[Senate Hearing 113-243]
[From the U.S. Government Publishing Office]
S. Hrg. 113-243
HIGH PRICES, LOW TRANSPARENCY:
THE BITTER PILL OF HEALTH CARE COSTS
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HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 18, 2013
__________
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland ROB PORTMAN, Ohio
SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania
Amber Cottle, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
WITNESSES
Brill, Steven, J.D., contributing editor, Time magazine, New
York, NY....................................................... 5
Delbanco, Suzanne, Ph.D., executive director, Catalyst for
Payment Reform, San Francisco, CA.............................. 6
Ginsburg, Paul, Ph.D., president, Center for Studying Health
System Change, Washington, DC.................................. 8
Colella, Giovanni, M.D., CEO and co-founder, Castlight Health,
San Francisco, CA.............................................. 9
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 43
Brill, Steven, J.D.:
Testimony.................................................... 5
Prepared statement........................................... 45
Colella, Giovanni, M.D.:
Testimony.................................................... 9
Prepared statement........................................... 51
Delbanco, Suzanne, Ph.D.:
Testimony.................................................... 6
Prepared statement with attachments.......................... 59
Ginsburg, Paul, Ph.D.:
Testimony.................................................... 8
Prepared statement........................................... 142
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 148
Communications
American Hospital Association.................................... 151
Federation of American Hospitals................................. 155
(iii)
HIGH PRICES, LOW TRANSPARENCY:
THE BITTER PILL OF HEALTH CARE COSTS
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TUESDAY, JUNE 18, 2013
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:03
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus (chairman of the committee) presiding.
Present: Senators Rockefeller, Wyden, Schumer, Nelson,
Menendez, Brown, Bennet, Casey, Hatch, Crapo, Thune, Burr, and
Toomey.
Also present: Democratic Staff: Mac Campbell, General
Counsel; David Schwartz, Chief Health Counsel; Tony Clapsis,
Professional Staff Member; and Karen Fisher, Professional Staff
Member. Republican Staff: Kristin Welsh, Health Policy Advisor.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
President Franklin Roosevelt once said that the best way to
address a problem is, ``In the cold light of day, to analyze
it, to ask questions, to call for answers, to use every
knowledge, every science we possess, to apply common sense.''
Journalist Steven Brill's March 4th Time magazine article,
``The Bitter Pill: Why Medical Bills Are Killing Us,'' detailed
the problem of skyrocketing health care bills in the cold light
of day. We are fortunate to have Mr. Brill with us today to
analyze the problem, to use knowledge, and to apply common
sense.
Mr. Brill shares the stories of uninsured and under-insured
Americans who survived life-threatening diseases, but their
lives were nearly ruined by medical bills they could not
afford. We learned about Sean Recchi from Ohio. Sean was
diagnosed with non-Hodgkins lymphoma last year at the age of
42.
Sean and his wife had just started their own business and
were only able to afford a limited health insurance plan, but
the hospital did not accept his discount insurance. So the
hospital made Sean pay nearly $84,000 in advance for a
treatment plan and an initial dose of chemotherapy.
Sean was billed off the hospital's internal list price,
known as the ``chargemaster.'' The chargemaster is like the
sticker price of a new car: it is inflated. Few would ever pay
it. In the case of hospitals, the list price is not just a 5-,
10-, or 15-percent mark-up; it could be 100 times higher.
But, unlike new cars, some people have no choice but to pay
the chargemaster price. Who are these people? The uninsured and
the under-insured, people like Sean Recchi. To start receiving
lifesaving care, Sean needed to pay 170 percent of the average
American's salary to a hospital, a nonprofit hospital, and that
was just for his first treatment. Mr. Brill's article shines a
light on the little-known chargemaster system used by America's
hospitals.
Mr. Brill also tells the story of Rebecca and Scott S., a
couple in their 50s living near Dallas. One day last year Scott
was having trouble breathing. Rebecca raced him to the
hospital. She thought he was about to die. Scott stayed in the
hospital for about 32 days until his pneumonia was brought
under control. Rebecca and Scott never imagined that this near-
death experience would wipe out their life's savings. They
exceeded their insurance annual limit and were left with a
$313,000 bill.
Thanks to health reform, these stories will soon be a thing
of the past. The Affordable Care Act will ensure heartbreaking
stories like Scott's and Sean's are no longer the norm. The law
got rid of lifetime limits, and by next year the law will
eliminate annual limits as well. Families like Rebecca and
Scott's will no longer face crippling debt as a result of
illness. Insurance companies will be required to cover the
medical services they need.
By 2016, the law will also provide coverage to 26 million
Americans who were previously uninsured. The health reform law
also prevents hospitals from over-billing uninsured patients
using inflated chargemaster prices. The administration needs to
act quickly to finalize the regulations related to this
provision.
The Affordable Care Act also helped increase transparency
of what hospitals charge Medicare. I applaud Medicare for
releasing chargemaster data on inpatient and outpatient
hospital stays over the last 2 months. We need to build on this
and take a comprehensive look at transparency from the
perspective of the consumer.
Some innovative firms like Castlight Health and Change
Healthcare are doing just this: they are pioneering analytical
tools that can zero in on meaningful pricing information. These
tools can help Americans be smarter consumers. They can help
employers and plans form better partnerships with providers.
They can help keep costs down. Unfortunately, these tools are
not widely available, however--not yet. I hope they will be
soon--to the average consumer.
While increased transparency has the potential to change
behavior, we will also expose the real thrust of Mr. Brill's
article: health care prices are too high in the United States.
Today's hearing will explore the causes of these high prices.
Specifically, I hope we can examine the consolidation of
hospitals and physicians. The practice can often help produce
more integrated care, but consolidation can also lead to higher
prices for patients.
I also hope to look at the medical device sector that often
reaps record-high profits, including gross profit margins
approaching 75 percent. We need to see if barriers exist that
prevent hospitals from more aggressively bargaining for lower
prices. If they do, we need to tear them down.
This hearing is an opportunity to start working through
these issues. We know there is a problem. It has been portrayed
in the cold light of day by Mr. Brill. We are here, as
President Roosevelt urged, to ask the questions, to analyze the
problem. So let us apply a little common sense. Let us continue
to make health care more transparent and affordable. And let us
not stop working until we finish the job we started with health
reform.
I look forward to our witnesses. They have spent a lot of
time thinking about this, and I know they will have a lot to
say.
[The prepared statement of Chairman Baucus appears in the
appendix.]
The Chairman. Senator Hatch?
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Thank you, Mr. Chairman, for convening this
hearing this morning. To be honest, I am not sure where to
begin. As we all know, the original impetus for this hearing
was the recent article in Time magazine about the costs
associated with health care, Mr. Brill's article.
While that article did not present much in the way of new
information, he reminded all of us how complicated our health
care system is and how our system of fee-for-service
reimbursement has resulted in tremendous cost growth over the
last 2 decades.
Congress has had discussions about the cost of health care
for years. Unfortunately, I think the President's health care
law missed a real opportunity to address these issues. We know
that there are many factors that drive up the cost of care,
some appropriate and some not.
Those of us who got through the more than 35 pages of the
Time article know that each sector of the health care industry
must play a part if we are going to be successful in creating a
more rational and affordable system.
Some have suggested comparing purchasing decisions in our
health care system to those of other industries, such as
airlines, cars, or hotels. With those types of purchases,
websites and other avenues exist that allow consumers to
readily find price information and customer reviews.
While I agree this is a very rational way to shop, we have
to acknowledge that health care is very different. Many factors
go into pricing health care, factors such as specialty of the
provider, severity of the patient condition, level of resource
use, et cetera. Different payers reimburse at different levels.
As many have noted, we have one of the best health care
systems in the world, but there is a significant debate as to
whether our outcomes are good enough to justify all the costs.
This year, Americans will spend $2.8 trillion on health
care, and, of that, Medicare will spend $800 billion. In
Congress, we tend to focus mostly on spending in Medicare and
other Federal programs, but the enormous amount spent in the
overall health care system needs to be examined.
For employers who provide coverage to their employees, the
rising cost of goods and services that make up our health care
system are very real. Increased costs mean less money that can
be spent on wages or other benefits and, perhaps more
importantly, less money to spend on hiring additional
employees. For individuals, as the costs continue to increase
and employers have to scale back, their out-of-pocket health
care costs will only go up.
The issue that most directly affects people, whether they
have health insurance or not, is their out-of-pocket costs.
Most people are not interested in irrelevant hospital
chargemasters or the details of health plan negotiations; they
simply want to know what they will be paying themselves at the
end of the day.
For savvy consumers who will spend time up front
researching costs and quality data, they want easy-to-
understand information to help them make decisions. For others,
it is as simple as receiving a bill that is, as they say,
patient-friendly.
As I stated, this is a very complicated issue, and many
factors need to be considered. Most of us would agree that
competition in health care is generally a good thing.
Hospitals, physicians, suppliers, and payers should all compete
on quality and price, and consumers should benefit from this.
However, in many parts of the country, consolidation, whether
it is provider or payer consolidation, has often led to higher
prices without better quality outcomes.
Mr. Chairman, I think this is an area that is worth further
exploration in the future. Many of the policies that Congress
has enacted, like for example Accountable Care Organizations,
bundled payments, or health information technology
requirements, lead to greater consolidation.
It is important that we know the consequences of some of
these policies. I also believe, as a former medical liability
defense lawyer, that medical liability costs are driving an
awful lot of the costs that are eating us alive in our society
today and that most of the cases that are brought are basically
frivolous, to get the defense costs, which are enormous.
Lastly, let me echo the point made in Mr. Brill's article
about the cost of defensive medicine. As the article stated,
much of the high cost of health care is due to over-utilization
of services as a means of protecting the physician against
future litigation. That is what we advised when we saw this
influx of medical liability cases when they changed the basic
laws to make every case a case that goes to the jury.
Physicians have been very, very concerned about future
litigation. In light of this fact, I hope the Congress will
work to pass legislation to address medical liability reform.
This was another missed opportunity in Obamacare, but it is not
too late to fix that.
Chairman Baucus, thank you once again for convening this
hearing today. I look forward to hearing from our witnesses and
learning about how we can harness the wealth of information
available to citizens to help them to make good decisions.
These consumers need that so they can make good decisions about
their health care.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator, very much.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. Today our four witnesses are as follows. Mr.
Steven Brill is the author of the Time magazine article,
``Bitter Pill: Why Medical Bills Are Killing Us.'' Next is Dr.
Suzanne Delbanco, executive director of Catalyst for Payment
Reform. Welcome. Dr. Paul Ginsburg--welcome back, Dr.
Ginsburg--is president of the Center for Studying Health System
Change. And Dr. Giovanni Colella is CEO and Co-Founder of
Castlight Health.
We will begin with you, Mr. Brill. You are the star witness
here. Our usual practice is for statements to be automatically
included in the record and then for you to summarize your
statements cogently. Do not pull any punches. Tell us what you
think.
Mr. Brill, go ahead.
STATEMENT OF STEVEN BRILL, J.D., CONTRIBUTING EDITOR, TIME
MAGAZINE, NEW YORK, NY
Mr. Brill. Thank you for inviting me, Mr. Chairman and Mr.
Ranking Member, to discuss what I found when I dissected seven
medical bills, as you know, line by line to see why health care
costs so much in the United States.
I found that, by any definition, this is no one's idea of a
functioning marketplace. In a functioning marketplace, prices
are based on something that is explainable, whether it is the
cost of producing the product, or the laws of supply and
demand, or the quality of the product.
In this marketplace, no one can explain a hospital's charge
of $77 for a box of gauze pads. No one can explain an $87,000
bill for a few hours of outpatient care. That bill included $3
for the magic marker that marked the spot where a
neurostimulator would be inserted into the patient's back. He
was then charged $49,000 for the neurostimulator, which cost
the hospital about $19,000, and it was paid to a manufacturer
whose gross profit margin is nearly double Apple's.
No one can explain why a school bus driver was charged, and
sued into paying, $9,400 after she fell and spent 2 hours in
the Bridgeport Hospital E.R., where among the charges was $239
for a blood test that Medicare, which pays hospitals based on
their actual costs, would pay $13.94 for.
No one can explain anything about what I discovered was a
massive, out-of-control internal price list called the
chargemaster. All hospitals and labs have one, but they vary
wildly and have nothing to do with quality.
The reason no one can explain any of this is simple: nobody
has to, because this is not a functioning marketplace. It is a
casino where the house holds all the cards. That school bus
driver did not wake up one morning and say to herself, oh, I
wonder what they have on sale over at the emergency room today;
maybe I will go have a look. When she became that hospital's
customer, she not only had no price information, she also had
no choice.
