgess. And, Dr. King, do you have any thoughts on
that?
Ms. King. I tend to agree. I think that on balance it's
probably helpful. I think any attempts to provide transparency
are generally useful. I don't think it probably delayed an All
Payer Claims Database unless you were considering that as the
alternative option and went with this one.
I think that an All Payer Claims--so, in terms of the
private entity tools, I think those tend to be much more useful
for consumers. Right? And so, United Healthcare they go in, you
type in your name, you get into the system, and it tells you
what your actual, where you are in your deductible, what your
copay would be for different people.
And I think All Payer Claims Databases allow you to use the
information for a lot of different purposes; right? So that's
sort of the difference. One is very targeted at individuals,
but you also have to be in the plan in order to see that
information.
Mr. Burgess. Sure.
Ms. King. Right? You can't get that information when you're
choosing your plan. Although Massachusetts I think just has a
law coming down that would enable that, for you to see
different prices as though you were in different plans.
Mr. Burgess. Txpricepoint.org you would not have to be in a
plan. That is a ----
Ms. King. No. But it tells you----
Mr. Burgess [continuing]. Public hospital provides
database.
Ms. King. But it doesn't tell you the price that you would
pay for your insurer.
Mr. Burgess. No, it does not.
Ms. King. Right. So that is very hard to know what to do
with those prices.
Mr. Burgess. So, every time I see that TrueCar ad on T.V. I
wonder why we don't have TrueCar for healthcare. But then as
someone who had a health savings and account for years and year
and always has paid the highest out-of-pocket costs for
everything, hospital labs included, I was a big believer when I
first heard about Theranos. And I thought, oh man, a cheap way
to get a bunch of blood tests done. I'm all in. Except the
reliability suffers.
Ms. King. Yes.
Mr. Burgess. So there is a caveat there, I guess. Is that
the correct observation?
Mr. Chernew. Yes. And remember, it's TrueCar, it's not
TrueCarborator; right? And it's TrueCar.
Mr. Burgess. So, I think, Dr. Chernew, I think you
mentioned the alternative payment methods. And going back to
when the Secretary of Labor was Secretary of Health and Human
Services he did a demonstration project, a physician group
practice demonstration project where they dealt with some
alternative payment mechanisms. I think, if I understand the
history correctly, ACOs kind of grew out from there.
But can you speak to that? Is there a way to foster the
development of what perhaps Secretary Leavitt's original idea
was there?
Mr. Chernew. Yes. And I think, again maybe a little far
afield, Medicare has been very innovative in the whole range of
payment models. But I also can't tell you what the right type
of payment models are. But I think----
Mr. Burgess. Neither can we. But we are learning, I hope.
Mr. Chernew. There you go. But the more we support
alternative payment models, in many ways the better.
One thing that I think does matter is to understand that
the price from the point of view from the physician is
different than the price from the point of view of the patient
because the patient is buying some episode of care. The
physician is delivering a small part of that, the same with the
facilities.
So, the more for example supporting bundled payments, which
Medicare is doing, the more you can support that type of thing,
and the more payment moves towards more consumer-oriented sets
of things that are being purchased, the closer you get to
transparency because then someone will know what does it cost
for a colonoscopy, not what does it cost for the technical
component, the professional component, the anesthesia
component, et cetera, et cetera.
Mr. Burgess. But people still buy on provider as well as on
price. Which just brings me to the final thought, and I will
close my section out.
In the lead-up to the Affordable Care Act there was a lot
of concern about physician-owned hospitals. And in fact,
remember, physician-owned hospitals got whacked in the
Affordable Care Act. Mr. Chairman, I am going to ask unanimous
consent to insert a letter or a article into the record about
physician behavior with physician-owned facilities.
Back in my world it was all about time. I got paid the same
amount, regardless whether the patient went to an ambulatory
surgery center or to a community hospital. The lab processing
from my reimbursement's perspective was identical. But the cost
to the patients was a fixed rate in an ambulatory surgery
center, and the sky's the limit in the community hospital. I am
oversimplifying. But nevertheless, that is I think one of the
pressures that we are going to have to consider as we work
through these.
But, again, I ask unanimous consent to put this article
into the record.
