The goal of state health care cost policy proposals

Lawmakers continued to grapple with Indiana’s high health care costs Thursday, determining what state actions would be effective in strengthening a free market.

Two national experts testified virtually before the committee to share what other states had done and examine options, but lawmakers appeared frustrated by the need for action.

in a (real) free market we wouldn’t have to do (this). In a free market, people would know how much to pay for what we don’t have, said Sen. Chris Garten, R-Charlestown. What disgusts me is that we have to get involved in this from a regulatory point of view and legislate on transparency.

Garten, leading the meeting, noted that Indiana was recently ranked the tenth worst in the nation by Forbes for health care, demonstrating the need for further study and analysis.

The study should serve as a reminder of why we are here; Hoosiers deserve better, Garten said.

California research professor Brent Fulton shared policy proposals to combat Indiana’s highly concentrated health care and insurance markets that build on his presentation from October of last year on state monopolies.

Our number one problem in America when it comes to health care is price. In fact, we visit the doctor less than in other countries, we go to the hospital less (but) when we go to the doctor, when we go to the hospital, we pay very high prices, Fulton said to the committee.

Lack of competition occurs when systems buy smaller chains, called horizontal mergers, or buy physician networks in vertical mergers.

The state could strengthen its merger review authority. Massachusetts, for example, has a commission to review mergers, and the attorney general also plays a role in ensuring competition. Following a merger, Fulton discussed ways to restrict anticompetitive contracts, increase price transparency, and institute regulation of hospital rates.

He acknowledged other options, including a state commission on health care affordability, site-neutral payments and a reassessment of the tax-exempt status of nonprofit businesses, but Fulton did not did not expand its offering because it said they had been covered elsewhere. That last point, in particular, has been the focus of Indiana economist Mike Hicks, who frequently criticizes Indiana’s largest nonprofit systems for making billions in profits that he says him, are invested in the stock market, rather than returned to the premises.

But each move has its own drawback. In terms of price transparency, Fulton noted that providers could then coordinate their prices and those offering affordable procedures could see an opportunity to increase their prices.

The role of government in the market is to ensure that the market functions properly; these markets don’t work, Fulton said. There are not a large number of sellers competing on price or quality.

State price-setting, as explored earlier this year in a bill that would set prices at 285 percent of Medicare rates, is a common practice for reducing health care costs in Europe. But choosing a price can be complex, Fulton said, and can easily go wrong if not done correctly.

Instead of setting prices at 285 percent of Medicare rates, lawmakers tasked the Family and Social Services Administration with researching where hospitals are located, even though at least one national expert said that was a good move.

I think it’s a good opportunity in my opinion for hospitals to make profit margins, because of course they have to make a certain level of profit, said Maureen Hensley-Quinn, senior director of the National Academy for Policy state health department.

However, we are seeing across the country, not just Indiana, that some hospitals are being paid by private plans as much as four to five times the Medicare rate without a clear understanding of whether this has actually helped improve quality or if it’s just raising prices.

The Health Care Cost Oversight Task Force, led by Garten, will meet once again to discuss the final report’s recommendations on November 13.