The result is an economy a world apart from the economy
that the rest of us live in. While things have been tough for
most Americans in the last half decade, those who run hospitals
or sell CT scans or drugs or medical devices have thrived, as
if living in an alternate universe.
In hundreds of cities and towns, tax-exempt, ostensibly
nonprofit hospitals have become the community's most profitable
businesses, often presided over by the region's most richly
compensated executives. So that is what I saw when I followed
the money.
What can we do about it? Well, the first step, obviously,
must be transparency. None of this will change until we can see
it all, so that those involved can be asked to answer for those
salaries, those out-sized profit margins on drugs and medical
devices, and, above all, the bizarre differences in prices
everywhere you look.
But transparency can only go so far. Let us consider the
man who was asked to pay $13,702 for his first transfusion of
the cancer drug that he desperately needed. Now, suppose he
knew that the drug only cost the ostensibly nonprofit hospital
maybe $3,500 and that it cost the drug company a few hundred
dollars.
Suppose he even knew that among the $71,000 in other
charges, he was getting soaked for $77 for a box of gauze pads
or $15,000 for lab tests for which Medicare would pay just a
few hundred dollars. What if knew all that? So what? What could
he do? He could feel the tumor growing in his chest, his wife
told me, and he was desperate for his check to clear.
In fact, they kept him waiting downstairs for his
transfusion until it did clear. So we need more than
transparency. My written testimony, as well as the Time
article, make a lot of suggestions in that regard, but I will
close by emphasizing again that, while transparency starts the
conversation about prices that we did not have in the debate
over Obamacare, it is only a start.
I might add that Obamacare itself does nothing about these
prices, nothing to solve this problem--zero. Once we follow the
money in this lopsided sellers' marketplace, we have to act to
stem the flow by doing something about these prices.
Thank you.
The Chairman. Thank you very much, Mr. Brill.
[The prepared statement of Mr. Brill appears in the
appendix.]
The Chairman. Dr. Delbanco?
STATEMENT OF SUZANNE DELBANCO, Ph.D., EXECUTIVE DIRECTOR,
CATALYST FOR PAYMENT REFORM, SAN FRANCISCO, CA
Dr. Delbanco. Thank you. Chairman Baucus, Ranking Member
Hatch, and distinguished committee members, I am here to tell
you that employers and consumers need price transparency. While
I am currently executive director of Catalyst for Payment
Reform, I was the founding CEO of another nonprofit, the
Leapfrog Group, which pioneered the public reporting of
hospital quality and safety information, so transparency in
health care is an issue I have been working on for 13 years.
Catalyst for Payment Reform is an independent nonprofit
organization working on behalf of large employers and other
health care purchasers to promote a higher-value health care
system in the United States. Currently, CPR has 30 members,
including Boeing, Dow Chemical Company, Safeway, as well as
eight State agencies, including 4 Medicaid agencies.
CPR designated price transparency as a top priority because
we cannot imagine a high-value health care system without it.
As you know, employers and other health care purchasers, as
well as consumers, are facing rising health care costs.
In response, employers are asking their beneficiaries to
take on a greater share of those costs, as well as designing
benefit plans that push users toward more efficient, higher-
quality choices. Purchasers believe that pressure from
consumers is an under-utilized lever, but consumers need
information to make good decisions. Consumers do not expect
prices for the same service to vary so much. One example was
found that the price for colonoscopy varied 10-fold within one
market.
Furthermore, employers in health plans cannot implement
some of those promising strategies to stem costs without price
transparency. Something called reference pricing is an example
of such an approach. Reference pricing sets a standard price
for a drug, procedure, or service, and requires health plan
members to pay any amount above it.
For example, CALPERS, California's Public Employee
Retirement System, set a reference price of $30,000 for hip and
knee replacements. If a patient chooses to seek a hip or knee
replacement from a more expensive facility, they do have to pay
the difference. CALPERS has said that this program has reduced
its costs in this area by 30 percent.
This approach enables purchasers to let providers know that
their unwarranted price variation is no longer going to be
tolerated and also gives them a chance to engage consumers in
making
higher-value choices.
There are many efforts to promote price transparency today.
As you know, CMS provides an online tool that provides
beneficiaries with estimated out-of-pocket drug costs, and of
course CMS just released some hospital charge information.
Thirty-four States also require reporting of hospital charges
or reimbursement rates.
But, in a report card on State price transparency laws that
we co-authored, we found that most State laws fall far short of
making sure that consumers get the information they need. Many
challenges remain.
Some health care providers prohibit health plans from
sharing any information about what they get paid. While health
plans are working to phase out these agreements--and they are
relatively rare--in the markets that they affect, they can
leave gaping holes in the information that consumers need.
Another barrier is that some health plans feel the
information about what they pay providers is proprietary,
making employers have to rely on the health plan to inform
consumers even if they feel another vendor is better suited to
do it.
CPR has been supporting its members to become a critical
mass, pushing for health plans and providers to remove these
barriers. We supply members with questions to ask prospective
health plan partners and model terms for their contracts for
the plans. We facilitate meetings for them to discuss price
transparency on a quarterly basis with some of the Nation's
largest plans.
We have also outlined specifications for how we think price
information can best be conveyed to consumers. One of today's
biggest shortcomings is the separation of price and quality
information, making it hard for consumers to choose the best
overall choice.
The Federal Government could facilitate transparency in a
variety of ways. First, it could share more charge, payment,
and quality information on a broader range of services and
providers.
Second, it could make sure that its own consumer
transparency tools, like hospitalcompare.gov, incorporate the
features that CPR highlights in its specifications as being
important.
Third, the Federal Government could, through the federally
facilitated exchanges, insist on price transparency from the
qualified health plans. CPR's model contract language could
help here.
Lastly, to help employers meet their fiduciary obligations,
the Federal Government could ensure that employers have access
to their own claims data for use in consumer transparency
tools.
Again, I am here to tell you that employers and consumers
need price transparency in health care. Catalyst for Payment
Reform commends the Senate Finance Committee for delving into
this issue. Thank you.
The Chairman. Thank you, Dr. Delbanco.
[The prepared statement of Dr. Delbanco appears in the
appendix.]
The Chairman. Dr. Ginsburg, you are next.
STATEMENT OF PAUL GINSBURG, Ph.D., PRESIDENT, CENTER FOR
STUDYING HEALTH SYSTEM CHANGE, WASHINGTON, DC
Dr. Ginsburg. Yes. Mr. Chairman, Senator Hatch, members of
the committee, I appreciate the opportunity to talk about price
transparency. I particularly will focus on policy initiatives.
Many policy activities related to health price transparency
have missed the mark. They are focused on transparency for
transparency's sake rather than on getting lower prices for
consumers, which is what I believe the principal goal should
be.
The best that could be said is that releases of price data
have increased awareness of policymakers, employers, and the
public concerning how widely prices vary from one area to
another and across providers in a single market.
But this accomplishment is limited when releases focus on
billed charges which have little relationship to the prices
that are actually paid on behalf of virtually all patients. The
recent CMS release of hospital charge data suffers from this
problem.
A notable exception are the various reports from the
Massachusetts Attorney General that released data on what
private insurers pay each hospital. These releases have in fact
led to State policies that have facilitated insurance designs
that reward consumers that use lower-priced hospitals.
But the data releases alone will not reduce price
variation. Policymakers must either take steps to make health
care markets more competitive or regulate prices, and large
employers need to change the design of their benefits.
I also worry about transparency proposals that advocate
publication of the specifics of contracts between insurers and
providers. Antitrust policies throughout the world seek to
prohibit the publication of contract prices in markets that are
concentrated, because of the risks that sunshine will lead to
higher prices. These risks can be reduced substantially if
discretion is used to shield the details.
The key to price transparency leading to lower prices for
consumers is benefit designs that offer rewards to them. Not
only will such approaches yield savings to those who choose
lower-priced providers, but, if enough are involved, incentives
for providers to improve their value will be created.
High-deductible plans provide such incentives for
outpatient care, telling patients the prices that they will pay
under their plan when using different providers--of course,
others on the panel are discussing this--but they have little
impact on choosing hospitals for inpatient care, because most
enrollees exceed their high deductibles when they go into the
hospital.
I believe the greatest potential for obtaining lower prices
comes from approaches where purchasers and health plans, rather
than report prices to enrollees, analyze the complex data on
costs and quality and provide simple incentives for enrollees
to choose
higher-value providers.
We see this approach in tiered network designs that major
insurers are pursuing in Massachusetts and some other places.
In fact, in Massachusetts, enrollees tend to pay three
different deductible amounts for hospital care according to the
tier of the hospital they choose.
We see this approach in reference pricing, such as the
initiative of CALPERS that Dr. Delbanco mentioned for hip and
knee replacements. These approaches are less transparent than
publishing prices for services, but they are likely a lot more
effective.
So what should policymakers do to get lower prices for
health care? Well, two steps were already taken that will
contribute a lot, and I am referring to the Cadillac tax and
the structure of the premium tax credits in the Affordable Care
Act, because these provisions will put a lot of pressure on
premiums, and the result will be benefit designs that encourage
enrollees to choose providers on the basis of value.
Providing employers, insurers, and consumer organizations
with better data on provider practice patterns, such as the
legislation introduced today by Senators Grassley and Wyden to
make Medicare data more accessible, would accomplish this.
Also, there is opportunity to prohibit some anti-
competitive contracting practices that block approaches, such
as tiered networks and reference prices. Thank you very much.
The Chairman. Thanks, Dr. Ginsburg, very much.
[The prepared statement of Dr. Ginsburg appears in the
appendix.]
The Chairman. Dr. Colella?
STATEMENT OF GIOVANNI COLELLA, M.D., CEO AND
CO-FOUNDER, CASTLIGHT HEALTH, SAN FRANCISCO, CA
Dr. Colella. Thank you very much. Chairman Baucus, Ranking
Member Hatch, distinguished members of the committee, thank you
very much for inviting me today. It is an honor and a pleasure
for me to be here.
Almost 29 years ago to the day, I came to this country to
complete my medical training. While I have since then become an
interpreter, my goal and my dream has remained the same: I want
to improve the health and the well-being of my fellow
Americans.
I first became aware of price transparency, and admittedly
a little bit obsessed with it, a few years ago when my mother,
who was very sick and ill, needed medical care. As hard as I
tried, looking everywhere, me, a trained physician, could not
get the basic facts about the quality and the cost for her
care.
I could not determine if a name-brand hospital, a famous
medical center, was indeed the best place for my mother to
receive care. On top of this, I was unable to determine how
much that care might cost. All this surprised me.
Now, if I go shopping for a car, I know the price; it is
right there. It is on the window. I see it right away, and
there is plenty of information on the quality of this. Yet,
when it comes to our health care system, it is virtually
impossible to find out cost and quality of what I am buying.
Now, this makes absolutely no sense. Consumers ultimately
end up paying more and getting worse care, and we as a country
end up spending more on health care than we need to. Years of
study and real-life experience demonstrate a huge variation in
price and quality across our country, across individual States,
across individual cities, and, even more, across individual
doctors practicing in the same hospital.
Now, let me be clear. We can spend much less as a Nation
than we currently do on health care and still receive much
higher quality care. This is because, when it comes to health
care, there is absolutely no correlation between price and
quality. Let me be more specific: almost no correlation between
price and quality.
Now, let me use an example for this. The price of care for
a typical pregnancy for a commercially insured woman in the
city of Chicago--the most expensive hospital in Chicago
actually has the poorest quality rating, while the least
expensive hospital has the best quality. The difference in
price between them is almost $12,000, or more than 300 percent.
Now, this is real money, real unnecessary costs for her
employer and eventually for the country. What does she get for
the bigger bill? Lower quality care. Fortunately, we have found
that, when given data on price and quality in a user-friendly
way, consumers use it to make smarter health care decisions.
When they do, they and their employers save money.
With these benefits in mind, I believe strongly that we
need to do much more as a Nation to bring transparency and
competition to health care so that the health care system can
deliver better value to consumers. We must start by unleashing
the cost and quality data that we already collect.
First, all purchasers of health care should have unfettered
access to their claims data, which are their receipts, to
enable price and quality transparency initiatives.
Second, all payers should be required to submit claims to
publicly available, privacy-protected data repositories for
quality measurements and reporting.
Third, the Federal Government should relax qualified entity
restrictions on access to Medicare data.
Fourth, Medicare, which is the biggest payer in the United
States, recently released prices for 130 procedures. That is
great, but it should do the same for the more than 1,000
additional procedures in its database.