Mr. Harper. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Harper. The gentleman yields back.
The chair now recognize----
Mr. Burgess. I want the gentlelady from Colorado to read it
before she accepts. I thought I had found a way to get you to
read my articles.
Ms. DeGette. I will take your word.
Mr. Burgess. All right. Thank you, Mr. Chairman, I yield
back.
Mr. Harper. And that was on the record by the way.
And the chair will now recognize----
Ms. DeGette. But not under oath.
Mr. Harper. Not under oath.
But the chair will now recognize the gentleman from
California, Mr. Ruiz, for 5 minutes.
Mr. Ruiz. Thank you, Mr. Chairman.
Overall we know transparency is a good thing and leads to
better understandings of market dynamics and better ways to
help everybody come up with good policy that is going to really
lead to a more cost-efficient way of providing better
healthcare for the American people. However, there are certain
things that transparency is good for and the market really
focuses on.
Like, for example, if you had the ability to make the
choice, and knowledge to know the difference between the
products in a situation where you can actually make a decision,
and not under duress, or when you are in a coma, or when you
are in cardiac arrest or something going into the emergency
department, and there are some things that transparency
obviously can work.
So, in your statement, however, Dr. Chernew, you note in
your testimony that ``many studies, including several of my own
and those of my colleagues, find that transparency has minimal,
if any, impact on the market.'' You go on to explain why
transparency results in only minimal impact on price.
Dr. Chernew, it sounds like the bottom line is that it is
somewhat folly to rely upon transparency as the magic bullet to
bring down healthcare costs. Is that correct?
Mr. Chernew. Yes.
Mr. Ruiz. OK. In what situation does transparency work?
Mr. Chernew. When there's more commodity type services,
when they're not as connected to things and you have time to
shop I think transparency works.
I think independent of shopping, transparency works just to
tell people what they would have to pay out of pocket. Just
knowing. So, you're not going to shop, it's just you don't want
to get a bill after the fact that's way higher than you
thought.
So, I think transparency is useful. I think it needs to be
coupled with other things.
Mr. Ruiz. But you are saying it is not what we should be
focusing on?
Mr. Chernew. I think there's a lot of reasons why
healthcare markets don't function well. Transparency I would
put down on my list for what that's true.
I think it's important, let me say, what I worry about, for
example, is insurance inherently, unlike most products is a
pooled product. I'm in with a lot of other people on the same
plan. I worry that if we allow the benefit packages to
deteriorate to the point where people are paying a lot out of
pocket and we separate that market through a range of things
that are going on that I won't mention--it might be too
partisan, I don't mean it to be--that people have higher out-
of-pocket bills because they won't understand when they bought
the insurance plan what was covered. They'll go to the doctor
and they'll realize that what they thought was insurance wasn't
that good. And it's very hard to make that work well.
Mr. Ruiz. So, do you think that putting too much weight on
transparency to reduce healthcare costs is a distraction?
Mr. Chernew. I worry that that's the case.
Mr. Ruiz. OK. I am a doctor. And I know that patients rely
on doctors' knowledge, and training, and years of experience to
make decisions that will be to the best benefit for the
patients. And I know that it is difficult for patients to then,
if an orthopedic surgeon says I recommend a titanium type of
metal for your knee replacement, that a patient in general is
not going to do the research or have the know-how in order to
determine what kind of equipment they want for their knee to
make that best judgment.
But I do think that there is some value in transparency. I
think it is just what Dr. Burgess said earlier, it is insane
that one hospital will charge, I don't know, I'm just making
these numbers up, but $2,000 for a colonoscopy. And then, like,
across the city in the same, same region another hospital
charges $10,000. So why is that?
And we should understand where are the mechanics that go
into that so that we can identify, in those cases when you do
have the time to choose which studies or which equipment you
want where you can have the knowledge and have the time, and
under the situation, to make that possible, I think we should
focus on that.
But, Dr. Chernew, you also mentioned that if the objective
is to meaningfully reduce healthcare costs, other strategies
such as addressing adverse selection in the individual market
for healthcare may be more fruitful. Can you expand on that?
