[Senate Hearing 116-556]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 116-556

                      LOWER HEALTH CARE COSTS ACT

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

                                HEARING

                                OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                                   ON

               EXAMINING THE LOWER HEALTH CARE COSTS ACT

                               __________

                             JUNE 18, 2019

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions
                                
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                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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             COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

		    LAMAR ALEXANDER, Tennessee, Chairman
		    
  MICHAEL B. ENZI, Wyoming		PATTY MURRAY, Washington
  RICHARD BURR, North Carolina		BERNARD SANDERS (I), Vermont
  JOHNNY ISAKSON, Georgia			ROBERT P. CASEY, JR., Pennsylvania
  RAND PAUL, Kentucky			TAMMY BALDWIN, Wisconsin
  SUSAN M. COLLINS, Maine			CHRISTOPHER S. MURPHY, Connecticut
  BILL CASSIDY, M.D., Louisiana		ELIZABETH WARREN, Massachusetts
  PAT ROBERTS, Kansas			TIM KAINE, Virginia
  LISA MURKOWSKI, Alaska			MARGARET WOOD HASSAN, New Hampshire
  TIM SCOTT, South Carolina		TINA SMITH, Minnesota
  MITT ROMNEY, Utah			DOUG JONES, Alabama
  MIKE BRAUN, Indiana			JACKY ROSEN, Nevada


		 David P. Cleary, Republican Staff Director
	   Lindsey Ward Seidman, Republican Deputy Staff Director
		    Evan Schatz, Minority Staff Director
      John Righter, Minority Deputy Staff Director
                            
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                         TUESDAY, JUNE 18, 2019

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening statement.........................     1
Murray, Hon. Patty, Ranking Member, a U.S. Senator from the State 
  of Washington, Opening statement...............................    56

                               Witnesses

Cavanaugh, Sean, Chief Administrative Officer, Aledade, 
  Washington, DC.................................................     6
    Prepared statement...........................................     8
    Summary statement............................................    12
Ippolito, Benedic N., Research Fellow, American Enterprise 
  Institute, Washington, DC......................................    13
    Prepared statement...........................................    15
    Summary statement............................................    20
Nickels, Tom, Executive Vice President, American Hospital 
  Association, Washington, DC....................................    21
    Prepared statement...........................................    22
    Summary statement............................................    29
Mitchell, Elizabeth, President and Chief Executive Officer, 
  Pacific Business Group on Health, San Francisco, CA............    30
    Prepared statement...........................................    32
    Summary statement............................................    38
Isasi, Frederick, Executive Director, Families USA, Washington, 
  DC.............................................................    39
    Prepared statement...........................................    41
    Summary statement............................................    50
Bartlett, Marilyn, Special Projects Coordinator for the 
  Commissioner of Securities and Insurance, Office of the Montana 
  State Auditor, Helena, MT......................................    51
    Prepared statement...........................................    53
    Summary statement............................................    55

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
Bartlett, Marilyn:
    Attachment to written testimony..............................    84
Mitchell, Elizabeth:
    ``Transforming Health Care'', Harvard Business Review........    88
    ``Why GE, Boeing, Lowe's, and Walmart are Directly Buying 
      Health Care for Employees''................................   115
    Families USA, Prepared statement.............................   122

 
                      LOWER HEALTH CARE COSTS ACT

                              ----------                              


                         Tuesday, June 18, 2019

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:34 a.m., in 
room 430, Dirksen Senate Office Building, Hon. Lamar Alexander, 
Chairman of the Committee, presiding.
    Present: Senators Alexander [presiding], Collins, Cassidy, 
Murkowski, Romney, Braun, Murray, Casey, Baldwin, Murphy, 
Kaine, Hassan, Smith, and Rosen.