Fifth, Medicare should make physicians' quality data widely
accessible. The anticipated release of this data has already
been delayed by half a year.
Finally, all States or the Congress should pass measures
that prohibit health plans and providers from entering into
contracts that prevent disclosures of providers' price and
quality.
By taking these small but bold and meaningful steps towards
more transparency, you will all go a long way to bringing
market discipline and better value to the American people.
Thank you all for the opportunity to speak with you. It is
an honor and a pleasure to be here. I will be happy now to
answer all your questions.
The Chairman. Thank you very much, Doctor.
[The prepared statement of Dr. Colella appears in the
appendix.]
The Chairman. I will start with you, Mr. Brill. You
mentioned that you outlined the problem by exposing the
chargemaster phenomenon, but you also said the ACA does not
really solve it. There are a couple of ideas here, and maybe
there are a couple of provisions that might help a little bit,
the Cadillac tax for one. But your thoughts? You have thought a
lot about this. What is the solution here? We hear that
transparency disclosure alone may not be sufficient. So, your
thoughts?
Mr. Brill. Correct. Thank you for the question. I guess
what I meant by that is that it seems counterintuitive to me,
if the issue is high prices and the issue is the market power
of the providers who are able to charge the high prices, that
injecting more competition into the entities that have to pay
the prices, the insurance companies, is going to help things.
I mean, if you take the New Haven, CT area, where Yale New
Haven has bought up pretty much everything, if you are an
insurance company and you want to sell health insurance in and
around that area, you have to pay whatever Yale New Haven is
going to charge.
Now, the result of that happens to be that the head of the
hospital makes 160 percent of what the president of the
university makes. That is just a world that is upside down to
me. I do not think that a tax on insurance premiums or a lot of
the other efforts to inject more competition into the insurance
market deal with that fundamental issue, which is that the
price of everything is just way too high.
Now, as a journalist, my theory about why that was not
attacked with Obamacare was that, if you do not mess with the
profits of the key players in the industry, you get to get your
bill through Congress. To me, that is what happened.
The Chairman. So you are basically suggesting that
transparency alone is insufficient because many of these
hospitals have such great market power.
Mr. Brill. Hospitals have market power, the drug companies
have market power. That guy needed that cancer drug.
The Chairman. Right. So what do we do about that? Let us
assume for the sake of discussion that that is accurate. That
is, there is very significant market power. In fact, I saw an
article in one of the papers just a week ago that made that
very point that you are making, that the drug companies have
market power that allows them to charge higher prices than what
most people think the charges should be.
What do we do about that? Just quickly, then I am going to
ask the others that same question.
Mr. Brill. All right. Very quickly. I think there is
another area of transparency, with all due respect to the
members of this committee, we need to look at when we wonder
about why those issues are not dealt with legislatively.
Since 2007, the health care industry has contributed over
$32 million to the campaigns and PACS of the members of just
this committee, with it split basically evenly on both sides
the aisle. The member receiving the least got just over half a
million, and the member receiving the most got over $2.5
million.
Maybe, in the interest of transparency, reporters covering
hearings like this ought to list the contributions whenever an
elected official holds hearings like this or votes on issues
like this. Maybe even C-SPAN could put it as a chyron under
each member's name, how much money they got.
The Chairman. Well, a lot is being disclosed these days,
which is almost all good. But putting that issue aside for a
moment, you are still suggesting that a concentration of market
power is the essential problem here and the effect of which
causes these high prices.
Mr. Brill. Well, in part it is concentration, in part it is
that it is not a market. In other words, no one buys health
care voluntarily, with the exception of maybe plastic surgery,
maybe Lasik surgery.
The Chairman. My time is expiring. I would like you to
answer, if you could, Dr. Delbanco.
Dr. Delbanco. So Catalyst for Payment Reform held a
national summit on provider market power last week in
Washington, DC, and Paul Ginsburg was one of our expert
speakers, so I think we can both comment on this. Market power
certainly enables providers to not be transparent about their
prices. It also enables them to charge higher prices, and many
think that price is the leading driver of health care costs
right now.
So, when you think about the role of price transparency in
trying to enhance competition among providers, if you are a
purchaser like the members of our organization and you do not
know what the price differences are across your choices, or as
a consumer you do not know, you may mistakenly believe that
higher prices are higher quality.
If we have greater transparency in both cost and quality,
then I think we can come up with all kinds of benefit designs
and networks of providers which people have access to that are
higher-value options. Our members are beginning to experiment
with this. There was the reference pricing example; there is
the tier network example in Massachusetts where the State has
cut out some of the highest-priced providers.
The Chairman. Right. Very quickly, let me just ask the
others, is reference pricing a good thing? I know it is not
going to solve everything, but is that something that makes
some sense? Does anybody disagree with that?
Dr. Ginsburg. No, I think it is a good example of how to
change a benefit design so that consumers, for the first time,
care about which provider they go to. In a sense, a lot of the
provider market power comes from the fact that the typical
insurance that people have leaves the patient indifferent about
which provider they go to, the very expensive one or less
expensive one.
I think the challenge is to not raise deductibles so much.
They focus on whether to get care or not, but within the
context of a benefit design, saying you will pay less to go
here. Even in New Haven, CT, where, as Mr. Brill mentioned,
there is just one hospital, I am sure there are some
freestanding outpatient facilities, physician offices, that
provide MRIs and offer colonoscopies.
So in a sense I do not think there are that many areas
where there is absolutely no competition, but the key thing is
for people to have incentives in their insurance that get them
to think about this issue.
The Chairman. Thank you. My time is way expired.
Senator Hatch?
Senator Hatch. Well, thank you, Mr. Chairman.
Mr. Brill, I have followed you for years, and I have a lot
of respect for you and your tough reporting.
Mr. Brill. Thank you, sir.
Senator Hatch. There is no question, this article is very,
very tough. For years, though, we have known that our health
care system lacks transparency and that the uninsured and
under-insured do receive staggering health care bills. So why
write this article now? What is different now, say, than 5 to
10 years ago?
Mr. Brill. Well, maybe I am just late to the party. It
could be that.
Senator Hatch. No, I want the real answer.
Mr. Brill. Well, that is part of it. The other part of it
is, I think, when you look at something, as I did, that is
rapidly approaching a fifth of our economy and is so much now a
part of people's lives because deductibles are higher, co-pays
are higher, and everything else, it begs to be looked at.
I mean, I guess I can put it to you this way. I remember
listening to a debate on one of the cable shows about, should
we pay a million dollars to pay for the last 6 months of life
of a terminal patient? It is an anguished debate, a really hard
question. The way my mind works, I kept saying to myself, why
does it cost a million dollars? Who is getting that money?
It turns out that, when you look at it, it is this
alternate universe where the hospital CEOs are all rich,
everybody who works in a hospital makes a lot of money, the
drug companies' profits are higher than Apple's and higher than
the software companies that we all admire, ambulances have
become a private equity play. Something is going on here.
So it is a combination of a market that is not accountable,
the regulations are not doing what they are supposed to do, and
the incentives are not rightly placed. I think all my
colleagues here have all the right answers, because we need
multiple answers.
Senator Hatch. And I think most of us realize we are not
doing what we should do, either. I mean, there have to be some
changes in the Congress as far as getting this under control.
But I appreciate your testimony.
Dr. Ginsburg, I have great respect for you as well, and for
all four of you. I think this has been terrific. I compliment
the chairman for having you all come. But, Dr. Ginsburg, I am
interested in your thoughts surrounding how we move forward in
providing better information for consumers.
I am concerned that policymakers have focused too much on
the amount of information to make available rather than the
reliability and the usefulness of that information. Where
should we focus our efforts in making sure that the right
information is being released?
Dr. Ginsburg. Senator Hatch, I believe the best opportunity
to inform consumers on issues of value is through insurers and
employers. I think what government can do is, sometimes,
provide the raw materials for insurers and employers to make
their calculations so that they can draw on the experience of
Medicare in doing that, but I think that this production of
information is something that has to be customized to
consumers; it has to reflect the details of their particular
health plan. I think insurers and employers are best positioned
to do that.
Senator Hatch. Thank you.
Dr. Colella, in your testimony you state that your company
has an 80-percent take-up rate among enrollees. Now, that
strikes me as incredibly high and frankly a little hard to
believe. Are initial enrollment activities, such as simply
signing up for coverage, included in this percentage?
Dr. Colella. Yes, Senator. Well, sorry. Can you repeat the
question? I want to make sure I understand it.
Senator Hatch. Yes. I am concerned about, in your testimony
you stated that your company has an 80-percent take-up rate
among enrollees.
Dr. Colella. Correct.
Senator Hatch. That does seem to be awfully high to me. I
find it a little hard to believe as well. But are initial
enrollment activities, such as simply signing up for coverage--
--
Dr. Colella. Oh, no. Absolutely not. Sorry.
Senator Hatch [continuing]. Are they included in that
percentage?
Dr. Colella. No. We are very proud of our uptake. Yes, we
focus, in our company, a lot of resources to making sure that
engagement happens. In order to do that, we have built an
entire product team around consumerism and understanding how
consumers use applications.
I joke about the fact that, when we started the company,
everybody we hired in product actually did not come from health
care, because we wanted people who really understand how
consumers engage with technologies like ours. So the 80
percent, which is not with every employer but across the board
is around those numbers, is a number we feel very proud of and
has nothing to do with the enrollment in the health plan. It is
the enrollment in the Castlight system.
Senator Hatch. Well, thank you.
Mr. Chairman, I have one more question for Dr. Delbanco. We
have heard from hospitals that chargemasters do not matter and
that attention should be placed on the rates negotiated between
providers and insurers. If chargemasters are only marginally
relevant, what steps should be taken to move away from the
system entirely, and what should replace it?
Dr. Delbanco. That is a great question. Well, I think one
of the most valuable things about CMS releasing the hospital
charge data is, it was a great education for all about how much
variation there is, even in the charges, much less the payment
amounts, and the fact that the charges really have little to do
with what people end up paying.
What we need to work toward, and it is going to take a lot
of work and a long time, is understanding exactly what the
underlying costs are of delivering care and what cost it takes
to deliver high-quality care. Without having good information
on both of those fronts, many hospital systems, health care
systems, really do not know what it takes in terms of the cost
to deliver a unit of care. If we do not know what that is, it
is going to be very hard to come up with a rational system of
deciding how much care, a procedure, should cost.
Senator Hatch. Thank you to all four of you. We really
appreciate this panel.
The Chairman. Thank you, Senator.
Senator Thune, you are next.
Senator Thune. Thank you, Mr. Chairman. I want to thank our
panel today, too, for some really good insights. Mr. Brill,
thank you for shining a light on this with your lengthy piece
and all that it told us about what is going on in the health
care business and how it impacts real people who are looking
for health care services in our country today.
I want to ask the question, and I guess I would direct this
to Dr. Delbanco, on the issue of price lists and hospitals
posting prices for common procedures. We have in the State of
South Dakota the South Dakota Health Care Organization that is
responsible for compiling a price list of the 10 most common
procedures in their, what they call a price point system.
I am curious to know how effective those types of listings
are in using market forces to put downward pressure on prices,
and really do consumers use those? In your experience, do
consumers use those types of price listings to make choices
about elective procedures?
Dr. Delbanco. Thanks for the question. I think we know very
little about whether consumers use that information. There are
many States that are posting information of a variety of types,
and there is very little research on whether consumers use it.
I think posting that information is the beginning of a
process to identify how the market is working and the variation
across providers. It is a step in the right direction that says
that transparency is something that we are moving towards, but
I do not think that posting a short list of prices is that
relevant.
If you do not connect it back to the consumers' insurance
plan, what their account balance might be in their insurance
plan, what is in network or out of network for them--so it
really takes a serious amount of customization, which States
like New Hampshire and Massachusetts have been working toward
in their public websites, for it to really be usable by
consumers.
Senator Thune. Good.
Dr. Ginsburg, the conversation on reimbursements in the
last couple of years has focused on the integration of health
care and coordination of care. This may be providing an
incentive in the market for consolidation. I am wondering, what
role does consolidation play in pricing? As the landscape of
health care providers changes, what areas of antitrust need to
be reevaluated, if this trend continues, to help put downward
pressure on prices?
Dr. Ginsburg. Yes. Well, I believe that the reforms in
provider payment are leading to additional consolidation. I
think there are a lot of other forces pushing for more
consolidation as well. I think that the best approach is to
take steps that make markets more competitive despite their
consolidated state.
I think an antitrust policy is probably a need to revisit
the safe harbor policy that the Federal Trade Commission has
had to actually require demonstrations of benefits for patients
from safe harbors. I think that the governments can take steps
which can facilitate tiered approaches.