So, if the objective is to lower costs are there ways to
combine transparency initiative with some of these other
efforts to lower costs? Can you go into that?
Mr. Chernew. Well, let me talk about two separate things
very quickly. The first one is transparency is important to
support almost all of the various new benefit design things we
do. It's important for a range of public regulation things. I
think there's a bunch of reasons why transparency matters. And
I think it's unconscionable, some of the stories that I'm sure
your constituents have told you. I think that's a really big
deal.
That said, the biggest problems we have in a lot of
healthcare markets aren't related to transparency, they're
related to how we hold the market together and how the benefit
design packages play out. So, at Harvard we control exactly the
benefit package. We push everybody into it. It's pooled, it
works.
If you allow markets to spin out of control and let people
do various things there's implications of that that differ from
markets for cars, or markets for asparagus, or things like
that. So, figuring out how to address those types of problems
so you don't have individuals that end up in insurance plans
where they're going to be charged a lot out of pocket I think
are important.
Mr. Ruiz. Harvard. Harvard Business School?
Mr. Chernew. Harvard University. Harvard University has a
Benefits Committee that offers benefits for all of the schools.
Mr. Ruiz. OK.
Mr. Chernew. So, Business, the Medical School, the main
part. And we advise the Provost, for the non-union workers,
about how to deal with our challenges. And we have a lot of
challenges.
Mr. Harper. The gentleman yields back.
The chair will now recognize the gentlewoman from Indiana,
the chair of our Ethics Committee, Ms. Brooks, for 5 minutes.
Mrs. Brooks. Thank you, Mr. Chairman.
And I want to stay on that line of questioning, Dr.
Chernew. Speaking of employers, and you mentioned Harvard
specifically, and even some insurers provide transparency tools
to their members or their employees, and have redesigned plans
and networks to encourage price shopping, can you describe some
of the features of the price transparency tools that are
adopted by employers and insurers, whether it is Harvard or
others, and how they differ from the state transparency
initiatives?
Mr. Chernew. Yes. So, and again Dr. King mentioned, if you
are in a plan that offers one of these types of transparency
tools and you know you need a service, you can go in and type
the service. Now, that actually sounds easy. But remember, if
you're shopping for a CT scan, there's 50 types of CT scans,
and it depends on what the dyes are, so it's not as easy as you
think.
It will aggregate out and try and come up with a number. It
will combine the physician and the hospital. Because you don't
care how much is going to the hospital and how much is going to
the physician, you care totally what are you going to pay----
Mrs. Brooks. Right.
Mr. Chernew [continuing]. For the whole thing. It will
know, and again it won't know perfectly because there's time
lags, it will know within reason where you are in your
deductible. So, if you are over the top of your deductible it
will give you a different price quote than if you haven't yet
spent your deductible.
Most of the public non-insurer-based tools don't have all
that information, so they cannot tell you very accurately what
you would pay. They don't. We know what prices our carriers
have negotiated with all the different providers. But most
public tools don't know--New Hampshire being an exception--the
prices that different providers have negotiated with different
insurers. And they certainly don't know where you are in terms
of your deductible.
Mrs. Brooks. And do you, are you familiar with a lot of
private tools like what you have just described, and are these
types of tools, whether they are insurers or employers, are
they proving to be effective in changing consumer behavior----
Mr. Chernew. So, the tools----
Mrs. Brooks [continuing]. And reducing steps?
Mr. Chernew [continuing]. Are almost always tools that
employers offer but the insurers make. The employers don't do
much. They buy things. So, the insurers are the ones that offer
the tools. Or other, there's a firm Castlight, for example,
that's well known for having these types of tools and selling
to employers who can buy access to them. And they have been,
unfortunately, disappointingly ineffective.
Mrs. Brooks. Why, do you believe?
Mr. Chernew. Well, for one, even the best of them are very
complicated. The people care more about their physician than
the tool, so they're hesitant to shop. And in many cases the
employers have provided the transparency tools but haven't
designed their benefit packages in ways that make them really
salient. So you get back the same result.
Even if there--you've mentioned, several people have
mentioned that there's wide variation in prices across markets,
$2,000 and $500. But most patients don't pay $2,000 and $500 to
their employers, most of them only pay--if you were at Harvard
you'd pay $30 flat fee no matter where you went to. So the tool
doesn't help you that much.