                 OPENING STATEMENT OF SENATOR ALEXANDER

    The Chairman. The Committee on Health, Education, Labor, 
and Pensions will come to order.
    Senator Murray has an important meeting right now, and she 
has asked me to proceed with the hearing because we have six 
excellent witnesses and we want to make sure that we hear from 
each of you, and then we want the Senators to have a chance to 
ask questions of each of you. So Patty should arrive about 10 
o'clock. When she comes, we will interrupt and let her make her 
opening statement, and then we'll resume the hearing.
    Good morning, Senator Murphy.
    Nearly a year ago, Dr. Brent James from the National 
Academies testified before our Senate Health Committee with a 
startling statistic: up to one-half of what the American people 
spend on health care may be unnecessary.
    Let me repeat that: up to half of the $3.5 trillion the 
United States collectively spent on health care in 2017 was 
unnecessary, according to Dr. James, and many of the other 
witnesses at our hearings agreed with that.
    That is $1.8 trillion, three times as much as we spend on 
all of our national defense, 60 times as much as we spend on 
Pell grants for college students, and about 550 times as much 
as we spend on national parks.
    A recent Gallup poll found that the cost of health care was 
the biggest financial problem facing American families.
    Like every American family, both Democrat and Republican 
United States Senators are concerned about the cost of health 
care. Health care has become a tax on family budgets and on 
businesses, and on Federal and State governments. Warren 
Buffett has called it ``a tapeworm on the American economy.''
    Over the last 2 years, this Committee has held 16 hearings 
on a wide range of topics related to reducing the cost of 
health care; specifically, how do we reduce what the American 
people pay out of their own pockets for health care. These 
included hearings on the cost of prescription drugs, on the 
340B drug discount program, on primary care, and the importance 
of vaccines.
    Last December, I sent a letter to experts at the American 
Enterprise Institute and the Brookings Institution, and to 
doctors, economists, Governors, insurers, employers, and other 
health care innovators, asking for specific steps the Congress 
could take to lower the cost of health care. We received over 
400 recommendations, some as many as 50 pages long.
    In May, Senator Murray and I released for discussion the 
Lower Health Care Costs Act of 2019, a package of nearly three 
dozen proposals from 16 Republican Senators and 14 Democratic 
Senators, that is designed to reduce what Americans pay out of 
their own pockets for health care.
    Since then, we've received over 400 additional comments on 
the legislation, and today's hearing was scheduled to hear your 
feedback on this legislation that will reduce what Americans 
pay out of their own pockets for health care.
    First, it ends surprise billing.
    Second, the legislation creates more transparency. There 
are seven bipartisan proposals in the bill that will eliminate 
gag clauses and anti-competitive terms in insurance contracts, 
designate a non-profit entity to unlock insurance claims for 
employers, ban Pharmacy Benefit Managers from charging more for 
a drug than the PBM paid for the drug, and require patients to 
be given more information on the cost and quality of their 
care. You can't lower your health care costs until you know 
what your health care costs actually are.
    Third, it increases prescription drug competition. There 
are nine bipartisan proposals within this legislation to bring 
more lower-cost generic and biosimilar drugs to patients. That 
is about 90 percent of all the drugs that are prescribed.
    Here are a few of the ways this legislation will lower 
health care costs.
    Ensure that patients don't receive a surprise medical bill, 
which is when you receive a $300 bill, or even a $3,000 bill 2 
months after your surgery because one of your doctors was 
outside of your insurance network.
    Many Senators, including Senator Cassidy, Senator Hassan, 
Senators Murkowski and Enzi, and many others are interested in 
ending surprise billing.
    It lowers the cost of prescription drugs by helping 
biosimilar companies speed drug development through a 
transparent, modernized, and searchable patent data base. 
Senators Collins, Kaine, Braun, Hawley, Murkowski, Paul, 
Portman, Shaheen, and Stabenow worked on this provision.
    Improves the Food and Drug Administration's drug patent 
data base by keeping it more up to date to help generic drug 
companies speed drug development, a proposal offered by Senator 
Cassidy and Senator Durbin.
    I'm mentioning these Senators names on purpose because I 
want it to be clear how much work has been done by Democratic 
as well as Republican Senators together on the provisions in 
this bill.
    Prevents the abuse of citizens petitions that can be used 
to unnecessarily delay drug approvals; Senators Gardner, 
Shaheen, Cassidy, Bennett, Cramer, and Braun.
    Clarifies that the makers of brand biological products, 
such as insulin, are not gaming the system to delay new, lower-
cost biosimilars from coming on the market; Senators Smith, 
Cassidy, and Cramer.
    Eliminates a loophole that allows drug companies to get 
exclusivity just by making small tweaks to an old drug, a 
proposal from Senators Roberts, Cassidy, and Smith.
    Bans gag clauses that prevent employers and patients from 
knowing the price and quality of health care services. This 
proposal from Senators Cassidy and Bennet would allow an 
employer to know, for example, that a knee replacement might 
cost $15,000 in one hospital and $35,000 at another.
    Requires health care facilities to provide a summary of 
services when a patient is discharged from a hospital to make 
it easier to track bills, and requires hospitals to send all 
bills within 30 business days to prevent unexpected bills many 
months after care. That is from Senator Enzi and Senator Casey.
    Requires doctors and insurers to provide patients with 
price quotes on their expected out-of-pocket costs for care so 
patients are able to shop around, a proposal from a number of 
Senators, including Cassidy, Young, Murkowski, Ernst, Kennedy, 
Sullivan, Cramer, Kennedy, Braun, Hassan, Carper, Bennet, 
Brown, Cardin, Casey, Whitehouse, and Rosen.
    Increases vaccination rates and prevents disease outbreaks 
through two proposals by Senators Roberts and Peters, and there 
are more proposals.
    For example, banning anti-competitive terms in health 
insurance contracts that prevent patients from seeing other, 
lower-cost, higher-quality providers. The Wall Street Journal 
identified dozens of cases where anti-competitive terms in 
contracts between health insurers and hospital systems increase 
premiums and reduce patient choice.
    Banning Pharmacy Benefit Managers, or PBMs, from charging 
employers, health insurance plans, and patients more for a drug 
than the PBM paid to acquire the drug, which is known as 
`spread pricing.'
    Eliminating a loophole allowing the first generic drug to 
submit an application to the FDA that can block other generic 
drugs from being approved.
    Provisions to help Americans stay healthy by preventing 
obesity, and improving care for expectant and new moms and 
their babies.
    Provisions to make it as easy to get your personal medical 
records as it is to book an airplane flight.
    Provisions to incentivize health care organizations to use 
the best cybersecurity practices to protect your health 
information privacy.
    Other Senators may have additional ideas that we hope to be 
able to vote on at a markup later this month.
    For example, Senator Murphy and Senator Cassidy are working 
to improve access to mental health care, building on their work 
in this Committee last year that became a part of the SUPPORT 
Act. I am optimistic we can get agreement to include something 
on that in this bill as well.
    Other committees in the Senate are also working on their 
own packages of legislation to lower the cost of health care.
    Since January, Senator Murray and I have been working in 
parallel with Senator Grassley and Senator Wyden, who head the 
Finance Committee. They are working on their own bipartisan 
bill, which they plan to markup this summer.
    The Senate Judiciary Committee is working on some 
bipartisan bills to address high drug costs and has held a 
hearing on consolidation in health care.
    The House of Representatives Energy and Commerce, Ways and 
Means, and Judiciary Committees, have all reported out 
bipartisan bills to lower the cost of prescription drugs.
    Secretary Azar and the Department of Health and Human 
Services have been extremely helpful in reviewing and providing 
technical advice in a timely way on various proposals to reduce 
health care costs.
    The President has called for ending surprise billing and 
reducing the cost of prescription drugs.
    The Administration has also taken steps to increase 
transparency so families and employers can better understand 
their health care costs.
    For the last decade, Congress has been locked in an 
argument about the individual health insurance market, where 6 
percent of Americans get their health insurance.
    Especially for Americans without subsidies, the cost of 
health insurance remains way too expensive. I am sure that the 
debate about how to fix that will continue. But that is not 
this discussion. This is a different discussion.
    We will never have lower-cost health insurance until we 
have lower-cost health care, which is why our Lower Health Care 
Costs Act of 2019 takes steps that will actually bring down the 
cost of health care that Americans pay out of their own 
pockets.
    This bill will lead to doctors, hospitals, insurance 
companies, and employers providing Americans a better 
experience and a better outcome at a lower cost.
    I want to thank Senator Murray and her staff. She is not 
here at the moment, but her staff is, led by Evan Schatz and 
Nick Bath, and my staff, led by David Cleary and Grace Graham, 
who have worked together to find about three dozen proposals 
that Democrats and Republicans agree on to reduce health care 
costs.
    This is not unusual for our Committee, because we have 
found a way to provide solutions to difficult problems that 
Members of both Republican and Democratic caucuses can support. 
We did that with fixing No Child Left Behind, we did it with 
the 21st Century Cures Act, we did it with user fee funding for 
the Food and Drug Administration, and most recently, in the 
midst of all the fireworks over Justice Kavanaugh, we had 72 
Senators of both parties working together to produce the 
legislation that dealt with the opioid crisis.
    Our goal for this legislation, the Lower Health Care Cost 
Act of 2019, is to be one more example of that sort of 
cooperation, because the American people expect us to work 
together to provide ways to reduce what they pay for health 
care out of their own pockets.
    Now, as I mentioned earlier, we will proceed with the 
witness testimony. I'll introduce the witnesses now. When 
Senator Murray comes, we'll ask her to make her opening 
statement. Then we'll proceed with the witnesses, and then 
we'll go to questions from the Senators.
    I'm pleased to welcome the six witnesses.
    Sean Cavanaugh is the first. He serves as Chief 
Administrative Officer at Aledade. It's a startup founded in 
2014. It works to develop and strengthen accountable care 
organizations in order to reduce health care costs and improve 
care. He joined Aledade in 2017 during the same year he served 
as an advisor for Parent Ping, an innovative Boston-based 
health technology company, as well as Omada Health. Prior to 
2017, he was Deputy Administrator and Director of the Center 
for Medicare at the U.S. Centers for Medicare and Medicaid 
Services. He now sits on the Board of Directors for the Center 
for Medicare Advocacy. He is a graduate of the University of 
Pennsylvania, received his Master's in Public Health from Johns 
Hopkins.
    Dr. Ben Ippolito is an Economic Policy Research Fellow at 
the American Enterprise Institute. He focuses on health 
economics and health policy. A lot of his recent work pertains 
to price regulation, specifically surprise medical billing. He 
graduated from Emory before receiving his Master's and Ph.D. in 
Economics at University of Wisconsin-Madison.
    Tom Nickels is Executive Vice President of Government 
Relations and Public Policy of the American Hospital 
Association, representing approximately 43,000 individuals, and 
serves nearly 5,000 hospitals, health care systems, and health 
care providers. Mr. Nickels has been with the American Hospital 
Association since 1994. He was Director of the American College 
of Emergency Physicians Washington office before that.
    Senator Collins, would you like to introduce Ms. Mitchell.
    Senator Collins. I would. Thank you, Mr. Chairman.
    Mr. Chairman, I know I speak on behalf of all the Members 
of the Committee in welcoming you back and saying it's great to 
see you looking so well.
    The Chairman. Thank you.
    Senator Collins. I very much appreciate the opportunity to 
introduce Elizabeth Mitchell. Although she is testifying in her 
role as the President and CEO of the Pacific Business Group on 
Health, I wanted the Committee to know that she is a native 
Mainer who we hope is only temporarily living on the West 
Coast.
    Before her work took her across the country, Ms. Mitchell 
led a multitude of health care organizations in the State of 
Maine, including serving as CEO of the Maine Health Management 
Coalition and the Network for Regional Health Care Improvement 
in Portland. In those roles she was a powerful catalyst for 
health care transparency and quality improvement. She also 
served in the Maine State Legislature.
    Although Ms. Mitchell and I are in different political 
parties, I can tell you that I've always found her work to be 
insightful, practical, and non-partisan. Given her extensive 
efforts to improve health care transparency and quality, I was 
pleased to recommend Ms. Mitchell for the Federal Physician 
Focused Payment Model Technical Advisory Committee, one of the 
longest committee names possible, PTAC, where she served as 
Vice Chair. I very much look forward to hearing Elizabeth's 
testimony this morning from an employer perspective.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Collins.
    Welcome, Ms. Mitchell.
    Mr. Frederick Isasi is Executive Director of Families USA, 
a non-profit consumer health advocacy organization that 
promotes a high-quality, affordable, and patient and community-
centered health system. He was once Health Division Director at 
the bipartisan National Governors Association Center for Best 
Practices. In addition to his work with the Governors, he 
served as Vice President for Health Policy at the Advisory 
Board Commission and as Senior Legislative Council on both the 
Finance Committee in the Senate, and the Pension Committee for 
our friend, former Senator Jeff Bingaman.
    Welcome.
    Our final witness is Marilyn Bartlett, Special Projects 
Coordinator for the State of Montana's Commissioner of 
Securities and Insurance. She is recognized as a leader in 
health care cost reforms and legislative initiatives, as well 
as improving benefit plan cost effectiveness. Before working 
for the Montana Commissioner, she served as Health Care and 
Benefits Division Administrator for Montana and managed health 
care for 33,000 individuals, distributed $200 million in annual 
benefits. She is credited with negotiating down the state's 
health care plan costs and increasing health care price 
transparency in Montana.
    Thanks to all of you for coming.
    Mr. Cavanaugh, let's begin with you. Welcome.