When Chairman Baucus asked about reference prices before, I
neglected to say that I believe that most insurers or employers
will not be capable of adopting a reference price system
because of the likely push-back they will have from providers,
who will basically say, if you have that, I will not contract
with you. I think that legislation is important to outlaw non-
competitive contracting practices between health plans and
providers.
Senator Thune. I would just ask this as a general question
for anybody to answer. But, Mr. Brill, you talked about market
power. One of the things that we are seeing with this
consolidation and the integration is, as more and more
physicians and hospitals are coming together, the entities are
getting larger. I am just curious, sort of as a philosophical
question, what can be done to return principles of the free
market into health care pricing in this country?
Mr. Brill. Well, I am not sure we ever started from that
place, but we certainly have slid very far away from it.
Senator Thune. We have evolved.
Mr. Brill. Again, one of the things I found in doing the
reporting is, if there is one countervailing power to even the
most concentrated health care provider, it happens to be
Medicare, which I found does an awfully good job. It is run, by
the way, mostly by the private sector. It is contracted out. I
thought that Medicare demonstrates that, if you have one really
big buyer in the marketplace, it can serve to address the
power, the accumulated power, of the providers.
Let me just add one thing, though, about the chargemaster.
I know that there is a lot of response that, well, the
chargemaster is not really relevant because it is only X
percent of people who actually end up paying that. It happens
to be the poorest people who are asked to pay it.
But the reason I focused on the chargemaster is, it is sort
of a metaphor, if you think about it, for the whole health care
system, in three ways. It is irrational. We all would agree
with that. It is completely unaccountable. Nobody can account
for it, and no one can explain it. And the prices are just way
too high. It serves as the basis upon which almost everything
else in the health care system has to operate. The insurers
negotiate discounts off it; everybody refers to it.
So, if we are talking about market power, the one entity
again that is big enough to just literally brush the
chargemaster aside and say, we will not even talk to you about
that, is Medicare, which does a very good job as a consumer of
health care.
Senator Hatch. Senator Brown, you are next.
Senator Brown. Thank you, Senator Hatch.
Thank you all. This has been very illuminating, I think,
for all of us.
Mr. Brill, thanks for helping to change this debate. You
are a terrific journalist, because you tell stories so well. I
want to sort of tell a story and ask you to comment on it. A
couple of years ago, for a period of several years, there was a
progesterone used by injection, taken by injection, for 20
weeks, once a week, for women who were at risk of low birth
weight babies, of early births. So it was a progesterone called
17-P. The injection cost between $10 and $20 an injection. A
woman would take, as I said, once a week for 20 weeks.
In February of 2011, a St. Louis company, KV
Pharmaceutical, became the first company to receive FDA
approval. This had been clinically tested earlier, the
progesterone 17-P, by KV Pharmaceutical out of St. Louis. It
spent about $200 million, went through the clinical trials,
then began selling the drug and marketing it under the name of
Makena and selling it for $1,500 a shot. So the cost of
treatment went from $200-$300 to $30,000, an increase, if our
math is right, of some 14,000 percent.
The CEO of KV said, well, it does not matter that we are
charging this much. What matters is the savings that we provide
for the health care system because there are not these very,
very, very expensive dollar costs and human costs: early
births. How does this happen? I mean, how does this health care
system allow this to happen, where they can come in like this
and disrupt something that was working well, there is no
argument there, and take this much money out of the health care
system?
Mr. Brill. Because they can. Again, there is not a
competing drug, I take it, from your story.
Senator Brown. Well, there is, but not the competing market
power, because they both are out there now.
Mr. Brill. Let us even say there is sort of a semi-
competing drug, but it is the physician who prescribes the
drug. The physician may have consulting contracts with the drug
company; there could be all kinds of things going on. But I
think your story just demonstrates again--and there are a
thousand stories out there--that this is not a marketplace that
functions like other marketplaces.
Name a product outside of health care where the price can
go up one day by 1,000 or 10,000 percent just because it can. I
guarantee you, without even knowing the price of that drug, if
it is prescribed in every other developed country of the world,
it did not go up that high and is not that high.
Senator Brown. That is correct, yes.
You call the current drug reimbursement structure a
perpetual gift to the pharmaceutical industry. A number of us
here have suggested that Medicare negotiate drug prices. Give
me your thoughts on that.
Mr. Brill. Well, I am not an expert on that or anything
else. It just seems logical to me that if you are the biggest
buyer of something, you ought to be able to negotiate the price
for it. The resulting loss to taxpayers--the math is pretty
clear. It is a big loss; it is pretty high. So it is a question
that almost answers itself, it seems to me.
Senator Brown. Could the rest of you give us your thoughts
on, as we do in the Veterans Administration, giving Medicare
the ability to directly negotiate drug prices on behalf of X
million consumers of those drugs? Dr. Colella, if you would
start first.
Dr. Colella. Thank you for the question, Senator. I am not
an economist, so I do not really have a strong opinion on that.
It just seems completely logical that if you are the biggest
payer and you are paying for something, you have the power to
negotiate for it, and that gives you market power and allows
you to reduce the cost.
Senator Brown. Dr. Ginsburg?
Dr. Ginsburg. Yes. Actually, the Veterans Administration is
very successful because they have the threat that they will not
include a drug on the formulary. In a sense, they can get
therapeutic alternatives to compete for the right to sell to
the VA. I think if Medicare is going to take that approach, you
are going to have to be ready to answer the complaints about,
well, but I wanted this drug, and you negotiated for this drug
instead. Now of course you can go to a pure regulatory system
and just say that we are going to set drug prices for
everything, and we are going to include them.
Senator Brown. I do not hear those complaints from veterans
that their drug is not available, not on the formulary that has
been negotiated or that has not been negotiated, so why would
we hear them on Medicare?
Dr. Ginsburg. Well, I think the reason is that, in the
Veterans Administration and Kaiser Permanente, they involve
their physicians in these choices. So, in a sense, if the
physicians help make the choices and explain to the patients
why this drug is good, I think it is much less likely that
complaints like that would come up.
Senator Brown. Dr. Delbanco?
Dr. Delbanco. I would just say that I am excited that we
are finally approaching an era where we look at the comparative
effectiveness of different therapies, drugs, procedures, and
that, as that information becomes more available, I certainly
hope that the Federal Government will act on it.
So, as we think about purchasing drugs, there should be
some kind of system where we are purchasing based on the value
that they offer. Whether that involves a competitive bidding
process or other process, I will not comment on, but bringing
into account how helpful, useful, and valuable the different
therapies are will be really important.
Senator Brown. I wish we were, as you said, moving into an
era of comparative effectiveness, because it was labeled
rationing, socialism, every other negative descriptive term
imaginable in that debate, and was not really included the way
that it should have been here.
The Chairman. Thank you very much.
Senator Bennet, you are next.
Senator Bennet. Thank you, Mr. Chairman.
I will actually pick up where my friend left off in talking
about socialism, and who is the biggest Bolshevik, and all this
other stuff. [Laughter.]
I want to say that one of the great mysteries to me about
this place over the last 4 years has been why this health care
debate has been so partisan in this town, because the people
whom I represent, their prices are going up, the quality is not
improving. That is what they care about. This place has made a
mess of all this, in the discussion that we had.
So I want to thank you, Mr. Brill, for your article, first
of all, which I think reveals very clearly that there is no
market, because there is no price transparency for anybody. I
hate to use the word, because it sounds like a 50-cent word,
but, when I read your article, my main reaction to it was that
opacity should never be a business model. But it is a business
model for the folks who are delivering this stuff.
So the first question I had for you was, I would be curious
to hear what the reaction has been to your article, what you
have heard from people in the industry that you wrote about,
and what they have said to you about the content of your piece.
There is nothing defensible about the chargemaster.
Mr. Brill. And they actually have not tried to defend it,
except to say that it does not matter, to which one might ask
the question, well then, why do you have it if it does not
matter? I think, rather than generalize, I will point out one
thing that kind of surprised me about the reaction.
That is, I had written in the piece that the nurses and
most of the doctors, unless they were gaming the system in some
way by getting consulting contracts, the people who actually
provide the care are not on the gravy train that everybody else
is on.
What surprised me in all the mail I have gotten is that,
not only have they not made out as well, but they really feel
like victims of the same system. They feel, not only that all
these other people are getting wealthy while they are doing the
scut work--which is not scut work, it is saving people's
lives--they feel like they have no control and they are
demeaned by the whole system, whether it is jumping through
hoops to fill out insurance forms or everything else.
As one doctor wrote me, he got an angry memo from his
supervisor that he had ordered in the last quarter 3 percent
fewer tests than he had the quarter before, and he had better
get that rate back up, as if the patients obviously must have
needed more tests that he did not order.
So that, to me, is the most surprising reaction, that the
most important players in the system, the people who provide
the care for all of us, are not only not the beneficiaries of
the system that you describe as so opaque but are, I think, the
victims of it too.
Senator Bennet. So I would like to ask the doctors, before
they roll me out of here, what would be your top one or three
or whatever the number of things that could be done
administratively today that do not require us to get our act
together in the Congress, but could be done today by CMS or
anybody else, to drive the transparency that we are talking
about.
Dr. Delbanco. I would echo something that Dr. Colella said
about CMS releasing more data and allowing it to be used by
more qualified entities to analyze for quality and payment
patterns. I think that is the number-one thing that I would
add.
Dr. Colella. Yes. Thank you very much, Suzanne. It is of
paramount importance. CMS is sitting on so much data; it is a
gold mine. Making that data accessible will help everybody
understand much better the quality of care and the cost of
care.
Last but not least important, is also making sure this is
an easy thing to do, and it would go a long way toward solving
problems, making sure that people who pay for health care,
which are mostly the employers, have access to their claims. A
claim is a receipt. When you go to a store and you buy
something, you have the right to have that receipt in your
hands. It is just incredible that it is only in health care
where this does not happen.
Senator Bennet. But even then, Doctor, the best that people
can do is maybe figure out what they have been charged--maybe.
But we never can get to what it actually costs. You mentioned
colonoscopies earlier. I mean, the range in communities is----
Dr. Colella. Thank you, Senator. That is exactly my point.
Once you have the claims, that claim then can be given to
organizations like ours or like other public organizations that
know how to actually explain to the consumer what they will be
charged out of pocket.
I think Dr. Ginsburg pointed out very, very appropriately
that to just show a price does not mean we can tell people what
you are going to pay for your colonoscopy out of pocket, and
where you are going to get that colonoscopy. And you know what?
If you go to the hospital next door, you may pay half and have
the same doctor. That is shocking.
Senator Bennet. I am out of time, but I think Mr. Brill had
a comment.
Mr. Brill. Yes. I just want to add, on the subject of
information, this could be a whole other hearing. But, as I
started to try to get information about Current Procedural
Terminology codes and all this stuff, I found out that,
somewhere along the line, that CMS and the Federal Government
have given certain information and licenses to codes to the
American Medical Association, the American Hospital
Association, and they started asking, well, are you working for
a for-profit company, what are you seeking this information
for, why do you want it? I know there is a reference in your
testimony, Dr. Colella, about them requiring that this data,
which is our data, the taxpayers' data, cannot be used by for-
profit entities but only nonprofit entities, such as nonprofit
hospitals, for example. That should be a whole other hearing,
because there is a real issue there.
Senator Bennet. Thank you, Mr. Chairman.
The Chairman. I just want to ask one question of anybody.
What is the responsible--if there is one--argument why CMS
should not release all this data, whether it is doctors'
charges or hospital charges? What is the rational, reasonable
counter-argument, if there is one? Why don't they?
Dr. Ginsburg. Yes. I would like to point out the difference
between that and information about quality, about practice
patterns. That, I think, would be very valuable for CMS to
release. Medicare Compare is probably the single-most important
source of quality information for those seeking to----
The Chairman. What is the answer? What would CMS say if we
said, all right, CMS, release it all? Would they have a
counter-
argument?
Dr. Ginsburg. I do not know, but I was going to make the
distinction between----
The Chairman. Well, I am asking, can anybody indicate what
maybe CMS might say?
Dr. Ginsburg. The only thing I could think of is, I do not
think there is a person in this room who has a computer with
the server capacity to be able to receive it.
Dr. Colella. Well, no, there is also another argument to be
made. Very powerful provider organizations do not want this
data to be released. So, when we, as a known qualified entity
because we are a for-profit, which the last time I checked was
not a crime in this country, asked to have this data so we
could work on it to show quality measurements, we were told,
no, you cannot because you are a for-profit organization. The
reality is, people do not want to be held accountable for the
quality of care that they deliver.
