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  • Washington Highlights

    House Energy and Commerce Subcommittee Examines High Health Care Costs

    Sinead Hunt, Legislative Analyst
    Allyson Perleoni, Director, Government Relations
    For Media Inquiries

    On March 28, the House Energy and Commerce Health Subcommittee held a hearing, “Lowering Unaffordable Costs: Examining Transparency and Competition in Health Care.” During the hearing, members discussed several health care policy issues including a lack of price transparency, increasing consolidation, pharmacy benefit managers, and the 340B Drug Pricing Program, while discussing potential drivers of health care spending. 

    In her opening statement, full chair Cathy McMorris Rodgers (R-Wash.) underscored the role of price transparency in reducing health care spending, promoting competition, and improving patient experience, stating, “Right now, it is nearly impossible for patients or their employers to shop for the best and most affordable care they or their employees need.” Health Subcommittee Chair Brett Guthrie (R-Ky.) echoed her concerns, stressing that rising health care costs pose “one of the single greatest threats to the overall economic security of Americans.” Also as part of his opening statement, he ascribed increased health care spending to market concentration, noting, “Rising costs have coincided with a sharp rise in consolidation within the health care industry.”  

    In his opening statement, full committee Ranking Member Frank Pallone (D-N.J.) highlighted Congress’ efforts to lower health care costs, including a three-year extension of the enhanced Affordable Care Act premium tax credits incorporated in the Inflation Reduction Act of 2022 (P.L. 117-169) [refer to Washington Highlights, Aug. 15, 2022]. “Millions of families have seen the cost of their monthly insurance premiums go down by more than 20 percent,” Pallone stated. Despite this progress, he acknowledged that affordability continues to be a challenge for Americans, citing the prevalence of “inadequate” insurance. 

    McMorris Rodgers, Pallone, and Guthrie agreed upon the need for greater price transparency and decried hospitals’ nonadherence with rules issued by the Centers for Medicare & Medicaid Services (CMS) under the Trump administration. Under current law, hospitals are required to publish, and update annually, pricing information for 300 common shoppable services in a consumer-friendly manner [refer to Washington Highlights, Nov. 14, 2019]. Pallone expressed his frustration over hospitals’ failure to comply with the final rule, calling such actions “inexcusable.” McMorris Rodgers added, “We need stronger enforcement from CMS, which to date has only levied two penalties against hospitals for not posting accurate information for patients.”  

    In a key exchange with Subcommittee Chair Guthrie, Marilyn Bartlett, senior fellow at the National Academy for State Health Policy, discussed her prior experience as chief financial officer for the Montana State Employee Health Plan. Bartlett observed, “Our biggest spend was in hospitals ... so I knew I had to hit that first,” describing the steps she took to promote price transparency and encourage plan beneficiaries to shop for health care services. Subcommittee Ranking Member Anna Eshoo (D-Calif.) reflected upon Bartlett’s response, stating, "I am somewhat skeptical that patients pick hospitals based on price. I think we go to the hospital that our insurance network covers, because their out-of-pocket costs are foremost in their mind.” To get at “how hidden costs operate,” Eshoo recommended that her colleagues invite insurers and pharmacy benefit managers to testify before the subcommittee, concluding, “that would be an important examination for us.” 

    Rep. Morgan Griffith (R-Va.) asked the witnesses if there were any barriers preventing hospitals from adhering to price transparency rules. Matthew Forge, chief executive officer of Pullman Regional Hospital, responded, “The part we haven’t talked enough about is transparency around payer strategies,” describing how price transparency renders it difficult for hospitals to cross-subsidize certain service lines against one another. “A lot of times in hospitals, you are looking at three service lines that have a profit margin that helps to support the other ones,” and as such, he stated, “hospitals have difficulty sharing that.” 

    Members also discussed whether and how the 340B Drug Pricing Program contributes to high prices and consolidation across the health care sector. In his testimony, Dr. Benedic Ippolito of the American Enterprise Institute summarized his research regarding the program’s “unintended consequences,” claiming that it incentivizes hospitals to acquire physician practices and prescribe more expensive medications. Rep. Larry Bucshon, MD, (R-Ind.) criticized the program’s lack of transparency, emphasizing, “We have no idea when the program is being exploited.” He called upon his colleagues to require additional reporting by 340B covered entities. Rep. Gus Bilirakis (R-Fla.) echoed Bucshon’s concerns about transparency within the program, citing examples of contract pharmacies that fail to pass along 340B discounts to patients. Ippolito responded, “I think that this speaks to a broader question about the 340B program, which is ... are the right institutions benefiting? Is it community access hospitals? Is it safety-net hospitals? Is it Johns Hopkins and the elite academic medical centers of the world?”  

    Rep. Doris Matsui (D-Calif.) spoke in support of the program, stating, “Some of the critics of this program seem to forget that 340B has another critical purpose: to help safety-net providers to provide critical services to underserved communities, and to empower them to stay open, especially after the strains of the past few years.” In a key exchange, Forge described the importance of the 340B program to Pullman Regional Hospital, noting that due to the hospital’s challenging financial margins, without the 340B program, they would be unable to support crucial health care activities such as staffing their emergency room or providing 24-hour access to obstetric services. “Without 340B, we would most likely have to cut some critical services to our service area, as well as lose some life-blood providers to our communities,” he stated.  

    Several members and witnesses also raised the potential for site-neutral payment policies to reduce health care costs. Sophia Tripoli, director of health care innovation for Families USA, urged the committee to consider site neutral payment policies, asserting in her testimony that, “Market inefficiencies that come from site-specific payment rates are a significant problem and if addressed could save American families and payers billions of dollars. ... Additionally, these payment differentials create a financial incentive for hospitals to consolidate [which] … leads to a growingly anticompetitive market where hospitals increase market power to demand even higher prices from commercial payers,” she stated. Tripoli noted that insurers then pass on these higher prices to consumers.  

    Rep. Annie Kuster (D-N.H.) declared her intention to introduce bipartisan legislation implementing site-neutral payment policies in the Medicare program, noting that such legislation would “give patients the peace of mind that they will pay the same amount for care regardless of where the care is provided.” The AAMC and other hospital organizations such as the American Hospital Association have historically opposed so-called site-neutral payment cuts [see Washington Highlights, Oct. 30, 2015].