  STATEMENT OF SEAN CAVANAUGH, CHIEF ADMINISTRATIVE OFFICER, 
                    ALEDADE, WASHINGTON, DC

    Mr. Cavanaugh. Thank you, Mr. Chairman.
    I'm Sean Cavanaugh, Chief Administrative Officer at 
Aledade. We partner with independent physicians in 24 States to 
succeed in value-based payment models, such as ACOs.
    Mr. Chairman, you mentioned Dr. James' testimony where he 
talked about the enormous amount of waste in our health care 
system. I think we all face a fundamental decision of how we're 
going to get rid of that waste, and it really boils down to a 
choice of two approaches. One is competition, and the other is 
regulation.
    I personally have a background in regulation. I am, one 
might say, the ultimate regulator. You mentioned I worked at 
CMS. At CMS, I published regulations all year long, centrally 
administering prices. In a previous career I worked at the 
Maryland Hospital Rate Setting Commission, where I set all 
payer hospital rates in Maryland.
    I am here to tell you, whenever possible, we should rely on 
competition, not regulation. So I applaud the approach this 
Committee has taken to try to ensure competition works wherever 
possible.
    At Aledade, we believe maintaining a robust, independent 
physician sector is essential to supporting competition and 
high-value care. Unfortunately, this approach is at risk as 
hospitals have aggressively been purchasing physician 
practices, and hospital consolidation is a growing impediment 
to competition and high-value care.
    Over half the markets in this country are considered highly 
consolidated by objective standards of hospital consolidation. 
And we know when hospitals merge, prices increase and quality 
stagnates. Hospitals have argued that consolidation will lead 
to greater efficiencies and more coordinated care, but the 
evidence doesn't bear this out.
    Gag clauses, anti-tiering, and all-or-nothing clauses are 
all prime examples of excess market power, enabling anti-
competitive behavior. These practices run counter to the 
movement to value-based care.
    Aledade strongly supports the provisions of Title 3 that 
should restore some competition to these overly consolidated 
markets.
    Other provisions of the legislation address other market 
failures and deserve support. Surprise billing in particular 
occurs because of a market failure. Patients don't have the 
time or the information necessary to shop to avoid these bills. 
We applaud this Committee's willingness to take on this issue 
and your willingness to consider multiple solutions and put 
patients interests first.
    For many years, studies of the American health care system 
have relied solely on Medicare claims data. This is 
problematic. Medicare is very different than the private 
insurance sector, and the patients are very different as well. 
Many anti-competitive behaviors have been exposed by studies 
using multi-payer claims data bases such as the one 
administered by the Health Care Cost Institute.
    I applaud your restrictions on PBM spread pricing. PBMs 
should be competing on the basis of providing high-value 
formularies to health plans and should generate the revenue 
that way, not by taking advantage of asymmetries in information 
between drug manufacturers and health plans and employers.
    Finally, while I support time limits on provider billing--I 
think that's very patient-centric--I do worry. We work with 
quite a few small practices and rural practices, and we wonder 
whether some of them might struggle with a 30-day limit. So I 
ask the Committee to consider whether small rural practices 
should have longer timeframes.
    Finally, I want to mention a couple of other things this 
Committee hasn't done but should consider in future 
legislation, eliminating facility fees for services that can be 
provided in a physician's office. These fees are unnecessary 
and have helped fuel hospital consolidation.
    Anything you can do to support physicians in independent 
practices--loan repayment programs, even for those who work in 
private practices--would be great.
    We encourage the Committee to reform restrictive CON rules, 
which often give hospitals monopoly powers.
    We encourage you to reinvigorate antitrust enforcement 
generally and specifically grant the FTC the ability to review 
potentially anti-competitive behavior by hospitals.
    Finally, our personal story at Aledade, we believe 
hospitals should be required to share patient-centric data. 
There is literature that shows when a patient is discharged 
from a hospital and sees a primary care physician shortly 
thereafter, they do better. They have fewer comorbidities, 
fewer readmissions. At Aledade, that's one of our big 
strategies, how our doctors visit the patient after discharge. 
We go to local hospitals and say we will bear the cost of the 
interface, we will bear the cost of setting up you alerting us 
when these patients are discharged. Most hospitals comply 
because they realize it's good for their patients, but there is 
a subset of hospitals that refuse to share these data for 
competitive reasons. We think hospitals ought to be compelled 
to share these data, especially when we're bearing the costs.
    CMS has proposed a rule in this regard, and we're 
supportive of that, but anything that fosters patient-centric 
data-sharing is good for their health and safety and the 
Committee should support.
    Thank you for your time, Mr. Chairman.
    [The prepared statement of Mr. Cavanaugh follows:]
                  prepared statement of sean cavanaugh
    Chairman Alexander, Ranking Member Murray and Members of the 
Committee, thank you for inviting me to discuss the Lower Health Care 
Costs Act.

    My name is Sean Cavanaugh, Chief Administrative and Performance 
Officer for Aledade, a health care company that partners with 
independent primary care physicians to help them transition to and 
thrive under value-based payment models. Previously, I served at the 
Centers for Medicare and Medicaid Services (CMS) for 6 years, as the 
Deputy Director of the Center for Medicare and Medicaid Innovation 
(CMMI) and then as Director of the Center for Medicare. In those 
capacities, I supported the movement toward value-based payment and 
service delivery models in Medicare and Medicaid, and I'm proud to 
continue that work in the private sector.

    Aledade was founded in 2014 to help independent physicians thrive 
in value-based programs. We bring together independent primary care 
practices who are committed to value-based care, join the Medicare 
Shared Savings Program, and negotiate similar accountable care 
organization (ACO) arrangements with commercial payers. We provide 
population health workflow tools and integrated data analytics, and we 
transform how our practices deliver care.

    Aledade has grown rapidly and continues to do so. This year, 
Aledade is partnering with over 430 independent physician practices, 
Rural Health Centers and federally Qualified Health Centers. Organized 
into 27 ACOs across 24 States, these physicians are accountable for 
nearly 650,000 people; this includes 350,000 beneficiaries through the 
Medicare Shared Savings Program, and almost 300,000 people (Figure 1) 
through ACO arrangements with Medicare Advantage plans, commercial 
insurers and other payers. More than half of our primary care providers 
are in practices with fewer than ten clinicians.


    Aledade is producing meaningful results. In 2017, our ACOs saved 
Medicare over $40 million. But we are not alone in succeeding in the 
Medicare Shared Savings Program. Our analysis of CMS data shows that 
physician-sponsored ACOs are generating outstanding results (Figure 2). 
CMS data indicate that ``low revenue'' ACOs (i.e., largely physician-
led ) generated nearly $200 in savings per beneficiary in 2016, or $499 
million, in total, to Medicare. By comparison, ``high revenue'' ACOs 
(i.e., largely hospital-led) generated a net loss to Medicare. The Next 
Generation ACO model also produced positive results. On average, 
Aledade ACOs outperformed both Next Generation ACOs and other 
physician-led ACOs.


    These savings were generated through real improvements in the care 
received by Medicare beneficiaries. We have empowered our practices to 
deliver more primary care and reduce unnecessary hospitalizations and 
post-acute care stays, and our results improve the longer our practices 
work with us (Figure 2).


    We are committed to outcome-based approaches to improve the value 
of health care. We are committed to using technology, data, practice 
transformation expertise and, most important, the relationship between 
a person and their primary care physician (PCP).

    We are pleased to see the Committee's attention to lowering health 
care costs and believe that increasing provider competition is central 
to doing so. My testimony focuses on the encouraging pro-competitive 
provisions included in the Lower Health Care Costs Act. I have also 
offer several additional ideas for the Committee to consider as it 
continues to assess next steps.
                              Competition
    As a Nation, we need to make a fundamental decision about how to 
drive more efficiency and higher quality in our health care system. In 
simple terms, this choice is between a competitive approach and a 
regulatory approach. I have extensive experience as a regulator: I set 
all-payer prices for Maryland hospitals and established provider and 
health plan payment rates at CMS, which guide over $600 billion in 
spending a year. But, we should rely on regulation only when market 
competition isn't feasible, or when it has failed. To give markets a 
chance to work, we have to establish an environment that fosters 
competition. Unfortunately, our current health care system has a number 
of market failures, including payer and provider consolidation, and our 
laws permit practices that undermine competition.