The Chairman. So I would just be honest, I have not heard a
good, solid answer.
Dr. Ginsburg. There isn't one.
The Chairman. All right.
Senator Wyden?
Senator Wyden. Thank you, Mr. Chairman. I believe the
answer to your very good question, Mr. Chairman, is there is no
answer. Later today, Senator Grassley and I, apropos of what
the chairman has said, and Senator Bennet, are going to
introduce legislation to open up the Medicare database. This is
long overdue, and I appreciate the thumbs up. Let the recorder
note that one of the witnesses gave a thumbs up to that.
This is a treasure trove of valuable information. It needs
to be released in a way that is sensitive to protecting the
personal issues with respect to seniors. But, in answer to the
chairman's question, there is no reason for not making this
public.
I want colleagues to know Senator Grassley and I are going
to do everything we can to add this to the SGR bill, because I
think it is very appropriate, apropos of what Dr. Ginsburg has
talked about, that we get this information.
It is going to give us a lot of clarity with respect to
practice patterns across the country. For the first time,
people around the United States are going to be able to see
what Medicare actually reimburses for various services.
People have been debating this since the days when I was
co-
director of the Gray Panthers, but I think the answer to the
chairman's question is, there is no compelling reason for not
doing it. With the court's decision as well, I think we now
have the green light to get it done, so I thank you all for
your answers.
Let me ask you about one other area, and that is, my hope
is, in the days ahead, we will be able to also focus on an area
of Medicare that has been neglected in the past--and Senator
Casey and a number of colleagues, Senator Isakson, have been
talking about this--and that is chronic disease. This is where
most of the Medicare money goes.
Well over 80 percent of the Medicare money in America goes
to heart, stroke, cancer, and diabetes. I would like to have
you all outline how you think access to data and improved
transparency in the Medicare program in particular can help
identify and help treat seniors with chronic disease.
So why don't we start with you on that, Dr. Ginsburg?
Dr. Ginsburg. Thank you, Senator Wyden. I believe that the
best approach to addressing chronic disease is not publishing a
lot of data, but to reform the provider payment system, such as
through Accountable Care Organizations or similar things.
These are organizations that are accountable, they have
incentives, and their biggest opportunities are to address
chronic disease better than in our fragmented fee-for-service
system. So I would not go the transparency approach, I would go
the payment reform approach.
Senator Wyden. Well, I think, Dr. Ginsburg--you are an
authority in this area. My hope is, we could do both. We could
do both, and certainly the Accountable Care Organizations, in
terms of integrating care, move us in the right direction.
There are some issues, particularly the attribution rule,
that I hope--and we will have another nod for the recorder,
because Dr. Ginsburg helped us there as well. I think that the
attribution rule is also limiting our ability to see
practitioners specialize in chronic disease. If you would like
to follow that up, please.
Dr. Ginsburg. Yes. Yes, I would. I mean, I think, even
though there is a lot of potential in Accountable Care
Organizations, the specifics on which the legislation was
written and the regulation was written may not have been the
best calls.
I would like to note that the Bipartisan Policy Center,
when they came out with their strategy, they called for an
enrollment model of Accountable Care Organizations where
beneficiaries would have incentives to enroll, and that that
would be a big improvement in attribution over the way it is
done now.
Senator Wyden. Well, you are absolutely right that there
are a number of pieces to this puzzle. There are also some
questions about which vulnerable seniors are going to get
access to a care plan, because the language in the text of the
rule talks about people at high risk. One of the things that
has come to light is what happens to people who, say, have
three chronic conditions. Are they considered high-risk?
But for any of you, on the point of transparency and
chronic disease, what are your thoughts with respect to how
various transparency reforms that you have been talking about
can help us deal with the area that I think Medicare has been
transformed into? There is more cancer, more stroke, and more
diabetes than when Medicare began in 1965. Having your thoughts
about how transparency can help us tackle chronic disease,
Doctor, would be great.
Dr. Colella. Yes. So I have been a practicing physician for
many years. I think Dr. Ginsburg is right: transparency is not
the only solution. Transparency is the beginning. The way I
like to say it is, transparency is like giving you a great seat
to a very bad movie. We are just starting from there.
But transparency is not only transparency on prices,
transparency is transparency on quality. So Medicare can give
us data, and, the more data we have, the more we can pick
quality. When my mother had cancer and I really desperately
wanted to find a good, quality hospital for her cancer, I could
not figure that out.
That is an area where Medicare really is still lacking, and
it is not fair to American citizens. As a physician, I find
this almost offensive, the fact that we cannot understand who
is performing better, what are the better outcomes, where do we
get the best surgery, and ultimately, what are we paying for?
Senator Wyden. My time is up, Mr. Chairman. But again, I am
surely glad you asked that question about the database.
The Chairman. All right.
Senator Nelson?
Senator Nelson. Representing a State like Florida where a
high percentage of our population is elderly, it is not
infrequently that I get the panicked call to one of our Florida
offices from a senior citizen with, for example, what happened
last week, a bill from the hospital of $40,000. When we got
into it on behalf of the senior, what was worked out was a bill
of about $4,000. So it basically is another example of the
thesis of your article.
Now, beyond that, I am concerned, as we implement the
Affordable Care Act, and we are seeing, at least in Florida,
hospitals buying up doctors' practices and other health care
provider practices since we set up Accountable Care
Organizations under the bill--and we want to encourage
physicians to get together in order to get efficiencies of
scale, sharing of information about patients, therefore
elimination of duplication--whether this is a good thing to
promote.
Here is what is happening, and I would like your comments.
Hospitals are buying the doctors' practices, then a patient in
a doctor's practice in an ACO not owned by the hospital has an
emergency. They end up in the hospital. Whatever the problem
is, it is taken care of, and now they are ready to exit the
hospital and they refer them to one of their doctors' practices
that the hospital owns, and in some cases their original doctor
does not even know about it, is never informed, and is cut
completely out of the loop.
Now, other than stealing patients, which this system would
lend itself to, it clearly is a way of consolidating power by
whoever owns all of the medical services. Now, this is contrary
to the competition that we were trying to create in Obamacare.
Can you all comment, please?
Dr. Ginsburg. Sure. I would be glad to comment. I think the
pressures on physicians in small practices to change, either to
become employed by a hospital or to perhaps join a large
physician organization, are very intense now.
I believe that if they could join physician organizations,
whether they are medical groups, independent practice
associations--which are looser organizations which have had
success in California and Massachusetts--that makes the market
more competitive than when hospitals employ physicians.
So I think it is an opportunity for insurance companies and
for governments to take steps to foster and encourage the
development of physician organizations. I think the medical
profession would rather that be the result than that their
members all work for hospitals.
Senator Nelson. Well, that is the theory of the ACOs.
Dr. Ginsburg. That is right.
Senator Nelson. But what is happening is consolidation of
the hospitals--exactly the opposite.
Dr. Ginsburg. That is right. Well, ACOs----
Senator Nelson. So what do we do?
Dr. Ginsburg. The ACOs can be led by hospitals, they can be
led by physician organizations, or they could be exclusively a
physician organization. I was actually very pleased with the
most recent announcement by CMS at the beginning of this year
about its new ACO contracts, that a majority of them were for
ACOs led by physician organizations, and they have in fact
eased some of the requirements for physician organizations to
contract with them for ACOs.
So I think, if you can think back to the 1970s, the Federal
Government did a lot to foster the development of health
maintenance organizations. There may be an opportunity for the
Federal Government to foster development of physician
organizations.
Dr. Colella. I could just give you a personal experience.
As a physician who practiced, I saw two things in the 1980s
when there was another wave of consolidation to take capitated
contracts. The model of physicians employed by hospitals is a
business model that usually does not work. You usually create
low-handicapped golfers at that point, because you take away
the incentive to work harder.
While I totally agree with Dr. Ginsburg that this is an
opportunity, if we have physician-driven organizations that
compete in a free market and competition is based on the common
denominator of transparency on quality and price, you will have
a much more efficient market, and costs in every free market
come down. I would ask anybody to show me a market where it is
a free market, where there is competition, and we have not seen
prices come down.
Senator Nelson. I do not know how we would do that if, in a
given urban market, the hospitals are owning most of the
practices.
The Chairman. Thank you, Senator.
Senator Burr?
Senator Burr. Thank you, Mr. Chairman. I am shocked at what
Senator Nelson has uncovered, that providers would do exactly
what we designed and take advantage of it. I might say that
Blue Cross Blue Shield has experimented in Florida with
actually owning their own provider networks, doctors, and the
insurer, cutting the hospitals out.
So to say that everything emanates good from up here, there
are experiments going on in every community across the country.
I remember when Safeway was that model up on the pedestal that
we all looked at and said, gee, look at what can happen. But I
will get to that.
Mr. Brill, your article was very informative.
Mr. Brill. Thank you, sir.
Senator Burr. It has been diluted to some degree. I have to
tell you, in full disclosure, I have taken health care money. I
do not know how much; I cannot tell you from whom. But I think
it is a cheap shot to come in here and say that has contributed
to the health care model that we have today. I do not think any
members have written more reform legislation than Dr. Coburn
and I, and we have never been influenced by where we took money
from.
Mr. Brill. It would be a cheap shot, if it is what I said.
Senator Burr. I think it is a convenient excuse some people
use, but there are many members who take it seriously up here.
Dr. Delbanco, will Safeway's model be able to exist with
the Affordable Care Act?
Dr. Delbanco. There have been questions about the annual
out-of-pocket max, how much consumers are going to be spending
out of their own pocket, and the cap on that, and whether or
not you can still have a reference pricing model with that cap
in effect.
There are some health insurance companies that are moving
full steam ahead, saying yes, we think that there is still
plenty of financial incentive within that maximum amount we
want consumers to spend out of pocket to encourage them to seek
care for more affordable choices.
Senator Burr. But if their model does not check all the
boxes--well, they are grandfathered, right?
Dr. Delbanco. Who?
Senator Burr. Safeway. Are most of the large corporations
that make up your group grandfathered from the Affordable Care
Act?
Dr. Delbanco. I have not done a poll of all of them to know
exactly which position they are taking.
Senator Burr. All right.
We have had a lot of talk about Medicare. Let me just
suggest that I think we have made great strides when we
instituted Medicare Part D. We thought about it from outside
the box, I think. We created an insurance model. Yes, we did
not go as far as to say the Federal Government can go out and
do what the VA does, but what we found was a marketplace that
reacted even better, I think.
In many cases, our projections on what the cost was going
to be for risk-takers to provide certain structures or
formularies actually has come down, in large measure because
generics were used, in other measures because patent lives
expired and we had some of the blockbuster drugs go off of
patent.
But what we found was that we had a more positive cost
experience than what we had designed. The one thing that we
learned from that that we did not anticipate was that seniors
do not like choice. When given a choice between something and
something else, it was hard to make a decision.
I think, at the end of the day, the person who most served
as the navigator for a senior was a child, not a health care
professional. This should be alarming. Even as one who had 19
years in policy, it was tough for me to try to determine how to
navigate for my parents.
Let me suggest to you that part of our health care reform
has to be putting health care providers back in the
consultation and decision role, and I think, Dr. Colella, it
gets at the heart of what you talked about, which is tying cost
and quality together, if I remember.
If we do not judge quality, then cost is an irrelevant
thing. It is either affordable for somebody or not. Part of the
quality is going to come from the relationship between the
medical professional and the patient.
Let me ask all of you, is there any value to us going back
to a health care system that really resembles 30 years ago,
when we got a service delivered, we paid for it out of our
pocket, and then we were reimbursed when we filed back to our
insurance company? Have we become so insulated as patients that
we have no concerns about what the cost is, therefore we do not
assess value because we do not know what we paid for something?
Mr. Brill. I think that what I saw when I did my reporting,
Senator, is that that has, in the last couple of years, changed
a lot, where it is now relevant to everybody, because
deductibles are higher, co-pays are higher.
I think where it is definitely the case--and you may recall
I wrote about this--one of the patients who had $335,000 worth
of bills, he was on Medicare, and his out-of-pocket expense was
$1,139. He would just wake up in the morning and go to some
doctor. He had a bunion, and it cost him 82 cents, but it cost
the taxpayers $60, as I recall. So he had no skin in the game
at all.
I think Medicare really needs to look at that from top to
bottom. This man is basically upper middle class. He could
easily have afforded more than 84 cents on the whim of having a
doctor look at his bunion. But I think that all of us who go to
doctors who are not in Medicare, we now have pretty much
everyone who has a lot of skin in the game, which is why I
think the reaction, frankly, to the article was much stronger
than I expected, because everybody has a story now. Everybody
has an experience.
