With the Biden administration now underway, Going Below The Surface is continuing to keep tabs on health care spending and policy topics. We’re committed to sharing with you the latest health care trends, research findings and policy proposals impacting our health system in 2021. Read on and be sure to share the issue with your colleagues.

Digging Deeper

An Experiment to Reduce Spending

Adding more transparency to the prices of health care services is one potential strategy to reduce costs for patients and overall system spending. This month a federal rule went into effect that requires hospitals to post the negotiated prices of “shoppable” services like knee replacements and baby deliveries. Another rule, slated to take effect in 2022, mandates health plans post specific negotiated rates and consumer cost-sharing information broken down by service. These regulations have the power to change market dynamics across the country, argued Mathematica researchers, but the impact on health care spending remains unclear.

On the surface, more transparency could pressure health plans to reduce premiums, encourage hospitals to find ways to lower costs and increase market share for more affordable providers. However, there could be some challenges. Transparency regulations could backfire. If providers with historically low prices see that others are charging more, they could raise their prices. There is also the hurdle of getting consumers to use this information. Previous studies demonstrate patients obtain care from wherever their physician suggests, even if lower-cost options exist.

Why it Matters:

Empowering patients with cost information could help them make smarter financial decisions regarding health care procedures and services. But policymakers and other stakeholders should be prepared for the potential unintended consequences of these rules. Despite the skepticism, there could be reasons to stay optimistic. Two recent surveys show consumers are interested in learning more about health care prices. Additionally, several smaller-scale price transparency initiatives have shown positive cost savings. It will be critical for policymakers and health care stakeholders to analyze the effects of the recent transparency rules after sufficient time has passed.

What We’re Reading

Not surprisingly, there are no easy answers when it comes to addressing health care costs. That’s what we gleaned from two articles that evaluated different policy proposals.

  • Basu A, Neumann PJ, Sullivan S. International Reference Pricing: A Lazy, Misguided, Bi-Partisan Plan to Lower US Drug Prices. Dec. 2, 2020. Health Affairs Blog.
    Researchers from the University of Washington and Tufts Medical Center consider various proposals to implement an international pricing index in the United States, noting that it would not produce the desired effect of sustainably lowering drug costs.
  • Johnson B, et al. How Differences Between Commercial, Medicare Professional Service Prices Could Result in Different Policy Impacts. Dec. 9, 2020. Health Care Cost Institute.
    Researchers at the Health Care Cost Institute evaluated three hypothetical policies that link commercial insurance payments to Medicare rates to address health care costs: setting rate caps, establishing a range of prices, and benchmarking prices to a percentage of Medicare’s rate. They found that in all scenarios, the impact of the policies “would vary dramatically across and within regions and greatly depend on where benchmarks are set.” The study showcases “the importance of awareness of existing dynamics of commercial prices when designing polices that would set prices based on a Medicare benchmark.”

Dialogues on Health Spending

  • KFF Digs Into Health Spending: Going Below The Surface Forum partners met for a virtual meeting in January, where they heard from Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation. Levitt shared his insights on a Peterson-Kaiser Tracker study that he spearheaded – “What Drives Health Spending in the U.S. Compared to Other Countries.”
  • Podcasts on Health Policy: Tradeoffs asked several health policy podcasters for their favorite health policy episodes of 2020. It’s worth checking out, especially if you’re looking for new content to listen to during your stay-at-home workouts.