    It is well known that hospital consolidation is a growing 
impediment to a high-value health care system. Evidence continues to 
show that when hospitals merge prices increase and quality stagnates. 
\1\ And this makes sense: concentration increases the local bargaining 
power of large health systems, which allows them to demand higher 
prices for services in the commercial market. And without alternative 
providers to generate competition, there is little incentive to provide 
higher quality care. \2\ Further, we see the most aggressive actors 
exert their market dominance with anti-competitive contracting 
practices that entrench their position in the market. Hospitals have 
argued that consolidation will lead to greater efficiencies and more 
coordinated care, but the evidence shows the opposite is true.
---------------------------------------------------------------------------
    \1\  Vogt. W.B., & Town, R. (2006). How Has Hospital Consolidation 
Affected the Price and Quality of Hospital Care, Robert Wood Johnson 
Foundation. Research Synthesis Report No. 9. http://www.rwjf.org/
content/dam/farm/reports/issue--briefs/2006/rwjf12056/subassets/ 
rwjf12056--1; Ginsburg, P.B. Wide Variation in Hospital and Physician 
Payment Rates Evidence of Provider Market Power.; Gaynor, M., & Town, 
R. (2012). The Impact of Hospital Consolidation--Update. Robert Wood 
Johnson Foundation. Policy Brief No. 9. http://www.rwjf.org/ content/
dam/farm/reports/issue--briefs/2012/rwjf73261; White et al. Inpatient 
Hospital Prices Drive Spending Variation for Episodes of Care for 
Privately Insured Patients. Cooper et al. The Price Ain't Right? 
Hospital Prices and Health Spending on the Privately Insured; New York 
State Health Foundation, Why Are Hospital Prices Different? An 
Examination of New York Hospital Reimbursement.
    \2\  Gaynor, M., Ho, K., & Town, R.J. (2015). The Industrial 
Organization of Health-Care Markets. Journal of Economic Literature. 
53(2), 235-284. http://dx.doi.org/10.1257/jel.53.2.235; Vogt, W. B., & 
Town, R. How has hospital consolidation affected the price and quality 
of hospital care?; Gaynor, M., & Town, R. (2012). The impact of 
hospital consolidation--Update.
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    I applaud this Committee for confronting some of the current 
contracting abuses and market failures--and for trying to chart a path 
toward true competition. Gag clauses, anti-tiering, anti-steering, as 
well as all-or-nothing clauses, are prime examples of excess market 
power enabling anti-competitive behavior. By banning gag clauses, 
Congress can prohibit dominant providers from concealing the price and 
quality of the care delivered by health systems; this is information 
about the people's health care, and patients and their representatives, 
such as employers, ought to know it. A similar abuse arises when health 
systems demand that insurance companies do not ``tier,'' or rank, their 
providers based on the cost and quality of the care that patients 
receive. Anti-steering clauses prohibit health plans from encouraging 
patients to receive care with higher value providers. And finally, 
``all or nothing'' clauses are coercive to health plans; they state 
that ``if you're going to contract with any providers of our system, 
you must contract with all of them.'' This allows a monopoly in one 
area to diminish competition in a completely different market.

    Together, these practices are anti-competitive and hurt patients. 
They stand in direct opposition to the movement to value-based care, 
asserting that cost and quality don't matter if dominance in the market 
is great enough.

    There is one objection to these provisions that I'd like to 
address, both as a former regulator and in working closely with rural 
health care providers today. Some have claimed that banning these 
market distorting practices could limit the power of health systems to 
negotiate higher rates that support some rural hospitals. In response, 
I would first question how prevalent this dependence is. Second, where 
these rural hospitals do struggle, the solution to inadequate funding 
is not to promote anti-competitive behavior and opaque cross-subsidies. 
If rural hospitals need greater support, direct subsidies would be a 
more efficient and transparent mechanism.

    I also note that there are new models being tested that focus on 
rural health care, including important ones in Pennsylvania and 
Maryland, under the auspices of the CMS Innovation Center. Both of 
these models seek to ensure access to care in rural communities while 
still promoting high value care. Neither model relies on anti-
competitive behavior.

    In addition, there are other ideas to promote rural health while 
advancing value-based care competition. One such idea would fix what is 
known as the Rural Glitch, which is a quirk in Medicare ACO policy that 
systematically disadvantages rural providers who participate in ACOs. 
Such policy remedies come at a much lower cost because they directly 
address the rural issues. We urge Congress to press ahead with such 
proposals and consider incorporating them in your legislation.

    There are additional elements of this legislation that would 
address other market failures and deserve support.

    Surprise billing. Surprise billing involves taking advantage of 
vulnerable patients who are not in a position to make an informed 
alternative choice. A functioning market would never permit surprise 
billing because it would drive away business from those who engage in 
the practice. The fact that we have this problem is proof of a market 
failure that requires corrective action by Congress. We applaud this 
Committee's willingness to take on this issue and to consider multiple 
solutions.

    All-payer claims data base. For many years, studies of the American 
health care system relied on Medicare claims data, which was the only 
available national data base. But we know that Medicare beneficiaries 
are very different from the privately insured population and that the 
two markets often behave very differently. Many of the anti-competitive 
practices that this legislation seeks to correct were exposed by 
studies using multi-payer claims data bases, such as the one 
administered by the Health Care Cost Institute. We need to support and 
nurture these types of data bases to understand market dynamics.

    Restrictions on PBM spread-pricing..Markets do not work when 
important information is kept from customers, including health plans 
and employers. PBMs should be competing on the basis of providing high-
value formularies to health plans and should generate revenue on that 
basis, not by arbitraging asymmetries in information between drug 
manufacturers and health plans and employers. Again, if the market for 
PBM services were highly competitive, PBMs would not be able to 
withhold information from their customers. In light of this market 
failure, it's appropriate for Congress to take action.

    Claims submission time limit. We are supportive of time-dependent 
requirements on billing. This is directionally the right step, it 
promotes transparency, and it is patient-centric. One cautionary note: 
we worry that this could impose a burden on small physician practices. 
Many of our solo practitioners who work around the clock seeing 
patients may struggle to submit a bill within 30 days . So I urge you 
to consider exemptions or longer timeframes for small practices in 
legislation like this.
           Additional Recommendations to Improve Competition
    This legislation takes steps to address the most egregious 
contracting practices that result from consolidation, but there is much 
more to be done to make our provider markets more competitive. Some of 
the ideas highlighted here are drawn from the work of Dr. Farzad 
Mostashari (CEO of Aledade), Dr. Martin Gaynor and Dr. Paul Ginsburg, 
writing with the support of the Brookings Institution. \3\
---------------------------------------------------------------------------
    \3\  Gaynor, M; Mostashari, F; Ginsburg P (2017) Making Health Care 
Markets Work: Competition Policy for Health Care. Brookings 
Institution.https://www.brookings.edu/research/making-health-care-
markets-work-competition-policy-for-health-care/
---------------------------------------------------------------------------
          Site-neutral payments. Facility fees paid to hospital 
        outpatient departments for services that can be provided in 
        physician offices helps hospitals acquire independent practices 
        and reduce competition in their markets. Congress passed 
        legislation in 2015 to put an end to extra Medicare payments to 
        new hospital sites but ``grandfathering'' allowed sites 
        acquired before 2017 to continue billing and receiving 
        ``facility fees.''. In recent rulemaking, the CMS has attempted 
        to apply site-neutral payments to a limited number of so-called 
        ``excepted'' sites, and for a limited number of services. That 
        rule change is being challenged in court, and we encourage a 
        legislative remedy that achieves full site neutrality.

          Improve access to capital for independent practices. 
        Independent physician practices, especially PCPs, appear to 
        perform better in value-based models, but their financial 
        status is often weak. Congress could expand loan repayment 
        programs to providers who serve in rural areas, even if they 
        work at private practices. Congress could also focus on Small 
        Business Association loans targeted at rural private practices.

          Reform Certificate of Need (CON) rules. When a state 
        strictly limits the number of hospitals that can receive a CON 
        for a particular service, it is often granting monopoly power 
        for that service in those markets with no corresponding 
        mechanism to control costs or improve quality. Congress could 
        establish Federal grants for states that commit to pro-
        competitive policies, such as repealing or reforming CON laws.

          Reinvigorate antitrust enforcement. The FTC, which 
        can oversee mergers of nonprofit hospitals, does not have the 
        ability to review other potentially anti-competitive behavior 
        by hospitals. While this legislation would outlaw many of the 
        contracting abuses that FTC would potentially monitor, we 
        believe that the agency should be better equipped moving 
        forward.

          Require patient-centric data sharing. Medical and 
        economic literature demonstrate that patients have fewer 
        readmissions and other adverse outcomes when they see their PCP 
        after discharge from the hospital. Aledade practices avoid one 
        hospital readmission for every eight transitional care visits 
        they provide. But independent physicians can provide this care 
        only when they receive timely notification of the patient 
        discharge. Aledade has encountered resistance from some 
        hospitals in providing these data--even when we bear the cost 
        of the interfacing and there is no technological barrier. CMS 
        recently published rules requiring hospitals to share 
        admission, discharge and transfer data. We applaud this move as 
        it will greatly increase patient safety. That the rules are 
        needed at all is proof that maintaining a competitive 
        environment requires vigilance.

    I am very supportive of this legislation and commend the Committee 
for its bipartisan work. Thank you for the opportunity to share 
Aledade's experiences with you, and I look forward to continuing to 
engage with Members of the Committee as you consider this legislation.
                                 ______
                                 
                 [summary statement of sean cavanaugh]
    My name is Sean Cavanaugh, Chief Administrative Officer for 
Aledade, a health care company that partners with independent primary 
care physicians to help them succeed in value-based care, particularly 
accountable care organization (ACOs). We provide population health 
workflow tools and integrated data analytics, and we transform how our 
practices deliver care. Our mission is to sustain independent primary 
care and offer community providers an alternative to hospital 
consolidation. We are pleased to see the Committee's attention to 
lowering health care costs by promoting competition.