Dr. Ginsburg. I want to point something out, that over the
last 10 years, as Mr. Brill was mentioning, there has been a
very substantial increase in the degree to which privately
insured patients need to pay part of the cost of their care.
That is continuing.
What is striking is the contrast with Medicare, because
Medicare's benefit design has not changed, and supplemental
coverage is just so common that your typical Medicare
beneficiaries pays nothing at the point of service for care. I
am not sure how long that divergence is going to continue.
Senator Burr. No, I agree with you. With the supplemental
care, you can buy down any risk exposure, and that is not a
good thing.
If I could, Mr. Chairman, just one last statement.
The Chairman. Very, very short, please.
Senator Burr. Over 10 years ago, I remember having a
conversation with Mike Hash, who was then CMS Director. It was
over a new technology called contrast imaging. The fact is, CMS
had no code for contrast imaging. We went through months of the
need to do this, because contrast imaging compared to non-
contrast gave one greater clarity of the diagnosis. It is
common practice today.
But I remember the day he called me, and he said, ``We have
a solution to the problem.'' I said, ``What is that?'' He said,
``We are going to reimburse non-contrast imaging at the same
number as contrast imaging, and the two will just sort of work
themselves out.''
I was dumbfounded at the other end of the phone, that all
of a sudden we had created a reason for every hospital
administrator to become a crook because, if you eliminate the
thing that has the best result from a diagnostic standpoint,
you will tell them, only do non-contrast because, if it does
not show it, we can do all these other tests and they will pay
the bill.
I think what I have heard from all of you is that our
health care system needs to be redesigned. It needs to focus on
patients playing a large role in, not only their choice, but
cost playing a big role and quality playing a big role in the
choice.
Mr. Chairman, it is going to be a big task for us, but I
think Medicare is the 800-pound gorilla in the room. When we
are willing to reform Medicare as we know it today, I think we
will have a private system that in fact follows.
The Chairman. Senator Casey?
Senator Casey. Thank you, Mr. Chairman. We want to thank
the members of the panel for being here, for your testimony and
your scholarship. It is important that we get this right. One
of the ways that we are going to get it right--and when I say
``we,'' I mean both parties here and anyone who is interested
in improving our health care system--one way we get it right is
by trying to find the answers to difficult questions. Mr.
Brill, your article reminded us why we have a free press, even
when it makes us uncomfortable. But we are grateful for the
work that went into that.
Mr. Brill. Thank you.
Senator Casey. I have a question that I am going to ask all
of you, but I start with a line--I know it is not the best way
to summarize testimony, but, Dr. Ginsburg, on page 3 of your
testimony you say, ``I perceive the greatest potential to
obtain lower prices comes from approaches where purchasers and
health plans, rather than report prices to their enrollees,
analyze extensive data on cost and quality and provide their
enrollees very simple incentives to choose providers determined
to be higher value.''
So you talk about analyzing data that would undergird the
provision of incentives. Can you tell me why you made that
statement and why you came to the conclusion that that is the
best way to lower prices?
Dr. Ginsburg. Yes. Well, sometimes we look at examples
where there are opportunities to lower prices. If somebody
needs an MRI, we tell them that it costs less at a freestanding
facility than in the hospital outpatient department. But there
is so much of care that is not scheduled.
I think we might just use incentives like, we have assessed
the different hospitals in this community, and we feel that
this group of hospitals has higher value than the other group
of hospitals, so we are just going to give you a lower
deductible if you go to the preferred tier of hospitals.
I think there is a limit to the complexity that consumers
are willing to deal with. You do not just give them a lot of
price information when they are worried and sick; it is very
complicated. So in a sense, I see a role of someone else
digesting the information, and in a sense it is not a
transparent approach, although I think it is an effective
approach, just to say, we have made a judgment as to which
providers are higher value and, if you go to them, you will pay
less.
Senator Casey. So we come to that question of incentives. I
wanted to ask each of you a question. I have 2 minutes, but it
is a little bit of a lightning round. But Column A and Column
B: Column A would be any provision in the Affordable Care Act
that you think positively impacts this problem that we have
discussed here today.
Column B, even if Column A has none--as I think Mr. Brill
will say based upon your earlier testimony--even if Column A is
no provisions, no positive effect, what should we be working on
for Column B? What policies, just by way of itemization or
listing of them? I will start with Mr. Brill and we will go
left to right.
Mr. Brill. Yes. I would just remind the Senator that I did
write that there are a lot of very good, positive provisions in
the Affordable Care Act, but they do not attack the price
issue.
Senator Casey. Right. But if you had to make your lists of
steps we should take----
Mr. Brill. Well, I tested one in the article. The more I
think about it, and the more I have gotten reaction, and the
more I do the math, the more I think it works, which is, if you
lowered the Medicare age, you would actually save money
compared to what it is going to cost us to fund the subsidies
on insurance premiums under the Affordable Care Act.
Senator Casey. You had that example of the 64-year-old, 11-
month person.
Mr. Brill. Yes. She would have saved money if she had been
a month older, but actually the government, under the new
regime, would have saved money.
Senator Casey. Thank you.
Dr. Delbanco?
Dr. Delbanco. So I would take it in a different direction
and talk about how some of the new payment models that are
being stimulated by the Affordable Care Act will help in this
case, because, first of all, consumers do not know enough to
know what individual components go into their care. If you look
at the individual payments made under fee-for-service, it is
unintelligible.
I think, whether it is bundled payment, global payment, or
the new methods, they should be tied to quality performance,
where it is not just, you get to earn more as a provider if you
do well, but actually, you will take on some risk if you not
only go over budget, but if you do not perform well on the
quality measures. I think we could go a long way to creating
incentives for all parties to not only choose higher-value
providers, but for providers themselves to be higher-value.
Senator Casey. We are out of time, so if you could itemize
them quickly.
The Chairman. Go ahead.
Dr. Ginsburg. Yes. I would say that our premium credits do
not depend on which plan you enroll in, so people have very
strong incentives to get a lower premium. What we are seeing is
a lot of innovation in network design and plans in response to
that so that plans are not including the lowest-value, most-
expensive providers in their networks and the plans they are
offering on exchanges. I think that is a positive change.
Senator Casey. Dr. Colella, you get the last word.
Dr. Colella. I will try to make a long story short, which
is really hard for me. People respond to incentives, and, if we
pay doctors in a different way, with bundled payments like
Suzanne was saying, or we provide data to consumers with
incentives, we will actually see changes in behavior.
Senator Casey. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Next is a very good friend of mine, a wonderful Senator,
and today happens to be his birthday.
Senator Rockefeller. Oh. That is me.
The Chairman. Senator Rockefeller?
Senator Rockefeller. Thank you, Mr. Chairman.
I am struck, Dr. Ginsburg, by your present and previous
position with the Independent Payment Advisory Board. I want to
relate my question to the fact that the increase in prices is
not just a problem for the consumers, but it is the underlying
cause of the sustained growth of the cost of health care, which
is growing faster than the rate of inflation. We cannot live
with that, so we have to do some dramatic things.
I have always felt that fee-for-service built in an
inefficient system, because it relied on others who did not
have public judgment or a concept of fairness, or whatever, to
make decisions. I refer you to the incredible battle we had
with the health insurance industry, as much a layering on of
lobbying and money if I have ever seen one. We had this thing
called the public option. Everybody loved it. There was just
one problem: we could not get any votes in the Senate Finance
Committee. I tried it and got nine, Senator Schumer tried
another one and got 10, so it was dead.
Everybody screamed and yelled that anything other than a
public option was traitorous to the American people. So we came
up in the Commerce Committee with something called a medical
loss ratio. Nobody can understand what that means, which is key
to calling up a bill if you are of good faith and good heart.
What that simply said was, it worked off the concept of
Ingenix, which is my parallel to chargemasters. They work
differently, but they controlled basically the same things,
until they were brought down by an Andrew Cuomo-initiated court
suit in New York and then by our legislation, that said they
had to pay--it was sort of simple and brutal. They had to pay
80 or 85 percent, depending upon the size of their business
they were insuring, or the number of people.
They had to pay 80 or 85 percent on health care that made
people better, and then we were watching them because, if they
did not do it, then they had to start rebating to the American
people, and already the thing is only a year and a half old and
several billion dollars have been rebated to the American
people. People come up to me in West Virginia and ask, ``What
is this check for?'' They will figure that out. I am trying to
make a comparison again about fee-for-service not being good.
My answer to that in part is in fact IPAB, which is not
wildly popular in either the House or the Senate. But it is in
the Affordable Care Act, and I think it is a very good
instrument, because it takes away from lobbyists, Mr. Brill,
and takes away from Congress people, Mr. Brill, the ability to
make a decision about how we reimburse Medicare, the largest of
all spenders in health care, and puts in the hands of 15 people
like yourself--Gail Wilensky, Stuart Altman, and the next
generation, the next generation of those people--the sole power
to make those decisions: how do you reimburse physicians, how
do you reimburse big hospitals?
I mean, I have watched big hospitals buying up more little
hospitals, and it is repulsive. It is an act of growth and not
an act of better medicine. I like that IPAB system, because it
controls costs, it is done by wise people who are not subject
as easily to lobbying, because you already know it all, and you
make wise judgments based upon the transparency of information,
which I support.
But I also support the idea that you give consumers a lot
of information, and sometimes it is distressing--I say this
respectfully--to them or to me, how to make a decision from
that.
But deciding how much people are reimbursed under
Medicare--doctors, hospitals and others--is to me the most
powerful instrument for the control of the cost of health care
and, therefore, also obliterates this ridiculous situation
which Mr. Brill reports, that the poor pay more than the non-
poor in our hospital system.
Could you respond?
Dr. Ginsburg. Sure. Senator, the overall idea of delegating
some authority to a committee or a commission of wise people to
make detailed decisions where perhaps, in the absence of
lobbying, they could make wiser decisions, I have always seen
that as an attractive idea. I wrote an article about that a
number of years back before the Affordable Care Act.
What I am concerned about is the way IPAB came out. Because
many members of Congress were so reluctant to delegate their
authority, IPAB's authority is so constrained and so limited
that, really, pretty much the only tool it has is to squeeze
provider payments, which is something that Medicare has been
pretty good at. I do not think it needs the IPAB to do that.
Senator Rockefeller. But it takes a two-thirds majority to
override it, your decision.
Dr. Ginsburg. Yes. But I am saying, as far as hospital
rates go, physician rates, they are on auto-pilot. Congress can
always say they should be lower. That is what I mean. I think
that the opportunities in Medicare to reduce costs long-term
come in provider payment reform.
I am very enthusiastic about the vigorous piloting programs
that the Innovation Center at CMS is running on ACOs, bundled
payments, medical homes. I think that is where the future is as
far as cost containment, as opposed to an IPAB which is
limited--I think improperly--to just adjusting provider payment
rates.
Senator Rockefeller. I thought I threw you a softball, and
you hit it all the way to the pitcher's mound, but I still
think you are terrific.
Dr. Ginsburg. Thanks.
Senator Rockefeller. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
It is my understanding that, even though there is a wide
variation among hospitals, say, for certain procedures--
colonoscopy has been referred to several times--that there is
much less variation in what Medicare pays around the country
for that same procedure. I saw a chart somewhere. It is pretty
flat around the country. It is flat-lined. There is not a lot
of variation. The variation is much more in the private sector;
it is not Medicare. If that is accurate, I would like to know
why we have not yet focused on the variation in private pay?
Dr. Ginsburg. Yes, that is entirely accurate.
The Chairman. And then also, what data are Medicare and CMS
going to release? Is it just with respect to Medicare
reimbursement, or does Medicare also have the data on private
pay charges?
Dr. Ginsburg. That is right. The Medicare payment rates do
not vary much. Basically, all hospitals are paid the same for
DRG except for the index of local input prices, and, if they
are a teaching hospital, they get an extra amount for that, or
if they are a disproportionate share hospital. But it is
generally uniform, whereas private payments vary enormously.
The Chairman. I know. My question, though, is, what do we
do about the private side, assuming that Medicare is doing a
decent job?
Dr. Ginsburg. Sure. One thing that has not come up in this
hearing is--we have talked about how to use competition to
address some of the variation of prices on the private side--
but nobody has mentioned the other alternative, which is to
regulate those prices the way, say, Maryland has done for
hospitals.
The Chairman. Could you explain that? What does Maryland do
with respect to regulation of private payers?