Mrs. Brooks. Dr. King, would you like to comment on the
private initiatives, private, the private tools?
Ms. King. Yes. So I would just basically reiterate what Dr.
Chernew said, that they haven't seen the kinds of results that
they would be looking for. And I know that Castlight has been,
is employers basically buy Castlight Health and offer it to
their employees. And they found very low engagement from
employees.
I think a lot of employees don't want to shop for
providers. They don't necessarily want to shop. They will shop
a little bit for the shoppable services. But they haven't seen
the overall level of engagement has been about 3 to 6 percent
on a lot of those tools.
Mrs. Brooks. Well, and I would like to ask both of you why
do you believe that is the case? Why is it that we have these
tools, whether it is a private sector, an employer, or at the
state base that states have invested in these, why do we have
such low engagement on this issue?
Ms. King. I think that we largely have low engagement,
partly because people aren't incentivized to use them. If you
pay the same price you're not that much incentivized to use
them. But I also think it goes back to this idea that when you
go to your provider and they make a recommendation for you of
which provider to go to for your hip surgery, or which lab to
go to. Oh, go to the lab down the street. It's unlikely to
then, to whip out your laptop and figure out if there's a
cheaper provider elsewhere.
Also, a lot of times individual providers prefer that their
patients use a particular lab----
Mrs. Brooks. Right.
Ms. King [continuing]. Because they know that they get the
results quickly, or it goes right into their EMR, or there are
some synergies within the system.
And so I think that patients are reluctant to go against
their provider's advice or recommendation, which is why you
should try to get this information into the hands of the
providers so that if they think I would recommend five doctors
to do your hip surgery. Oh, two of them are in your network.
Let's talk about you'd pay $500 for this doctor, and you'd pay
$200 for this doctor, let's talk about the benefits and
detriments of that. That's what we need.
Mrs. Brooks. And, Dr. Chernew, anything different on that
as to why we have such low rate of use?
Mr. Chernew. Yes. I think that it is a mistake to believe
that consumers fundamentally want to shop. They actually
fundamentally want to pay less out of pocket, and they want
things to be simpler. That's what they really want because of
all these sort of interactions with their physicians.
And so they tend not to want to go find these things out.
You can push at the margins, but as a main view that we're
going to use market forces to fundamentally control our
problems I think is a little optimistic, as much as that pains
me to say as an economist.
Mrs. Brooks. Thank you both. I yield back.
Mr. Harper. The gentlewoman yields back.
The chair will now recognize the gentleman from New York,
Mr. Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair. And welcome to our guests.
Many states and healthcare systems have implemented a
variety of programs that are intended to give consumers
additional information about the price of healthcare services
on the theory that this will allow consumers to make more
informed decisions and perhaps lower their costs. They are
listening to your concerns there.
But maybe you can develop for us a little better some of
the tools and some of the concerns that we should have.
Academics, including both of you today, have studied these
reforms to see what works, what doesn't work, and where we
might go from here. I would like to spend a few minutes
discussing with our panelists what the academic literature has
to say about these efforts.
Dr. Chernew, in your written testimony you use the example
of shopping for a car to describe why transparency doesn't
always work to bring down the cost of shopping for healthcare
and the like. Could you briefly describe what makes shopping
for healthcare different and more complicated than that which
we would utilize for products or services?
Mr. Chernew. Most products or services are bundled in a way
that you care about. So you're not buying the ingredients. When
you go buy a meal you don't price out all the individual
ingredients, it all comes together.
Healthcare, because of the history of the way in which it
developed, and because the reimbursement system was really
provider focused so you, remember, physicians and hospitals,
they're inputs to providing care. Right? But you really care
about the joint product. And so that has made it difficult to
simply give prices that have been developed from sort of a
payer perspective to consumers who are purchasing from a
different perspective. And it, broadly speaking, has been hard
for people to shop in that way. Combine that with insurance
distorting prices, the reliance on physicians, the complexity
of the problem, the salience of the problem altogether has made
it very hard for people to shop.