    To address rising health care costs, we should work to create a 
more competitive market before resorting to more regulatory approaches. 
Unfortunately, our current health-care system is rife with market 
failures, including payer and provider consolidation, and our laws 
permit practices that undermine competition. Evidence continues to show 
that when hospitals merge prices increase and quality stagnates. I 
applaud the Committee for confronting anti-competitive practices and 
for charting a path toward true competition. Gag clauses, anti-tiering, 
anti-steering, as well as all-or-nothing clauses, are prime examples of 
excess market power enabling anti-competitive behavior. These practices 
stand in opposition to the movement to value-based care.

    I also commend the Committee for supporting the creation of an all-
payer claims data base. For many years, studies of the American health 
care system relied solely on Medicare claims data. Many of the anti-
competitive practices that this legislation seeks to correct were 
exposed by studies using multi-payer claims data bases, such as the one 
administered by the Health Care Cost Institute. We similarly support 
action on PBM practices, in which consolidation has led to pricing 
opacity that increases costs. Finally, we support time limits on 
billing because it promotes transparency, and it is patient-centric, 
but we urge the Committee to consider exemptions or longer time 
requirements for small practices that may struggle, in earnest, to meet 
such deadlines.

    The Committee could take additional steps to support competition by 
creating site neutral payments for services that can be provided in a 
physician's office, improving access to capital for small practices to 
enable physician independence, strengthening the FTC, and encouraging 
states to remove anti-competitive regulation, such as Certificate of 
Need (CON) laws.

    Thank you for this opportunity to testify today.
                                 ______
                                 
    The Chairman. Thank you, Mr. Cavanaugh, for your testimony.
    Dr. Ippolito, welcome.