Dr. Ginsburg. Yes. Well, Maryland, since the late 1970s,
has been setting the rates that hospitals in the State can
charge. It also sets----
The Chairman. Mr. Brill, what about that? Does that make
sense?
Mr. Brill. It seems to work. In a world of perfect
information, I will tell you what the information ought to be.
There ought to be sort of a 5-column price list for a hospital.
One column is, what does Medicare pay for that; another would
be, what does the chargemaster say--that one would be all the
way over there--and then what do the three largest insurance
companies doing business with that hospital, what do each of
them pay?
So those would be your five columns. If you publish those
five columns--and that is really kind of a summary of the work
that Dr. Colella is trying to do in one respect--if you publish
those five columns, those columns would start to come together
very quickly, because it is just too----
The Chairman. What about quality? There is a lot of
discussion here that just transparency alone is not sufficient.
Mr. Brill. Well, I am describing there----
The Chairman. I am asking now about quality. What is the
quality input in those columns?
Dr. Delbanco. I think part of how you reduce payment
variation is, you have much more transparency on quality. You
start asking your provider, justify to me that you are 40
percent better than that hospital down the street, and, if you
cannot prove it to me based on quality, then I know where to go
for a better value.
So I think the quality measures have to be those where
there is the greatest disparity among providers, not just the
quality measures that are the easiest to report and sort of the
least offensive to providers. I think if we move toward those
quality measures that really show differentiation, payment
variation will reduce along with that.
The Chairman. How far along are we in measuring quality?
Dr. Delbanco. We have many, many, many quality measures. I
think the problem is, we have probably too many now and not
enough that focus on exactly those points where there is the
greatest opportunity for reducing harm if we improve quality
and where there is the greatest variation in performance. We
tend to measure things that are easy to collect data on and
that show very little difference among providers.
The Chairman. So how would you synthesize or bring together
these quality measures? What would you do?
Dr. Delbanco. I would look to see where the greatest
complications are, the greatest risk of mortality is, and where
the greatest disparity in costs is. I would use those as the
criteria for selecting a more parsimonious set of quality
measures than the huge proliferation we have today of measures
that do not help consumers very much.
The Chairman. All right. Thank you.
Senator Menendez, you are next. Thank you.
Senator Menendez. Thank you, Mr. Chairman. On a day of
competing hearings, I thought this was an incredibly important
one to come to, but now that I know it is Senator Rockefeller's
birthday, it is an extremely important one to come to. So Jay,
happy birthday. Many more.
Let me thank the panel for their testimony. Mr. Brill, in
your article, you make very little mention of health reform and
how it could help resolve or mitigate many of the issues you
discuss. For example, when you describe a couple who are faced
with high fees related to cancer treatment, you say that
``Obamacare does nothing to prevent the high costs.''
Yet I would suggest to you, by limiting the low-quality
mini-med plans which do not provide comprehensive coverage and
expanding access to insurance that is required to provide
standard benefits and meet specific quality standards, that
couple will not have to worry about paying out of pocket for
what----
Mr. Brill. Actually, that is what the article says in the
paragraph right below the one you just quoted.
Senator Menendez. Well, first of all, I would appreciate it
if you would just let me finish my question first.
Mr. Brill. Sorry, Senator.
Senator Menendez. So that couple will not have to worry
about paying out-of-pocket expenses. In addition to that, there
are States like New Jersey that have a law capping hospital
charges to 115 percent of the Medicare rates for anyone earning
under 500 percent of poverty. So, as a result, less than 5
percent of patients could even be potentially subjected to a
chargemaster rate, and those are people who make enough to
afford insurance but often choose not to purchase it.
Here is the question. Considering the vast array of
insurance regulations and consumer protections provided and
enacted, by both the States and as part of the Affordable Care
Act, in addition to the expansion of coverage to millions of
Americans who are currently unable to find it, do you not agree
that a large part of this problem has been addressed in some
very meaningful ways?
Mr. Brill. No.
Senator Menendez. All right. So, with the facts that I have
just finished describing to you, how is that not responsive in
part to this challenge?
Mr. Brill. Well, I am sorry, Senator, but those are not the
facts. In New Jersey, for example, many more people fall
through the cracks of the regulations limiting the chargemaster
charges.
There was a case I looked at at the Passaic Hospital, which
is not in the article, of a doctor who was able to bill
someone, and then ultimately an insurance company, $9,600 for a
half hour's worth of care in the emergency room, and the
regulations did not cover that. So I just do not agree with
your characterization of what the article says.
Senator Menendez. Well, do you not agree that limiting the
low-quality mini-med plans and providing comprehensive coverage
is in fact in part dealing with this challenge?
Mr. Brill. Exactly, which is why I wrote just exactly that
in the article. That is what the article says. What I also said
is that Obamacare does not address the other fundamental
problem, which is the high prices.
The patient who is asked to pay $13,700 for his first
transfusion of a cancer drug, he has two problems. The first
is, he does not know that that is the price, but the second is,
there is nothing he can do about it, because that is the price.
Obamacare does zero, nothing, to address that.
As you point out, though, Obamacare would eliminate the
kind of insurance policy he had that forces him to pay that.
That is a good thing, and the article says that. It does not
eliminate the fact that somebody--in this case it is now going
to be the taxpayer--is going to pay that $13,700 for a drug
that cost the drug company about $200.
Senator Menendez. Well, that is a whole different question.
Let me just ask you this, then. So are you suggesting that part
of the solution is some form of price control?
Mr. Brill. That is also in the article. Price control for
patented, lifesaving drugs, I think, is necessary, and it is an
experiment that has been tried by every other country in the
world.
Senator Menendez. Well, let us forget about the drug for
the moment. You just described a procedure. Should there be
price controls for procedures?
Mr. Brill. What I described was $13,700 for a drug,
Senator.
Senator Menendez. All right. Do you have procedures that
you think there should be price controls for?
Mr. Brill. No. I am not advocating anything.
Senator Menendez. So it is only when you come to
medications that you think there should be price controls.
Mr. Brill. No. I think that, as the article suggests, there
should be all kinds of interferences in the marketplace,
because it is not a free marketplace. There should be some
interference in the marketplace where supposedly nonprofit
hospitals are the most profitable businesses in the community,
including many in your State. There should be interference with
the marketplace where doctors are having lab tests done in labs
that they have invested in. There should be interference in
that marketplace, yes.
Senator Menendez. Dr. Colella, let me turn to you. Your
company shares a laudable goal of increasing transparency and
access to health care information. I think that is incredibly
important. I agree that empowering people to make better
decisions about their health care is the first step in really
transforming our health care system.
But I think it is important we provide data that is easily
understood and properly used. For example, in your testimony
you mentioned the wide variation in the cost of a colonoscopy,
for example, even within the same network and within the same
region. You correctly say that we have no way of knowing if the
higher-cost procedure is the highest-quality one.
However, what we do not know from your testimony are some
of the outside factors that could account for the differences
in cost. For example, is the highest-cost procedure provided in
an emergency room that factors in all the additional costs
associated with running a 24-hour/7-day-a-week emergency
department, or is the lowest-cost procedure offered in a single
physician's practice without those overheads? Which is to say,
the total cost of the procedure varies widely, but why is
equally as important for us to know so that we can make
determinations.
This is the question: with so many different factors going
into pricing any given procedure, how can we increase access to
data in a way that provides people with usable information?
Dr. Colella. Senator, thank you for the question. There are
two parts to this. The first one is, our application, our
software, allows you to understand where the procedure--in this
case the colonoscopy--is done. So you would know if it is done
in ambulatory services, in an emergency room, or if it is done
in a hospital. Not only that, we even give you outcomes and
specific quality measurements on the physician who is doing it.
So we empower the consumer already to do that.
For the second part of your question--which is more of a
policy one and is absolutely a very fair question, and I
appreciate you asking it--how do we account for all the
variables in this? Please give us data. You are sitting on a
lot of Medicare data. The more data we can get, the more we can
actually provide the right quality and cost information to
consumers.
Senator Menendez. All right.
Mr. Chairman, I heard earlier that Mr. Brill suggested that
we should be scrolling contributions to members. I think that
is an interesting idea. I think we should also be scrolling the
advertising and/or the contributions to organizations that
appear before the committee so we know the perspective of those
who are testifying before the committee. I think it would be an
interesting proposition.
Thank you, Mr. Chairman.
The Chairman. I have a couple more questions. Some
hospitals I see are pretty fancy. They have fountains, Taj
Mahals, and so forth. I just wonder why. You mentioned
executive salaries. I do not want to paint all executives with
one brush.
Mr. Brill. No.
The Chairman. But it is a question. So my question is, at
least with respect to DRGs and Medicare, to what degree do they
calculate in, or do they not at all, hospital costs for the
fountains and all that?
Mr. Brill. They actually do. They actually calculate all
the average overhead for the average hospital, so they do take
account of that. I think what we have seen is sort of like what
a lot of people say they have seen with higher education:
higher prices, higher salaries, more building, an over-supply
of courses, an over-supply of beds in the United States, and
everybody just keeps getting bigger, and therefore their costs
are higher. There really are not the kinds of economies of
scale that one would expect, at least that is what I found in
my reporting. My colleagues here would know a lot more about
that.
The Chairman. Does Medicare also pay more for fancier
hospitals?
Mr. Brill. No, not in theory. That is not how the DRGs are
done.
The Chairman. Right. So then, is it private payers that
make up the difference? Is that basically what happens?
Dr. Delbanco. Well, I think what is happening is that
people do not have the most accurate and objective data on
which to make a choice of hospitals, so they look at what it
looks like. They look at the ease of parking, they look at
patient satisfaction.
All of this matters, but it does not matter as much, when
someone gets sick, as whether or not they are going to get the
right care that they need. I think if we can balance the more
superficial elements with ones that are meaningful to
consumers, we will do a better job of right-sizing those kinds
of expenditures.
Dr. Ginsburg. Yes. You have some hospitals that have must-
have status: insurers need to have them in their networks.
Those are the ones that can charge the highest prices and, if
they want, build palatial facilities. There are a lot of
hospitals that do not have that power, and their facilities are
pretty mundane.
Clearly, Medicaid is not a profitable payer for hospitals.
It appears to be generally adequate. Hospitals that do not have
the ability to generate large margins on privately insured
patients are usually able to get to a positive Medicare margin,
get their costs down enough so that Medicare is paying its way.
But it is, overall, an issue of, with a third-party payment
for health care, with student loans for higher education, they
are both very important programs, but in a sense they start
removing the consumer from the cost of these things, and one of
the results is that costs go up.
The Chairman. All right. Oh, I am sorry. Chuck came back. I
did not see you.
Senator Schumer, you are next.
Senator Schumer. Thank you, Mr. Chairman. I thank all the
witnesses. I am sorry I could not be here for most of it. I
would just like to first pick up what Dr. Ginsburg said. Well,
I want to start with another question. I am a large defender of
our great teaching hospitals in New York. Your study, Dr.
Ginsburg, said what we have been saying all along.
I go to them, and I say, why are your costs so much higher,
and they tell me, because they are higher. Even Dartmouth's
study and things like that, they factor out rent and the high
cost of living in New York, which is higher, but not that much.
What they basically say is, such a large proportion of the
people who come there----
The Chairman. Patients.
Senator Schumer. Patients. That is the word I was looking
for. I am getting old. [Laughter.] Such a large proportion of
our patients have very complicated conditions. We are the place
of last resort. When the hospital in Paduca, KY cannot really
do it, they say, you had better go here. We take them, and
there is all of this. But that is why their costs are much
higher. Your studies seem to show that that is the reason,
overall, of most of the high costs.
Could you just elaborate on that a little bit? Then I would
like to hear what my good friend Steve Brill has to say about
that.
Dr. Ginsburg. Yes. Actually, I do not recall having studied
teaching hospitals----
Senator Schumer. Per se, I know.
Dr. Ginsburg [continuing]. Per se. In a sense, the studies
I have done are just looking at price variation.
Senator Schumer. Yes.
Dr. Ginsburg. Of course, Medicare, when it created the
prospective payment DRG system, actually was so concerned about
not paying enough to teaching hospitals--not so much for the
teaching function, they paid directly for that, but for the
concern that the patients are more complicated and are not
going to be picked up by the DRG--that they have what we call
the indirect teaching adjustments.
Senator Schumer. Yes.
Dr. Ginsburg. MedPAC, over the years, has said that it is
too high. The adjustment is too high.
Senator Schumer. I do not agree with MedPAC on that issue,
as you know. But you are right. Go ahead.
Dr. Ginsburg. So, in a sense, I think we understand that
teaching hospitals will cost more, both because of the teaching
and because of the differences in patient mix that our DRG
system----
Senator Schumer. Just does not have. Right.
