Negotiating power

MARY REICHARD, HOST: It’s Tuesday, the 3rd of August, 2021.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

PAUL BUTLER, HOST: And I’m Paul Butler.

First up on The World and Everything in It, competition in healthcare.

Before leaving office this year, former President Trump implemented a hospital price transparency rule. It mandates that hospitals disclose the prices they’ve negotiated with insurance companies.

And now President Biden is strengthening that rule and adding others. WORLD’s Sarah Schweinsberg reports.

SARAH SCHWEINSBERG, REPORTER: Jennie Ayres was in a lot of pain.

AYRES: It seemed like my knee was getting worse. All I could do is walk versus you know, going to a class and exercising.

Ayres saw a specialist. He recommended a knee replacement. She scheduled her surgery at the hospital he recommended last fall. No questions asked.

AYRES: I did not shop around.

When it was all over, she got her hospital bill: $40,000 dollars.

Ayres is a part of a Christian medical sharing ministry. Her provider told her it would negotiate the bill down based on what knee replacements cost at other hospitals around the country.

The final price tag? $14,000.

Ayres says that was a learning experience. She had never known that hospital bills aren’t set in stone.

AYRES: I hadn't had a surgery to kind of know that I had negotiating power until I had my surgery. So as a cash payer, you don't realize that these big conglomerates have the ability to do that. And you do, too.

Like President Trump before him, President Biden wants more patients to realize they do have the power to negotiate prices with hospitals just like insurance companies do.

The White House also wants patients to be able to choose the hospital providing the treatment or procedure for the lowest price.

But in order to make those decisions, patients have to know what those prices are.

Cynthia Cox is a researcher at the Kaiser Family Foundation, a healthcare policy analysis group.

COX: If you went out to a restaurant, and you ordered some food, and you suddenly got a bill afterwards that your meal costs, you know, 100 times as much as you thought it would have. That's just not a fair system, and no other kind of aspect of our economy works that way, except for with health care.

Cox says besides making the healthcare market more fair, disclosing prices will also increase competition between hospitals for patients’ business. And that should drive down healthcare costs.

It’s been eight months since President Trump put the hospital price transparency rule into effect. But multiple surveys have found most hospitals haven’t complied. One found only 17 out of 100 randomly selected hospitals had posted their prices.

At the same time, most patients still don’t know the rule exists. A June Kaiser Family Foundation poll found only 14 percent of adults say they’ve researched the cost of treatment.

COX: One thing I found really interesting in our polling was that in fact, people who shopped for hospital prices were somewhat more likely to incorrectly say that there is no rule. I think it's because they had looked and didn't find the prices, you know, and and, in fact, concluded that they don't exist.

So, last month in an executive order, President Biden upped federal financial penalties for hospitals that don’t comply. One year of noncompliance could rack up a $2 million dollar fine.

The Biden administration also issued other recommendations and rules all aimed at increasing competition in healthcare.

President Biden echoed similar calls made by President Trump to lower prescription drug prices by importing cheaper medicines from Canada. He wants to work with states to create drug import plans.

The president also urged the Federal Trade Commission to ban a tactic called “pay for delay.”

That’s where pharmaceutical companies pay generic drug makers to keep their cheaper versions off the market.

Doug Badger is a scholar at the Heritage Foundation. He says banning the tactic is a good thing.

BADGER: To the extent that more generic alternatives become available to consumers, we will save money.

The Biden administration also wants the FTC to consider blocking future hospital mergers and to reexamine past ones. The administration argues the big mergers of the last decade have driven down competition and increased prices.

Doug Badger agrees.

BADGER: You get these huge hospital systems. And they dominate in in local areas. So the fact that the Biden administration sees this as a problem, and is willing to address it, is very encouraging.

But will all of these changes actually make a big difference in driving down healthcare costs?

Tom Miller studies healthcare policy at the American Enterprise Institute. He says these are important measures to fix competition in the private healthcare sector.

But he says the blame for some of the biggest issues with healthcare doesn’t lay with private hospitals, insurance companies, or pharmaceuticals. The problem is with government regulation.

MILLER: There's multiple reasons why health care prices are high. And I would certainly like to see more competition, but if you want competition, you want robust competition, you want to facilitate greater entry into these markets. Some of the regulations we have make it harder for new entrants to come in. The burden of dealing with those regulations basically keep just the major players at the table, as opposed to new entrants.

Miller says the Biden administration is promoting limited competition. It’s trying to improve the private healthcare market while at the same time pushing for the government to get more involved.

The American Rescue Plan passed in March expanded Obamacare to 7 million more people for the next two years. The president has also proposed lowering Medicare eligibility from 65 to 60, and he’s said that he’d like to create a public healthcare option although Democrats haven’t proposed any official legislation yet.

Tom Miller also says the Biden Administration is working to undo Trump-era rules that allow states to transition away from a single, government-run insurance exchange market.

So he says until full free-market competition is unleashed, little will change.

MILLER: So the Biden administration as much as it talks about consumer choice and lower prices, they won't let people go off road and buy something different, that may stray from this is the insurance that's good for you. That's the general ambition to try to simplify, standardize, and politicize the options you have in healthcare, all within the wrapper of what they think is best.

Reporting for WORLD, I’m Sarah Schweinsberg.

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