  STATEMENT OF BENEDIC N. IPPOLITO, RESEARCH FELLOW, AMERICAN 
              ENTERPRISE INSTITUTE, WASHINGTON, DC

    Mr. Ippolito. Thank you very much. Chairman Alexander, 
Ranking Member Murray when she arrives, and Members of the 
Committee, thank you for the opportunity to appear before you 
today to discuss the Lower Health Care Costs Act.
    My name is Benedic Ippolito, and I am an economist and 
research fellow at the American Enterprise Institute.
    I first want to applaud the Committee on this evidence-
based and constructive proposal. Together, the provisions in 
this bill will meaningfully increase competition and 
transparency in health care markets. If enacted, this 
legislation would lower insurance premiums and drug prices for 
consumers, and it would ensure patients are no longer exposed 
to surprise medical bills.
    By lowering costs, this bill would also improve access to 
health care. It's a laudable proposal and one of the most 
impressive bipartisan health policy bills in recent years.
    Now, much of my written testimony is going to echo 
recommendations submitted to the Senate HELP Committee by 
health policy experts at AEI and the Brookings Institution 
earlier this year. In my remarks this morning, I'm going to 
focus on two provisions of the Lower Health Care Costs Act: 
namely, establishing a transparency organization to lower 
health care costs, and ending surprise medical bills.
    First, the provision establishing a non-governmental entity 
that would assemble and analyze data from commercial insurers 
would meaningfully improve our understanding of the private 
health care market, and I'm very much going to echo the 
previous comments by saying that the Federal Government already 
regulates many parts of the private health care market, yet 
much of our understanding of health care has traditionally come 
from public payers like Medicare. As it was previously noted, 
this represents a substantial problem.
    Ensuring a vibrant and competitive private market requires 
that policymakers are not flying blind. Assembling data on the 
private market in this manner would improve research and, in 
turn, improve policymaking.
    Second, I'd like to discuss surprise medical billing, a 
feature of the health care system that has received 
considerable recent attention. All three proposals included in 
the draft legislation represent serious attempts to resolve 
this issue.
    With that said, adopting an in-network guarantee is the 
best option. It represents a straightforward and market-
oriented way to stop surprise medical bills before they ever 
occur rather than adjudicating them after the fact.
    By tasking hospitals with ensuring that physicians are in-
network for insured patients, market actors would need to 
bargain over prices themselves rather than having those prices 
set by arbitration. Physicians at in-network hospitals would 
have two choices: either they could come to an agreement with 
the insurer, as many already do; or they could choose to be 
paid by the hospital if they prefer. This would force the small 
number of bad actors to stop surprise billing patients and 
impose little additional burdens on the majority of providers 
who do not engage in this behavior.
    This approach has received support from a wide array of 
health policy experts, including those at the Brookings 
Institution, the Center for Budget and Policy Priorities, 
Georgetown Law, Yale University, and my colleague Jim Capretta 
at AEI. As scholars at Brookings note, the in-network guarantee 
is the only option that would fully address the market failure 
that gives rise to surprise bills, and as economists at Yale 
further emphasize, the resulting payments would be generated by 
market forces.
    I agree with these assessments, and I really think this is 
a point worth emphasizing. With an in-network guarantee, there 
are no more surprise bills to adjudicate after the fact. We 
need not rely on an arbiter to tell us which of either the 
provider or the insurer is being more reasonable. The bills 
simply do not happen, and we task market actors with figuring 
out what an appropriate market price is.
    Now, an alternative option would have disputes over out-of-
network bills be adjudicated by an arbiter. While I understand 
the appeal of this process, I think in practice arbitration 
effectively represents an inferior version of setting a simple 
benchmark. The arbiter ultimately must decide what a reasonable 
price for a service is, just like a price setter would.
    Moreover, the process is less transparent. It includes 
unnecessary expenses. It can be unpredictable. It takes the 
resolution out of the hands of market actors, and it does not 
stop surprise bills from occurring in the first place. An 
arbitration scheme is not the best option for resolving 
surprise medical billing.
    Now, while some pieces are yet to be finalized, I do want 
to be very clear on one thing. This bill represents a very 
impressive bipartisan effort to meaningfully lower health care 
costs for Americans. I applaud your efforts, and I genuinely 
thank you for the opportunity to be here today, and I look 
forward to your questions.
    [The prepared statement of Mr. Ippolito follows:]
               prepared statement of benedic n. ippolito
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee. Thank you for the opportunity to appear before you today to 
discuss the Lower Health Care Costs Act.
    I want to applaud the Committee on this evidence-based and 
bipartisan effort. Together, the provisions in this bill would 
meaningfully increase competition and transparency in health care 
markets. If enacted, this legislation would lower insurance premiums 
and drug prices for consumers, and would ensure patients are no longer 
exposed to surprise medical bills. By lowering costs, this bill would 
also improve access to health care.
    In this testimony, I discuss a few of the specific provisions--some 
of which echo those submitted to the Senate HELP Committee by health 
policy experts at the American Enterprise Institute and the Brookings 
Institution at the request of Chairman Alexander. \1\ Specifically, I 
focus on two titles of the proposed bill: ending surprise medical 
billing and increasing transparency in health care.
---------------------------------------------------------------------------
    \1\  ``Cost-reducing health policies: A response to Chairman 
Alexander of the Senate Committee on Health, Education, Labor, and 
Pensions.'' Henry Aaron, Joseph Antos, Loren Adler, James Capretta, 
Matthew Fiedler, Paul Ginsburg, Benedic Ippolito, and Alice Rivlin. May 
1, 2019. https://www.aei.org/wp--content/uploads/2019/03/cost--
reducing--health--care--recommendations--antos--capretta--ippolito.pdf
---------------------------------------------------------------------------
                     Ending Surprise Medical Bills
    Surprise medical bills occur when patients are unexpectedly treated 
by health care providers who do not accept their insurance, but whom 
they could not reasonably avoid. When patients are treated by these 
out-of-network providers, they can be billed at ``list prices,'' which 
are typically many times higher than what any insurer would pay. 
Surprise medical bills are one of the most pernicious features of the 
modern health care market.
    Unfortunately, these bills are not rare. An estimated 20 percent of 
emergency department visits, 50 percent ambulance rides, and even one-
in-ten scheduled stays at in-network hospitals, where patients have the 
opportunity to do their due diligence, result in a bill from an out-of-
network provider. \2\ These rates are fairly constant across employer-
sponsored plans and those purchased on the individual market. \3\ It is 
important to note that these bills are also not random. Physicians that 
are least likely to be actively chosen by patients, like 
anesthesiologists and emergency physicians, set their list prices 
highest. Doing so increases the size of resulting surprise bills and is 
suggestive that physicians are behaving strategically. \4\
---------------------------------------------------------------------------
    \2\  Cooper, Zack and Fiona Scott Morton. 2016. ``Out-of-Network 
Emergency-Physician Bills--An Unwelcome Surprise.'' New England Journal 
of Medicine. 2016; 375:1915-1918. https://www.nejm.org/doi/full/
10.1056/NEJMp1608571; Garmon, Christopher and Benjamin Chartock. 2017. 
``One in Five Inpatient Emergency Department Cases May Lead to Surprise 
Bills.'' Health Affairs. 36(1). https://www.healthaffairs.org/doi/
10.1377/hlthaff.2016.0970.
    \3\  Garmon and Chartock, 2017.
    \4\  Adler, Loren, Matthew Fiedler, Paul B. Ginsburg, Mark Hall, 
Erin Trish, Christen Linke Young, and Erin Duffy. ``State Approaches to 
Mitigating Surprise Out-of-Network Billing.'' USC-Brookings Schaeffer 
Initiative for Health Policy. February 2019. https://www.brookings.edu/
wp-content/uploads/2019/02/Adler--et-al--State-Approaches-to-
Mitigating--Surprise-Billing-2019.pdf
---------------------------------------------------------------------------
    It is not only those consumers who receive surprise bills that are 
affected by this phenomenon. Because some health care providers can 
implicitly threaten to engage in this kind of behavior, they will only 
agree to join insurance networks if in-network payments are very 
generous. Because of this, the physicians with the greatest ability to 
surprise bill also receive the highest in-network payment rates. Figure 
1 presents data on average contracted payment rates for selected 
specialties relative to Medicare payment rates (these data were 
originally presented in Adler et al., 2019). For example, 
anesthesiologists and emergency physicians receive average in-network 
payments that are over 300 percent of Medicare reimbursement. Among all 
physicians, however, average payments are under 130 percent of Medicare 
rates. As a result, the lucrative outside option to surprise bill 
patients means that all commercially insured patients are left paying 
higher premiums.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The very unpredictability which defines surprise bills is the same 
feature that makes it hard for markets to correct this behavior. If 
patients cannot reliably avoid providers who engage in such practices, 
they cannot send market signals to end it. Because of this market 
failure, targeted legislative intervention is well merited. I commend 
the Committee for including multiple options to address this in the 
Lower Health Care Costs Act.
                 The Wisdom of the In-Network Guarantee
    While all three proposals represent serious attempts to resolve 
this issue, adopting an in-network guarantee is the best option. It 
represents a straightforward and market-oriented way to stop surprise 
bills from occurring in the first place, rather than adjudicating them 
after the fact. By tasking hospitals with ensuring that physicians are 
in network for insured patients, market actors would need to bargain 
over prices themselves, rather than having those prices set by 
arbitration or regulation. Physicians at in-network hospitals would 
have two choices: come to an agreement with the insurer, or chose to be 
paid by the hospital. This would force the small number of bad actors 
to stop surprise billing patients and impose few additional burdens on 
the majority of providers who do not engage in this behavior.
    This option (or very similar options) has received support from a 
wide array of health policy experts, including those at the Brookings 
Institution, \5\ the Center for Budget and Policy Priorities, \6\ 
Georgetown Law, \7\ Yale University, \8\ and my colleague James 
Capretta at AEI. \9\ Scholars at Brookings, who have studied surprise 
billing extensively, emphasized that the in-network guarantee is ``the 
only option that would fully address the market failure that gives rise 
to surprise bills.'' \10\ They go on to note that under this solution 
``payment for these services would be negotiated among the insurer, 
hospital, and clinician. This would then resemble a more typical market 
negotiation, rather than today's situation where certain clinicians can 
leverage the threat of surprise billing patients to secure higher 
contracted payment rates.'' \11\ Scholars at Yale further emphasize 
that the resulting payments would be ``generated by market forces.'' 
\12\
---------------------------------------------------------------------------
    \5\  Adler, Loren, Matthew Fiedler, Paul B. Ginsburg, Mark Hall, 
Erin Trish, Christen Linke Young, and Erin Duffy. ``State Approaches to 
Mitigating Surprise Out-of-Network Billing.'' USC-Brookings Schaeffer 
Initiative for Health Policy. February 2019.
    \6\  Straw, Tara.''Lawmakers can prevent surprise medical bills, 
lower health costs.'' Center on Budget and Policy Priorities. June 11, 
2019.
    \7\  Ippolito, Benedic and David Hyman. ``Solving surprise medical 
billing.'' AEI Economic Perspectives. 2019.
    \8\  Cooper, Zack, Fiona Scott Morton, and Nathan Shekita. 
``Surprise! Out-of-network billing for emergency care in the United 
States.'' No. w23623. National Bureau of Economic Research, 2017.
    \9\  Capretta, James. ``Congress should force the medical 
industrial complex to end surprise bills'' RealClearPolicy. May 17, 
2019.
    \10\  Adler, Loren, Matthew Fiedler, Paul Ginsburg, and Christen 
Linke Young. ``Comments on the Lower Health Care Costs Act of 2019.'' 
USC-Brookings Schaeffer Initiative for Health Policy. June 5, 2019.
    \11\  Ibid.
    \12\  Cooper et al., 2017
---------------------------------------------------------------------------
    Similarly, my AEI colleague, James Capretta, argues that, ``if a 
patient goes through the trouble of ensuring the hospital and main 
physician (such as a surgeon) are in-network, then the entire care 
process should be treated as an in-network episode. That means the 
insurers, working with the hospitals and physicians, should be required 
to build networks that prevent this kind of surprise billing from ever 
occurring.'' \13\ I agree with these assessments. This is the best way 
for Congress to restore normal order to this market.
---------------------------------------------------------------------------
    \13\  Capretta, James. ``Congress should force the medical 
industrial complex to end surprise bills'' RealClearPolicy. May 17, 
2019.
---------------------------------------------------------------------------
    As the Committee moves forward, I would suggest that they consider 
two possible improvements to this proposal. (Note: the following two 
paragraphs are largely taken from Adler, Fiedler, and Ippolito, 2019.) 
\14\
---------------------------------------------------------------------------
    \14\  Adler, Loren, Matthew Fiedler, and Benedic Ippolito. 
``Network matching: An attractive solution to surprise billing.'' 
Health Affairs Blog. May 23, 2019.
---------------------------------------------------------------------------