Steve? Mr. Brill?
Mr. Brill. Senator, I do not think I know nearly as much as
Dr. Ginsburg or the other panelists about how fair as a general
matter the DRG is, or how fair it is to teaching hospitals. But
I will tell you that, just in looking at the hospitals I looked
at, with the bills that I looked at, I do not think the issue
was that Medicare was under-paying or cheating these hospitals.
Again, I am just reminded of one of the quotes in the
article from Mr. Blum, who, as you know, is a senior CMS
official, who said, if you think hospitals lose money on
Medicare, just drive down any highway in Florida and look at
all the billboards. What are they advertising? It is hospitals
advertising for patients. Who are the patients they are
advertising for? It is not teenagers, it is people in Medicare.
Senator Schumer. Yes, but that is a different issue.
Mr. Brill. It is a different issue, yes.
Senator Schumer. Hip replacement or something that is
standard, you have every leg to stand on--bad metaphor.
[Laughter.] You have good grounds in terms of your argument.
But when you are dealing with--take Sloane Kettering, a
hospital you criticized in your article. So many of their
patients have rare, unique, untreatable in other places types
of cancers, that the costs are higher, the reimbursement rates
do not recognize most of that, and it puts a lot of pressure on
them that may come out in unfortunate ways.
But the bottom line is, we need these unique institutions,
because they treat patients that other places have tried and
failed to treat, or cannot treat. Do you not agree with that?
Mr. Brill. Yes, I do.
Senator Schumer. All right. Good.
Mr. Brill. With all respect, I take a little bit of issue
with the notion that I criticized Sloane Kettering in that
piece. I did point out that their survival rate is in fact
their business plan. It is even in the bond offerings that they
write. What I did say was that whatever their costs are--as you
know, cancer reimbursement with Medicare is sort of a special
case with special formulas.
But the only thing I did say about Sloane Kettering was
that, in one way, it was emblematic of the alternate universe
that is health care, where the top fundraiser for Sloane
Kettering, to take one example--you shrug it off because it is
not a lot of money--but the top fundraiser for Sloane Kettering
makes three times as much as the top development officer of
Harvard. I just use that as a metaphor for the different world
of health care economics. It was not a criticism of Sloane
Kettering, which is a marvelous place.
To put it in even more perspective, I hope I made clear,
and I will make clear now, that we are not talking about evil
people here. We are talking about a marketplace that just does
not work, does not make anyone really price-accountable. What
happens, whether it is in higher education or medicine or
something else, when marketplaces do not work, people tend to
maximize their income.
Senator Schumer. Yes. And the marketplace--that is the
fundamental problem here. I tend to have sympathy for the idea
that, because people are not paying themselves, either it is
Medicare, Medicaid, or insurance for most people, or they are
uninsured and it gets picked up by some other big pool--that
the market system does not work in health care.
I--and I am sure some of my colleagues have gone over
this--am dubious of the fact that, if you give consumers
information, particularly in a complicated area here, there are
some who will look at their bill and say, why did I pay $2,000
for somebody I never saw, but most people will not, because
they are not paying for it.
That is why, at least in my opinion--I mean, I was for a
public option. I was more sympathetic than I usually would be
to a single-payer type system, because when you do not--look,
who would not give all the money they had to save the life of a
loved one? Because of that, we have insurance.
That is the main reason we have insurance. We do not have
insurance for cars or houses or anything else where this is the
cost and you have to pay it no matter who you are, what you
are, and you are willing to put some money aside each year in
case, God forbid, something happens to your spouse, your
parents, your kids.
Because when you do that, you lose market control. That is
why I have always thought free market models do not really work
in health care very well. In the Affordable Care Act, we
struggled with an alternative. We tried to use markets to
create competition among the big insurers, but, at the consumer
level, it is very, very hard to get the market to work. You are
really rolling a stone uphill.
Any comments on that?
Dr. Ginsburg. Actually, this also goes back to what Senator
Rockefeller brought up before. To me, the most important aspect
of the public option proposal was not so much to disadvantage
insurance companies, it was to apply Medicare pricing power
more broadly than just in the Medicare program.
I suspect that that is something we are going to have to
come to grips with. We are talking a lot about ways to use
benefit design, et cetera, to make markets more competitive. We
do not know how successful we will be. In the background, there
is always going to be this opportunity of, well, let us just
tie it to Medicare payments.
Dr. Colella. Yes, Senator Schumer. First of all, I trained
in one of the highly specialized hospitals in New York, so I
appreciate your comments on the fact that they are some of the
best ones in the world. I could not agree more. I think you
raise a very valid point. When I practiced medicine, for many
years people would come in and pay with somebody else's credit
card, so they were completely desensitized from the cost of
what they were doing.
The world has changed. In the past 10 years, now we are up
to 60 percent of employers in the United States that are
offering high-deductible plans. The out-of-pocket payment has
grown exponentially in the past 7 years, and the trend is in
that direction. So, when you are asking a consumer to pay out
of pocket up to $4,000 or $5,000, which for the average
American family is real money, it is only fair to provide them
with the information necessary to do that. That is how markets
can work.
Now, otherwise, we are in the worst of both situations,
right, where we do not have an efficient market and we are
covering first-dollar coverage. So that is where the big
difference is.
Senator Schumer. Good point.
Thank you, Mr. Chairman.
The Chairman. Yes. Let me just somewhat follow up on that.
The assumption here is more transparency, more information,
somehow will get a better result. Let us take Sloane Kettering.
Let us take teaching hospitals. Let us take some hospital, a
much smaller hospital, not a teaching hospital, say in my State
of Montana. What if all of the information, whatever it all is,
were available?
Let us say a teaching hospital, Sloane Kettering. Let us
take the teaching hospital. How much is the cost to train
residents? How much is the extra cost actually? Go on down the
list here, just item by item by item. So you are in effect the
CEO of that hospital, and you know what all the charges are.
And the CFO of the big hospital, or somebody, knows what is
being charged for whatever it is: the bed, the MRI, the gauze
strips, you name it.
My thought is that somebody like Dr. Colella, some
entrepreneur, would take that information and would develop
some kind of a program, some kind of an app, that would help a
little bit, and also would take into consideration a lot of the
information that Dr. Delbanco talked about, namely with respect
to quality. There are a lot of questions there, obviously. One
is, to what degree would that work? The second is, what is
proprietary here? What should be proprietary here, frankly?
Mr. Brill. The analogy may be akin to something I worked on
in a prior life, which is legal decisions rendered by the
courts. They are not proprietary, they are public. A lot of the
CMS data and a lot of the data that hospitals file with the
Department of Health and Human Services is somehow licensed to,
I think it is the American Hospital Association, in one
instance, and the AMA for Current Procedural Terminology
billing code data.
They have rules that say that, as Dr. Colella said, if you
are a for-profit entity--which I guess, when I was doing this
article for Time magazine, they mistakenly thought that I was
representing a for-profit entity--you are not entitled to it or
you have to explain how you are going to use it. It just does
not make any sense. I am sure it is rooted in history
somewhere.
The Chairman. Right. Well, I know that is right. That tends
to happen around here. But that begs the deeper question: how
much of it should be proprietary?
Mr. Brill. Why not----
The Chairman. How much of it is, how much of it should be,
from the public interest point of view?
Mr. Brill. As long as it is not patient data, he could tell
the large corporations that are hiring him to parse out this
pricing information in a hospital, he could tell hospitals who
has the most efficient operation when it comes to food service
or who has the most efficient operation when it comes to this
or that. All that stuff is filed with the government. Some
entrepreneur ought to be able to make a lot of money, adding a
lot of value in this world, by providing it to people. Why not?
The Chairman. You are an entrepreneur, Dr. Colella. Why
don't you take a crack at it?
Dr. Colella. Yes. I could not agree more. I do not know if
we are going to make a lot of money. That is not what makes us
do this. We are really driven by providing a good service to
our customers. I ask you, Senator, think of a world where you
walk into a supermarket and you want to buy cereals, and you
have a series of boxes there, all different cereals, and you
have no price and no information on what cereals you are
buying, and then you leave that supermarket and you get a bill
6 months after that, and you cannot read what the bill is. That
is completely inefficient. There is complete asymmetry of
information, and it is the most opaque industry in the world.
The Chairman. Well, it is worse than that, because I may
not like that brand of cereal, and I don't have to buy it.
Dr. Colella. You may not even like what you got.
The Chairman. When I am in the hospital, I have to take it.
Dr. Colella. So that is health care today. If you think
about it, this is the most sacred industry that we have. We are
not dealing here with bond yields or equity, we are dealing
here with madness, death, and birth. We are dealing with the
most sacred things that we have. It is really close to immoral,
the fact that we cannot even understand what we are buying and
what we are paying for it.
The Chairman. I am going to go back to my question. I am
trying to game this out, red flag it. What is the down-side?
What is the other side of the coin here? That is why I asked
the question about proprietary information, what should or
should not be proprietary. Yes?
Dr. Delbanco. So I think maybe the better analogy is, when
you are in the grocery store, each cereal company does not tell
you the cost of each of the inputs into making that cereal.
Part of what I think the other side of the argument is--you
have asked for that--is that I do not think that CFOs actually
really know what the cost of each of those inputs is.
There are some line items there, but really what they are
operating on is, what is my overall revenue and what are my
overall costs, what margin do I want to achieve, and how can I
do that by sort of shifting things around? So I think the more
we can understand what the costs of those components are and
somehow push that to have to be a reality would go a long way.
I do not think we want to stymie innovation by making
everybody reveal exactly the cost of their secret sauce if they
think they are better at patient through-put, or they think
they are better at patient quality, or whatever it is. We do
not need to know the granular detail, but they do. I do not
think that they are in a situation where they do it this way.
The Chairman. Well, patents clearly should be protected,
trademarks. Certain processes do not have patent protection. I
am just trying to figure out, when we push this point in
hospitals, et cetera, what reaction might we get that might
have some merit?
Mr. Brill. Just one note that I am not sure anyone has
mentioned yet. I think it is particularly important, because we
tend to think, with something as important as health care, that
the most expensive sort must be the best. I mean, one of the
magic aspects of the chargemaster is, if you get a bill for
$47,000 and you see that your insurance company got it
discounted down to $4,000 and you owe $200, you feel great
because you just got $47,000 worth of medical care.
If you were comparing and you saw that the hospital next
door would only charge you $8,000, you might say, well, I
cannot go to that hospital, because they are not doing a good
job. If you knew the costs at both hospitals, then you could
see that the $47,000, hypothetically, is not going toward
anything having to do with quality, which it is not.
The Chairman. Does U.S. News and World Report, that ranks
the 10 best, include quality? I mean, 10 best, 100 best, or
something?
Dr. Colella. I have been a part of the marketing effort to
get on that when I was practicing, and it is a beauty contest
about who does the best belly dance. There really is very
little about high quality in that. Unfortunately, I did not do
a great belly dance, obviously, but there is absolutely very
little link to quality, with scientific measurements, in that
report.
The Chairman. Was it you who said that the most expensive
had the least----
Dr. Colella. Yes. In Chicago, we have plenty of examples.
We have plenty of examples that, because of the asymmetry of
information in health care, there is very little correlation
between price and quality.
The Chairman. All right. I have a lot of other questions,
but it is about time to wrap up. Thank you. This was very, very
helpful. I think you have exposed a lot here. You got a lot of
people thinking about this. There is no monopoly on good
thinking in this committee, believe me.
But people listening to this hearing will, I think, come up
with some good ideas and help us try to find some solutions
here. It is an abomination. As you know, we pay about 60
percent more per person for health care in this country than
the next most expensive country. There is something not quite
right there. I think you put your finger on a lot of it.
I think Senator Schumer is correct when he said market
forces have a hard time in this area. Maybe it is all right
when you are buying a car, but when you are buying health care
it is very, very difficult. Frankly, the Affordable Care Act
was an attempt to come up with, in my view, a uniquely American
solution.
We did not have any health care system in this country
until that act was passed, and even now we really do not. But
it is a uniquely American solution, because we are American. We
are not Great Britain, we are not France, we are not Germany,
we are not Japan, we are not Taiwan; we are who we are.
This committee had to do the best it could, given that we
are Americans, we are not French and Swiss and Japanese, et
cetera. I think it is a very good act, because it is a good
start. It has a lot of warts, a lot of places where things slip
through the cracks, but it is a good start, and this hearing is
going to help us go forward. Thank you. Thank you very much.
The hearing is adjourned.
[Whereupon, at 12:16 p.m., the hearing was concluded.]
A P P E N D I X
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