Mr. Tonko. And, also, you wrote in an August 2017 ``Health
Affairs'' article that ``simply offering a transparency tool is
not sufficient to meaningfully decrease healthcare prices or
spending.''
So, what did you find regarding these transparency tools?
And why were they unable to bring down the prices on their own?
Mr. Chernew. They're often offered with the narrative of
they're going to help make markets work. And because most
people don't use them, because they're complicated, they don't
make markets work that well on their own, and as a result you
don't see prices respond.
Mr. Tonko. So, could you describe what conditions would be
sufficient to meaningfully bring these costs down?
Mr. Chernew. Well, there's bringing costs overall down is
challenging. What's sufficient to how transparency tools work,
which I believe are true in a limited number of cases, is you
need to have services bundled in a way that people can
understand. You need to have benefit designs done in a way that
make people actually feel the cost at the margin. And you need
to avoid a situation in which the physicians that are making
the recommendations are, for example, owned by a system, so the
physician's going to refer within a system. And once you choose
your primary care doctor you're actually choosing a whole
referral network they use, and it's very hard to get them to
work.
So, I think Dr. King and I agree that the margins is all
valuable. There are specific cases. It's really valuable to let
people know what they might have to pay out of pocket. But as a
fundamental question about what could you all do to all of a
sudden use transparency to revolutionize the way that consumers
shop, and therefore to control healthcare spending, that's a
really tall order.
Mr. Tonko. Thank you.
And, Dr. King, your written testimony discusses the
usefulness of state efforts such as All Payer Claims Databases
to bring down prices for consumers. These databases are
intended to house a comprehensive collection of medical claims
data from both public and private payers on how much they pay
for different kinds of procedures.
How can consumers use that information in these databases
to inform their healthcare decisions? And what are the
limitations on this kind of data?
Ms. King. Thank you. So, basically the consumers wouldn't
use the database themselves. The information that's housed in
the database would then have to get put into a consumer-facing
website like what New Hampshire has on Health Costs. And that
has been demonstrated to bring down costs a little bit and
allow patients to use it.
So if you have the negotiated rate between a provider and
an insurance company in all of these All Payer Claims
Databases, and all of the utility, how we utilize healthcare,
who patients go to, what they charge, what the negotiated rates
are across the State, you could then generate really meaningful
information for patients because you would know which insurance
company they were in and what that insurance company had
negotiated its prices with providers for. And you could use
that to populate consumer-facing websites and consumer-facing
tools that would provide patients with information on their
out-of-pocket costs.
I just want to say that one of the other things that we
haven't really discussed today as a driver of costs that
affects transparency is the fact that a huge majority of our
markets for healthcare are highly concentrated. And one of the
reasons why we have such a problem with transparency is that
you have provider organizations and provider systems with a
large amount of market power and they can demand to keep their
prices secret. They can negotiate things in ways that drive up
costs and then, and then hinder transparency to find that out.
And so, if you were really looking, I think transparency is
important at the margins. I think it's useful. I think it's
generally a good thing in a capitalist society for people to
know what they're going to pay. But I also think if we want to
talk about competition and why the markets don't work you need
to look at the markets themselves and figure out that
competition is dwindling and dying because these markets are so
consolidated.
Mr. Tonko. Thank you very much. And, Mr. Chair, I yield
back my time.
Mr. Harper. The gentleman yields back.
And the chair will now recognize the gentleman from
Georgia, Mr. Carter, for 5 minutes.
Mr. Carter. Thank you, Mr. Chairman. And thank both of you
for being here.
Dr. King, I am going to let you continue on because you
have hit on the right point, the vertical integration that we
are experiencing right now. What you have is you have a PBM who
owns a pharmacy. Now the PBM and the pharmacy are talking about
buying an insurance company. Now you have got an insurance
company, Cigna, talking about buying the PBM, which also owns
the pharmacies.
The vertical integration and lack of competition is
something. And then they can hide it all throughout that
vertical integration. They don't care where they make it, as
long as they make it. But that is the problem. You hit the nail
on the head right there.
Anything else you want to add to that?
Ms. King. I just want, I just want to pile on. So, I ----
Mr. Carter. Sure.