    Providers and insurers could seek to skirt these requirements by 
setting up creative arrangements in which a facility was notionally out 
of network, but the facility tacitly agreed to accept a rate similar to 
the one it would have accepted in network and the insurer agreed to 
apply cost-sharing terms similar to in-network cost-sharing terms. The 
Senate HELP discussion draft includes some language that appears to be 
aimed at foreclosing this possibility, but it would be also worth 
considering additional safeguards. For example, a facility could be 
``deemed'' in-network for the purposes of these provisions if it 
treated a large enough fraction of an insurer's enrollees in a given 
geographic area.
    Notably, the network matching requirements in the current Senate 
HELP discussion draft appears to apply more broadly to all out-of-
network services at an in-network facility, not just out--of-network 
services delivered by emergency and ancillary clinicians. In revising 
the draft, consideration should be given to narrowing the requirement 
to exclude other categories of clinicians in cases where they meet 
notice and consent standards.
    I want to address a few concerns that have been raised regarding 
this proposal. First, some suggest that this approach will transfer too 
much bargaining power to insurers. Under a worst-case scenario, a 
dominant insurer could use their leverage to drive down rates for 
affected physicians so far that they would be unwilling to work. This 
is a concern that appears to particularly resonate in rural states 
where ensuring the supply of providers can be more challenging. In 
practice, however, I believe this is unlikely to be a problem. In order 
to stay open, hospitals need to ensure adequate staffing. Even under a 
scenario with a dominant insurer, hospitals can ensure this in two 
ways. One option is to ``top up'' the payment rates to 
anesthesiologists, and similarly affected physicians, to ensure they 
are willing to work. A more likely option is to demand that insurers 
guarantee reasonable market rates to these doctors as part of their 
broader negotiations with insurers. That is, hospitals can leverage 
access to their entire facility to ensure that payments to physicians 
remain at acceptable levels.
    To the extent that rural states remain concerned about the supply 
of health care providers, there are a number of other steps they can 
take. Chief among them is ensuring that a state's scope of practice 
laws support a robust supply of providers. For example, CMS requires 
anesthesia services to be provided by an anesthesiologist (i.e. a MD), 
or nurse anesthetist--but only if the nurse anesthetist is supervised 
by an anesthesiologist. \15\ However, CMS allows states to opt out of 
this and permits nurse anesthetists to practice independently if the 
Governor (in consultation with the state medical board) submits a 
letter to CMS opting out. Opting out provides states with a way to make 
sure the supply of qualified providers remains robust. And number of 
states with substantial rural areas have done just that--these include 
Alaska, North Dakota, New Hampshire, Montana, Idaho, Nebraska, Kansas, 
and Iowa. Taking steps like these can further ensure a healthy number 
of providers even in rural states.
---------------------------------------------------------------------------
    \15\  42 CFR Sec.  482.52
---------------------------------------------------------------------------
    Second, some have argued that this represents an untested reform. 
While it is true that no state has implemented this exact proposal to 
resolve surprise billing, it is not the case that this type of 
contracting arrangement is untested. The vast majority of physicians or 
other health care professionals already secure payment from hospitals 
or insurers. Moreover, data from a large, national health insurer shows 
that most hospitals already effectively require that physician and 
hospital networks align. Indeed, most hospitals have surprise billing 
rates that are below 2 percent. \16\
---------------------------------------------------------------------------
    \16\  Cooper, Zack, Fiona Scott Morton, and Nathan Shekita. 
``Surprise! Out-of-network billing for emergency care in the United 
States.'' No. w23623. National Bureau of Economic Research, 2017.
---------------------------------------------------------------------------
    Finally, I acknowledge that intervening in the contracting 
practices of private firms and workers should not be entered into 
lightly. Any such regulation must be motivated by clear evidence of a 
market failure and be a case where contracting reforms can restore 
market forces to the situation. In this case, I believe the evidence is 
sufficiently compelling that this type of intervention is well 
supported.
              Concerns with Independent Dispute Resolution
    A separate option would have Congress solve this issue by having 
disputes over out-of-network billing be adjudicated by an arbiter. Both 
the insurer and provider would submit final offers to an arbiter, who 
would then choose which is ``more reasonable.'' The appeal of this 
option is understandable--in theory, arbiters could have flexibility to 
tailor resolutions to specific cases. In practice, however, arbitration 
effectively represents an inferior version of rate setting. The arbiter 
must decide what a ``reasonable'' price for a service is, just like any 
price fixer. Moreover, this process is not transparent, is 
unnecessarily expensive, can be unpredictable, carries the greatest 
risk of unintended consequence, and takes the resolution out of the 
hands of market actors. I believe that arbitration is not the best 
solution to surprise medical billing.
    Some may argue, however, that this process is not opaque or 
uncertain since the independent dispute resolution gives some guidance 
to the arbiter on what to consider when adjudicating cases. If the goal 
is to reduce unpredictability or variability in the outcome of 
arbitration, however, setting a transparent benchmark payment at this 
same rate is a preferable option since it eliminates those concerns and 
costs nothing to implement.
    I am not alone in my concerns about arbitration. Researchers at 
Yale who studied the effects of the arbitration system in New York 
note, ``it is extremely unlikely that a regulated price of this sort 
will match the market price for any given transaction.'' \17\ My 
colleague, James Capretta, has also warned that this approach is 
``likely to lead to an ever-expanding role for government rate-
setting.'' \18\ If Congress must put limits on payment rates, it should 
do so in the most transparent and restricted way possible.
---------------------------------------------------------------------------
    \17\  Ibid.
    \18\  Capretta, James. ``Congress should force the medical 
industrial complex to end surprise bills'' RealClearPolicy. May 17, 
2019.
---------------------------------------------------------------------------
                      Opportunities to go further
    I encourage the Committee to consider further reforms surrounding 
ambulance transportation. Roughly half of all ground ambulance rides 
and nearly 70 percent of air ambulance rides are out of network. \19\ 
By its very nature, emergency transportation is an area where patients 
generally have limited scope for choice, making it hard for markets to 
solve this issue. Among other possible reforms, the Committee may 
consider whether Federal pre-emption of state regulation of air 
ambulances is worth revisiting.
---------------------------------------------------------------------------
    \19\  U.S. Government Accountability Office. March 2019. https://
www.gao.gov/assets/700/697684.pdf
---------------------------------------------------------------------------
                 Improving Transparency in Health Care
    I further applaud the Committee for its efforts to improve the 
competitiveness and transparency of health care markets. If markets are 
to tame health care costs, they need the data and opportunity to do 
just that. The provisions in this section of the bill are a bold step 
toward that goal.
                  Pro-competitive contracting reforms
    Dominant health care providers make use of a number of contracting 
strategies to reduce potential competition. These include gag clauses, 
which prohibit enrollees, plan sponsors, or referring providers from 
seeing data on cost and quality of providers. These provisions can also 
prevent plan sponsors from accessing de-identified claims data for plan 
administration and quality improvement purposes.
    I agree that denying information in this manner is anti-competitive 
behavior. Without information on costs and quality of services, market 
forces have no way of disciplining costs of the health care system. 
Congress is well justified in banning this type of contract. Doing so 
will increase transparency and introduce more downward pressure on 
health care costs.
    The Lower Health Care Costs Act would further restrict contracting 
by disallowing ``anti--tiering'' and ``anti-steering'' clauses which 
prevent plans from incentivizing patients to see providers with lower 
costs or higher quality. In cases where dominant providers engage in 
this behavior, they can solidify their market dominance and inflate 
costs over time. I would, however, suggest that the Committee consider 
adding some caveats to this provision. In a provider market that is 
very competitive, these clauses are not necessarily unduly 
anticompetitive. If insurers can simply exclude providers who demand 
these kinds of clauses in their contracts, and instead direct patient 
volume to other providers, they would be naturally disincentivized by 
the market. Thus, the Committee could consider applying such bans to 
markets that are deemed ``sufficiently consolidated'' (for example, if 
the Herfindahl-Hirschman Index, or another measure of concentration, is 
sufficiently high). The same considerations should apply to proposed 
bans on ``all-or-nothing'' or ``most-favored-nation'' contracting 
clauses.
    Some will argue these proposed reforms would force consumers to 
choose narrower networks or otherwise limit choice. For example, the 
American Hospital Association argues that ``banning so-called `all or 
nothing' clauses could lead to even more narrow networks with fewer 
provider choices for patients.'' \20\ I believe this framing is 
misleading. Under the status quo, dominant providers can effectively 
force consumers to have very broad and costly plans, without any other 
option. Insurance plans do not reflect patient preferences, but those 
of the large provider. The contracting provisions in this draft would 
give insurers, and ultimately consumers, more choice over the kind of 
plan they want. If providers are confident that consumers only want the 
kinds of plans that result from this anti-competitive contracting 
behavior, then they have no reason to worry. Consumers will presumably 
continue to choose those very plans. If, however, consumers prefer 
lower cost plans, they would now have more options to choose them.
---------------------------------------------------------------------------
    \20\  Nickels, Tom. ``AHA statement on Senate HELP Committee draft 
legislation on health care costs.'' American Hospital Association. May 
23, 2019. https://www.aha.org/press-releases/2019-05-23-aha-statement-
Senate-help-committee-draft--legislation-health-care-costs
---------------------------------------------------------------------------
                Establishing a transparency organization
    I applaud the Committee's efforts to further increase transparency 
by designating a nongovernmental, nonprofit entity which will use de-
identified health care claims data from self-insured plans, Medicare, 
and participating states to help patients, providers, academic 
researchers, and plan sponsors better understand the cost and quality 
of care, and facilitate state-led initiatives to lower the cost of 
care. Assembling and disseminating this kind of information is crucial 
for addressing the long-term health care cost growth.
    In 2009, Atul Gawande famously profiled the town of McAllen, Texas 
in the New Yorker. \21\ Data from Medicare had shown that the 
unassuming city in the south of Texas held an inauspicious title: It 
was one of the most expensive health care markets in the country. In 
2006, Medicare spent $15,000 per enrollee there. The national average 
was just half of that. McAllen was the example of health care markets 
gone horribly awry, and if we failed to act, ``McAllen won't be an 
outlier. It will be our future.'' Little did Gawande know at the time, 
but that might have been a good thing.
---------------------------------------------------------------------------
    \21\  Gawande, Atul. ``The cost conundrum: What a Texas town can 
teach us about health care.'' The New Yorker. May 25, 2009. https://
www.newyorker.com/magazine/2009/06/01/the-cost-conundrum
---------------------------------------------------------------------------
    In the mid-2000's, data on the commercial market was extremely 
rare, so researchers had to rely on data from public insurers, like 
Medicare. Unfortunately, this led to gross mischaracterizations about 
U.S. health care. Only later did we learn that health care spending by 
commercial insurers in that same McAllen, Texas was actually pretty 
unremarkable. Data on private insurers from the Health Care Cost 
Institute shows that McAllen's commercial price level is near the 
national average and its use of health care is actually meaningfully 
lower than normal in the commercial market. \22\ In other words, 
Medicare data only told part of the story.
---------------------------------------------------------------------------
    \22\  ``Healthy Marketplace Index.'' Health Care Cost Institute. 
https://www.healthcostinstitute.org/research/hmi/hmi--interactive--HMI-
Price-and-Use
---------------------------------------------------------------------------
    The Federal Government is tasked with regulating parts of the 
private market, yet much of our understanding of health care has 
traditionally come only from public insurers like Medicare. Ensuring a 
vibrant and competitive private market requires that policymakers are 
not flying blind. Accurate data is an important element of ensuring 
this is not the case.
                             Joint Ventures
    The bill would further task the Government Accountability Office 
with producing a report which describes what is known about profit-and 
revenue-sharing relationships in the commercial health care markets. 
This information is important for helping researchers and policymakers 
better understand the nature of market dynamics in health care markets. 
I believe this report could be useful for future efforts to make sure 
health care markets retain competitive forces where possible.
                                 ______
                                 
