John Locke Update / Research Brief

Lower Health Care Costs Act: Bipartisan Effort to Bring Relief to Americans

posted on in Health Care, Health Care & Human Services
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Bipartisan legislative efforts are hard to come by. Any attempt to reform America’s broken health care system is even harder. When there is a legitimate bipartisan health care reform proposal at any level of government, we should pay attention to it.

Led by the efforts of U.S. Senate Health Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murphy (D-WA), a comprehensive, bipartisan health care reform package has been assembled and introduced into the committee. Sen. Alexander said he would like to have the bill through the committee in June and onto the floor in July.

The bipartisan package of reforms was crafted after a late 2018 request from the committee chairman for health care reforms that would help lower costs. A group of right-leaning health scholars from the American Enterprise Institute and left-leaning scholars from the Brookings Institution submitted a report that contained a substantial list of proposals that undoubtedly helped inform the final committee legislation. (I wrote about this report here.)

So, what made it into the bipartisan health care reform package of the 166th Congress? I will detail a few provisions from the bill in this research update.

Surprise Billing

Surprise bills are a common phenomenon. The odds are that you, or someone you know, has fallen victim to the shortfalls of insurance networks and received one of these bills. The story usually goes something like this: You need a procedure done. You find an in-network facility to complete the procedure. Your primary physician is in-network. After the procedure is completed, you receive a bill from the anesthesiologist or another specialist who was out of network, and you are stuck with a sizable bill that your insurance won’t cover. The Alexander-Murry bill proposes three different methods of dealing with surprise bills:

  1. In-Network Guarantee. This would require every physician who works in a facility to be considered “in-network” for the insurance providers that have a contract with that facility. Physicians can either directly contract with the insurers who consider the respective facility in-network or bill the health insurer through the facility rather than sending the patient the bill.
  2. Independent Dispute Resolution. Surprise bills that exceed $750 would be eligible to be mediated by a third-party arbiter. The arbiter would be given information on median, in-network rates paid for the same procedure in the geographic area. The arbiter would have the final say, and the loser would pay for arbitration costs.
  3. Benchmark for payment. The health plan would be responsible for paying the facility a median contracted rate for the services in the geographic area.

Reducing the Prices of Prescription Drugs

High prescription drugs are a significant problem for many Americans. However, the fix to this problem is not a simple one. It’s fair to say some severe shortfalls in the patent process create opportunities for drug companies to game the system and keep competitors off the market. This legislation would attempt to tackle high drug prices by promoting more competition among companies and increasing transparency. Here are a couple of targeted areas:

  1. Generics. Generic drugs marketed to be the same as a particular brand name drug. They have the same clinical benefits and work in the same way. Through the patenting process, owners of the brand name drug often attempt to block the generic from coming to market. This bill would create new rules to limit abuse of the petition process to block access to generics. More generics on the market would promote more competition in the drug market.
  2. Biologics. Biologic drugs differ from traditional drugs in its chemical makeup. Similar to generic drugs, the bill would create new rules to ensure there isn’t unfair abuse of the system where incumbent drug makers can block the market entry of new biologics that would compete directly with their drug. For example, there would be improved access to information about marketing, licensure status, patent information, and patent exclusivity periods.

Improving Transparency in Health Care

If you step back and think about the way Americans purchase health care services compared to every other product, it’s an odd process. Patients rely on third-parties to handle all of the administration. The patient, or consumer, has very little control over payment and negotiation. Also, there are so many aspects of behind-the-scenes health care negotiating that affect patients’ out-of-pocket costs of which they are entirely unaware. More transparency in pricing and the overall health care process would serve patients well. Here are a few ways the proposed legislation would attempt to improve transparency:

  1. Ban on “gag clauses.” Gag clauses are put into insurance contracts to ban the disclosure of specific pricing information. President Trump already signed into law a bill which would ban gag clauses in pharmaceutical contracts that restrict pharmacist’s ability to tell patients when they can buy drugs cheaper without using insurance. This bill would outlaw these clauses in contracts between health plans and providers that hinder the ability of enrollees, referring providers, and plan sponsors from seeing cost and quality data.
  2. Ban on anticompetitive terms in facility and insurance contracts. Often insurers and providers will include anticompetitive terms in their contracts such as “anti-steering” or “anti-tiering,” which restrict plan sponsors from directing patients to lower cost or higher quality facilities. This bill would limit the anticompetitive nature of insurance contracts.
  3. Health plan oversight of pharmacy benefit managers (PBM). PBMs are used by plan sponsors to handle claims associated with pharmaceuticals for enrollees. There are sometimes vast differences between the price a PBM pays a pharmaceutical company and the amount charged to the insurance plan by the PBM. The process is often criticized as an extra middleman that unfairly collects rebates that aren’t passed on to customers. The bill would impose requirements for PBM to report on cost, fees, and rebates, limit their ability to charge vastly different prices than they pay, and pass on 100 percent of the rebates they receive to customers.

These are just a few of many reforms included in the Alexander-Murray bill. None of these reforms would be a silver bullet. Some of the proposals in the package of reforms are better than others. However, I am encouraged by the bipartisan acknowledgment of the need to take action. The health care sector is already one of the most highly regulated in the U.S. economy, so any reforms that stimulate competition and transparency should be beneficial to patients.

As the committee and floor debates concerning these issues continue, I will weigh in on them in more detail.

Jordan joined the Locke Foundation in the summer of 2018 as Health Care Policy Analyst. After two years in the research division, he moved over to the government affairs team. Jordan now works with state decision-makers in the public and… ...

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