Ms. King. I think that in some instances we're seeing
integration and it's not just vertical; right? We're seeing
horizontal integration. We're seeing vertical integration. And
now we're also starting to see cross-market integration where
hospitals are buying provider systems in other parts of the
state, other, and in other states. And the more integrated
these markets become overall, the less competition we are able
to have.
Mr. Carter. And that is the whole key. Transparency is
eminently important, no question about it. But competition is
the key as well. And being able to see that competition, we
have used the example about buying a car. I believe it is New
Hampshire who has a database, a website you can go to to
compare medical costs. That is the kind of thing we are talking
about, and that is what is going to lead to decreasing
healthcare costs.
Ms. King. Well, that's right. And if there's very little
competition in the state, or you have an entity with an extreme
amount of market power, they are able to keep prices very high,
regardless of how transparent you make them.
Mr. Carter. Right.
Ms. King. If you don't have a choice of where to go, they
can charge you whatever they want.
Mr. Carter. OK. Let me get to my part. First of all, Mr.
Chairman, I want to ask unanimous consent to submit two
letters, one from the National Community Pharmacists
Association and another from the American Pharmacists
Association for the record.
Mr. Harper. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Carter. Thank you very much.
I need to get back very quickly to a question that
Representative Barton asked about the coupons being used in
Medicare Part D. The anti-kickback, as you know, that will
prohibit that from happening. But one thing my colleagues need
to keep in mind is that a lot, most of these coupons are for
brand name drugs. And if you get outside of that formulary it
is going to end up costing taxpayer more.
And every quickly, the reason that happens is because when
a patient goes and meets their deductible, then goes into the
donut, if they increase the costs by buying the ones that are
off the formulary then they get into the catastrophic quickly,
more quickly, which means that the taxpayers are going to be
paying more for their insurance, for that patient's insurance.
It is going to end up actually costing taxpayers more.
So that is one of the reasons why the Medicare Part D CMS
does not allow that to happen in there. So I want to make sure
we got that clear.
Representative Griffith mentioned my legislation dealing
with gag clauses. Twenty-two states have implemented this thus
far. We need to implement it at the Federal level. Here we are
in America with freedom of speech, and over 30 years of
experience in working in pharmacy and I could never tell a
patient, look, if you pay for this out of your pocket it will
only cost you $7.00, but your copay is going to be $20.00. And
that is just ridiculous for us, particularly here in America,
not to be able to do that.
I wanted to talk also about PBMs and their licensure and
registration. A number of states have required PBMs to register
with their insurance commissions. And the most recent one was
Arkansas held a special session. And now they have enacted the
Arkansas Pharmacy Benefit Licensure Act where the state
insurance department requires PBMs to license within the state.
One of the things, also, we talk about pharmacies. The
number one pharmacy in America, CVS, they have more stores.
Walgreens. You know what number three is? Express Scripts with
their mail order pharmacies. Yet, they do not have to register
in each state.
Don't you think they should at least have to register in
each state, the third largest pharmacy chain in America? And
they are nothing but mail order pharmacies. Surely they should
have to register in every state.
Any comment.
Ms. King. I know very little about it but it sounds like
you're right, yes.
Mr. Carter. OK. I know.
So, anyway, Dr. King, Medicaid managed care organizations,
that is another way that we can attack some of these costs as
well because without having, without having the transparency
there to see what exactly the PBMs are charging in those, then
we are unable to control costs.
In fact, West Virginia just did away with their managed--
they carved that out and saved $30 million. In Ohio they saved
$227 million. In Kentucky they figured their costs would be
$380 million. Why can't we control that on a Federal level as
well?
We have a number of managed care organization contracts at
the Federal level. If we could control those, do you think we
could have--and had transparency in it, do you think we could
save costs there?
We could. The answer is yes. I'm sorry.
Mr. Harper. The gentleman yields back.
The chair will now recognize the gentlewoman from Illinois,
Ms. Schakowsky, for 5 minutes.
Ms. Schakowsky. Thank you.
Dr. Chernew, I have never heard a witness, though I am sure
many are thinking of it, that I wish my time were over. And I
have been chuckling over that for most of the hearing.
