[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

=======================================================================

                                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

                              ----------                              


                         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.]




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