For Immediate Release (9/12/19)
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WASHINGTON – Price caps on out-of-network provider prices would cut in-network prices, according to Arielle Kane, Director of Health Care, in a new analysis from the Progressive Policy Institute (PPI). This aggressive proposal to go after the root cause of high health care spending: high prices.
Americans spend more money on health care because prices are higher here than anywhere else in the world. Our system is fraught with waste, our providers (physicians and hospitals) are paid more, and goods like biopharmaceuticals and medical devices are more expensive. On average, U.S. hospital prices are 60 percent higher than countries in Europe and physicians make twice as much as their counterparts in other advanced countries.
But despite spending almost a fifth of the U.S. economy on health care, Americans have no better outcomes (often worse) than other advanced countries. But as long as there is so much spending on health care services, there isn’t enough funding to go after other upstream solutions to improve health outcomes – things like housing, environment, education, and diet, all of which impact a person’s health status.
PPI has outlined how we can limit health care spending, encourage delivery reform, and invest the savings in upstream social services without the disruption and inflation in federal spending a single-payer system would bring.
Among many other comprehensive reforms in the plan, PPI proposes capping insurers’ out-of-network payment rates – starting at 200 percent and then steadily decreasing to 120 percent of Medicare rates. It would lower in-network prices because providers (including hospitals) have no incentive to remain outside of networks if the price they can charge is capped at levels comparable to what they would receive for delivering services to patients in network. This allow all Americans to benefit from the leverage of the government’s bargaining power without dramatically increasing government spending.
Capping out-of-network bills more broadly – not just for surprise bills – would have a huge impact on rates over all. It would place a de facto limit on all health care prices, tied to Medicare rates, and would create a stronger incentive for hospitals and doctors to negotiate value-based reimbursement arrangements with insurers.
“Endorsing price regulation in the private health care marketplace is not a step we take lightly,” said Kane. She continued, “but private insurers have demonstrated that they are unable to impose reasonable limits on what health care providers charge Americans for their services.” As a result, health insurance premiums keep climbing – along with spending on public subsidies intended to cushion working Americans from sticker shock. By capping prices above Medicare reimbursement rates, the plan would apply greater price discipline over time, so that providers wouldn’t see a precipitous decline in their earnings. More fundamentally, we believe a price cap or default price would speed the move away from fee-for-service towards a more efficient model for rewarding high-value, innovative health care.
The PPI proposal also includes many other substantial reforms – such as bolstering the ACA, allowing older Americans to buy into Medicare, modernizing Medicare for the 21st century – including prescription drug plan reform, and transition Medicaid to the delivery model of the future. “Relying on one national fee-for-service plan may hold down prices in the short-term – but without major reform to improve care delivery, it would not address needed upstream interventions or prevent a rise in utilization that could driving up costs in the long-term,” Kane said.
People are hurting in America – health care costs too much and our health care outcomes leave much to be desired. PPI’s plan could cut health costs in the commercial market by almost half if fully implemented.