You mentioned the idea that pharmaceutical companies,
manufacturers can charge whatever the market will bear. But the
question is, what is the market?
We have a briefing from a Dr. Anderson from Hopkins who
said, for example, Sovaldi, that they decided that all they
really needed to make back the money that they invested in
Sovaldi, or the marketing that they do, they need 20 percent of
the market.
So, we are not talking about widgets, we are not talking
about cars, we are talking about illness, life, death. And so
if they charge, which they did, $86,000 for this cure to Hep C,
all they really care about is that if 20 percent of people who
have this really awful disease can get cured.
And so it seems to me that we ought to have a better way.
When you say charge whatever they want to make the money they
want, this isn't about free markets, this is about a very
segmented market. I just wonder if you would comment on that?
Mr. Chernew. I wrote in my written testimony that I was
going to avoid pharmaceutical markets because it raises so many
complicated issues. But since asked, I will dip my toe in.
The challenge, and I will use Sovaldi as an example, is
Sovaldi was a truly innovative drug. And all analyses suggest
at least most any value criteria you would have. And although
it may be difficult for people to swallow--that's not a pill
joke--but anyway, it turns out that the evidence suggests that
with greater incentives for prescription drug innovation you
get more innovation.
The problem is that statement should not imply that the
drug companies get a blank check. And therein lies the basic
problem.
I do not think their goal was simply to make back their R&D
money. Their goal was to make more money.
Ms. Schakowsky. Yes.
Mr. Chernew. Right? That's the goal in capitalist
societies, to make more money. And in fact they have created a
remarkably good product that for decades will benefit us and
everybody. Right?
Ms. Schakowsky. Not everybody.
Mr. Chernew. The challenge----
Ms. Schakowsky. The people who can pay for it.
Mr. Chernew. No, that's right. So the people who can't pay
for it and don't get it, they're in the same place off they
were before it got invented. So, the challenge is how to manage
the incentives for innovation, which are really important, with
the obvious egregious problems of pricing. Not simply for what
people who pay out of pocket. It's the out-of-pocket comments
that bring everybody here. But the charge, to deal with the
overall total amount of spending, and the prices, and the
volume for all of these drugs.
Ms. Schakowsky. You know what, let me stop because I have
one more----
Mr. Chernew. Thank you.
Ms. Schakowsky [continuing]. One more question about it.
But I think it is worse if you know that there is the cure
right there, that there is a cure right there and you can't get
it. I think in some ways it is worse than thinking there isn't
one.
But, again, about--OK, so you don't want to talk about
markets, but I just want to mention this. One argument is that
increased competition or more generic drugs are going to lead
to lower drug prices. But recently Elizabeth Rosenthal
described the bizarre phenomenon economists call sticky pricing
where prices of competing prescription drugs simply rise
together with each new drug that is provided.
So, we have got Novartis, a cancer drug. And Gleevec was
first listed at $26,000 in the market. And the first generic
was list priced at around $140,000 annually. And now many drugs
in the same family as Gleevec cost on average $150,000 per
year.
So, we aren't seeing. Again, markets in drugs, very
different. We are seeing an increase. So, this thought that
competition is going to drive it down and generics will drive
it down, not working always.
Mr. Chernew. Always. I agree.
So, if you look at drugs at 15 years ago we could have been
arguing about Lipitor and a whole series of other blockbuster
drugs. They've all gone generic. We buy them at Harvard,
they're bought as generic. It's a great deal. And there's a lot
of real advances.
The challenges that are presented through some of those
drugs, through biosimilars, which is a whole different issue,
becomes important, are really, really, really important. And
the issues you're raising I'm incredibly sympathetic with
because the basic problem is we've been very successful at
encouraging amazing innovation.
We haven't found a good way to make sure that that
innovation is affordable for people. And even if you solve the
problem that people are paying a lot out of pocket, the prices
getting passed through through insurance premiums create a
really fundamental challenge.
Ms. Schakowsky. OK, but I just want--and I know my time is
up--but we are seeing increases in drugs that have been on the
market for decades. They charge what the market will bear, and
that means that the prices have kept going up out of control.
So, I can't let you answer. I am sorry, I am out of time.
And you should be happy.
Mr. Harper. The gentlewoman yields back.
The chair will now recognize the gentleman from
Pennsylvania, Mr. Costello, for 5 minutes.
Mr. Costello. Thank you, Mr. Chairman.
Dr. Chernew, in your written testimony you noted that one
of the many reasons that many transparency initiatives have had
only a minimal impact on the market is because consolidation in
the healthcare markets limits choice. Consolidation in the
healthcare industry is something that is of great interest to
this committee. As Chairman Harper mentioned at the beginning
of the hearing, the O&I Subcommittee had a hearing on
consolidation in the healthcare market last February.
Do you think that there has been too much consolidation in
the healthcare market? And, if so, what impact has it had on
healthcare costs?
Second piece of the question, how does consolidation limit
the effectiveness of both private and public transparency
initiatives?
Mr. Chernew. Yes, there's too much consolidation and it's
raised the prices and spending.
And the consolidation makes it difficult for transparency
initiatives to work because they fundamentally require choice.
If there's no choice, knowing the price of an office charge
doesn't help you all that much.
The only thing I will say is don't think about transparency
as only working through consumers. Having the regulators,
having the policy commission, having journalists see the prices
can also be helpful. But by and large the more consolidation,
the harder it is to get markets to work and, therefore, the
harder it is to get transparency to work.
Mr. Costello. I have a question for you. But would you like
anything to add, Dr. King? You were shaking your head yes
before.
Ms. King. Yes. Well, I'm in vehement agreement with most of
the things he has said today.
So, I think that also transparency can help with the
consolidation problem because you can actually, if you have a
good All Payer Claims Database you can look and see how a
particular merger or acquisition over time drove up costs or
didn't drive up costs.
Did they actually gain the efficiencies they said they were
going to get when they actually merged?
Did they pass it through to consumers? You'd be able to
know that. And you'd be able to then turn around and stop
future consolidation in the markets through that.
So, I think that those work both ways.
Mr. Costello. Dr. King, thank you. In your written
testimony you highlighted how states could use healthcare
claims data reported to an APCD to examine the drivers of
healthcare costs over time, the impact of mergers,
acquisitions, and other affiliations on healthcare price and
quality, among other things, similar to what you just were
sharing with us right there.
How would the healthcare claims data reported to an APCD
give states with an APCD unique insight into the impact of M&As
that states without an APCD would not have?
Ms. King. So, currently because a lot of these private
prices are shrouded in secrecy, the attorney general doesn't
know and other state entities don't actually have the data to
examine how mergers in the past have affected prices, or they
don't have the ability to project how mergers in the future
might affect prices.
And so, if you have this enormous database of healthcare
prices over time that allows you to look at utilization
patterns, how people went, were funneled to different
providers, and the cost, you could then make much better
economic projections about how a merger might affect things in
the future. And, also, you'd be able to look back in the past
and see if they kept their promise.
Mr. Costello. Can you describe the general approaches
states have been taking regarding the pharmaceutical price
transparency bills you have seen?
Ms. King. Yes. So, states have looked at a number of
different things with regard to price to pharmaceuticals this
year. This has been the big topic among the states. They have
done everything from a lot of price, pharmaceutical price
disclosure anti-gag clauses this year.
They have also looked at pricing reports or requiring
pharmaceutical companies to submit reports at the end of the
year, annually or at some other time that basically describe
how much it cost them to produce a drug, what they spent on
development and marketing, and then what, how they're pricing
their drugs, both as an annual cost, as an individual patient
cost.
States have also focused on gag prohibitions and
disclosures, pricing reports. And that's a lot of what we've
seen with respect to pharmaceuticals. And then a lot of PBM
regulation as well, trying to promote transparency amongst the
pharmacy benefit managers.
Mr. Costello. Thank you. I will yield back.
Mr. Harper. The gentleman yields back.
I want to thank both of you for being here today, giving us
some very valuable insight and information as we tackle this
very important challenge that we have.
So, I want to thank the members that have participated in
today's hearing. And I will remind members that they have 10
business days to submit questions for the record. And should
you receive any written questions, we would ask the witnesses
to respond as quickly as possible to those questions.
The subcommittee is adjourned.
[Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]