               [summary statement of benedic n. ippolito]
    In my testimony, I discuss a number of the specific provisions--
some of which echo those submitted to the Senate HELP Committee by 
health policy experts at the American Enterprise Institute and the 
Brookings Institution at the request of Chairman Alexander.

    First, I commend the Committee for addressing surprise medical 
billing so constructively. I believe that adopting an in-network 
guarantee is the best option for resolving surprise medical billing. 
This approach has received support from a wide array of health policy 
experts, including those at the Brookings Institution,1 the Center for 
Budget and Policy Priorities,2 Georgetown Law,3 Yale University,4 and 
my colleague James Capretta at AEI.5 I agree with scholars at Brookings 
who note that this is ``the only option that would fully address the 
market failure that gives rise to surprise bills.''6 While well 
intentioned, arbitration is not the best solution to this problem and 
carries the largest chance of unintended consequences.

    Second, establishing a nongovernmental entity to increase our 
understanding of the private health care market represents a major 
opportunity to improve health care in the future. Third, I applaud a 
number of pro-competitive contracting reforms but suggest that the 
Committee consider targeting some to only those cases where provider 
markets are sufficiently concentrated. Fourth, tasking the GAO with 
producing a report describing what is known about profit-and revenue-
sharing relationships in commercial health care markets strikes me as a 
smart step forward for ensuring competitiveness of markets.

    I thank you for the opportunity to engage on this ambitious and 
substantive proposed bill.

    1 Adler, Loren, Matthew Fiedler, Paul B. Ginsburg, Mark Hall, Erin 
Trish, Christen Linke Young, and Erin Duffy. ``State Approaches to 
Mitigating Surprise Out-of-Network Billing.'' USC-Brookings Schaeffer 
Initiative for Health Policy. February 2019. 2 Straw, Tara.''Lawmakers 
can prevent surprise medical bills, lower health costs.'' Center on 
Budget and Policy Priorities. June 11, 2019. 3 Ippolito, Benedic and 
David Hyman. ``Solving surprise medical billing.'' AEI Economic 
Perspectives. 2019.

    4 Cooper, Zack, Fiona Scott Morton, and Nathan Shekita. ``Surprise! 
Out-of-network billing for emergency care in the United States.'' No. 
w23623. National Bureau of Economic Research, 2017. 5 Capretta, James. 
``Congress should force the medical industrial complex to end surprise 
bills'' RealClearPolicy. May 17, 2019. 6 Adler, Loren, Matthew Fiedler, 
Paul Ginsburg, and Christen Linke Young. ``Comments on the Lower Health 
Care Costs Act of 2019.'' USC-Brookings Schaeffer Initiative for Health 
Policy. June 5, 2019.
                                 ______
                                 
    The Chairman. Thank you, Dr. Ippolito.
    Senator Murray has asked that we continue with the witness 
statements, and then she'll make her statement at the end of 
Ms. Bartlett's comments.
    Mr. Nickels, welcome.

 STATEMENT OF TOM NICKELS, EXECUTIVE VICE PRESIDENT, AMERICAN 
              HOSPITAL ASSOCIATION, WASHINGTON, DC

    Mr. Nickels. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here today. My name is Tom Nickels. I am the 
Executive Vice President for American Hospital Association, 
here to represent our 5,000-member hospitals.
    The Committee has identified several important areas where 
we can make the health care system work better and cost less 
for patients. On each of these, we stand ready to work with 
you.
    On surprise medical billing, the bottom line is we must 
protect patients from surprise medical bills, and the AHA 
supports a Federal legislative solution to do so. Protecting 
patients means limiting their cost-sharing to an in-network 
amount, as the draft legislation does, and keep them out of any 
subsequent negotiation between providers and the health plan. 
Once the patient is protected, providers and payers should be 
allowed to determine fair and appropriate reimbursement.
    The Committee put forward in its discussion draft three 
further options to address surprise billing. The in-network 
guarantee or network matching approach would require facility-
based practitioners to contract with every plan for which a 
facility has a contract. This approach interferes with the 
fundamental relationship between hospitals and their physician 
partners and severely limits practitioners ability to negotiate 
terms with insurers. It's going to be particularly hard for 
rural areas, who are already challenged, to recruit 
practitioners. We believe health plans should not be absolved 
of their core function of establishing provider networks and 
negotiating rates with providers.
    The second option is the independent dispute resolution 
process with the balance of bills paid at the median contracted 
rate. While the AHA believes that hospitals and payers should 
negotiate reimbursement for out-of-network claims without 
government involvement, there may be a role for a dispute 
resolution process, not for hospital services but certainly for 
physician claims. We encourage the Committee to look at the 
features of S. 1531, with some modifications, as an option for 
determining out-of-network reimbursement for physicians. This 
proposal allows a market-based, flexible, and efficient 
negotiation to take place.
    However, while much of the structure of the process 
outlined in S. 1531 is positive, we do believe that an 
automatic payment prior to initiating the dispute resolution 
undermines a provider's opportunity to negotiate fair 
reimbursement.
    The baseball style of arbitration, similar to what New York 
State and many other states have implemented, and which does 
not include hospitals, appears to be an efficient process that 
places the responsibility to initiate the request with the 
provider or health plan, not the patient. Studies have shown a 
34 percent reduction in out-of-network billing. Decisions have 
been largely split between providers and payers, and there's 
not been a noticeable inflationary impact on premium costs.
    The third option is to establish a benchmark rate. We 
oppose a national rate for out-of-network services such as a 
median contracted in-network rate, even if geographically 
adjusted, as it would not be able to capture the many factors 
that specific health plans and providers consider.
    We are also concerned that setting a reimbursement standard 
in law will serve as a disincentive for insurers to maintain 
adequate provider networks.
    We also share the Committee's goal of increasing 
transparency in the health care system. However, we have 
serious concerns with a couple of the policies proposed. For 
example, discussion draft would prevent providers from 
declining unfair tiering and/or steering restrictions imposed 
by insurers. We believe these and other provisions in the 
transparency section would infringe on provider and health plan 
contracting in ways that could limit our Members ability to 
pursue new care delivery models and value-based purchasing 
arrangements designed to improve quality and coordination of 
care while reducing costs.
    Put another way, commercial insurers cannot be allowed to 
have it both ways; that is, enjoy the savings from providers 
shouldering financial risk under a value-based care arrangement 
while simultaneously encouraging those same patients to go 
elsewhere for care. Likewise, it would be unfair, particularly 
to rural hospitals, to allow commercial insurers to cherry-pick 
which hospital in the system they contract with. We strongly 
urge the Committee to remove those provisions.
    I want to thank the Committee for looking for ways to 
improve the health and well-being of all Americans by making 
investment in public health priorities, like vaccinations and 
public health data systems. We especially appreciate the 
Committee's look at maternal health. As hospitals work to 
improve outcomes, we are redoubling our efforts to improve the 
health of mothers and babies, and reaching out to community 
partners to aid in this effort.
    I also want to thank you for your efforts to reduce drug 
prices. Runaway drug prices mean that many of our patients 
simply cannot afford their medications for conditions that 
cannot be managed.
    We support the drug pricing provisions in the bill. Each 
seeks to increase competition.
    We also in our testimony identify additional actions the 
Committee may consider, such as further increasing transparency 
in pricing through the FAIR Act.
    Mr. Chairman, we have an opportunity to help patients with 
their health care costs and affordability. We look forward to 
working with you and the Committee on those efforts. Thank you 
very much.
    [The prepared statement of Mr. Nickels follows:]
                   prepared statement of tom nickels
    Chairman Alexander, Ranking Member Murray and Members of the 
Committee, my name is Tom Nickels. I am executive vice president of the 
American Hospital Association (AHA). On behalf of our nearly 5,000 
member hospitals and health systems, along with our clinician partners, 
I appreciate the opportunity to testify today.

    We appreciate the Committee's interest in addressing the important 
issue of health care costs, and recently provided feedback on the Lower 
Health Care Costs Act of 2019. The cost of health care in America 
affects all stakeholders, including patients and their families, 
employers, policymakers and care providers. We all play a role in 
making care and coverage more affordable. Hospitals and health systems 
understand the importance of this issue and have been addressing it 
directly by taking steps to redesign care and implement operational 
efficiencies.

    The Committee has focused its efforts around surprise medical 
bills, prescription drug prices, health care transparency, public 
health and health information technology. I address the provisions 
contained in the Lower Health Care Costs Act, as well as suggest some 
potential additions to the package, below.
                         Surprise Medical Bills
    No patient should be surprised by a medical bill. Hospitals and 
health systems are deeply concerned about the effect unanticipated 
medical bills can have on our patients. These bills can cause patients 
financial and emotional stress and undermine trust and confidence in 
their caregivers. Protecting patients from surprise medical bills is a 
top priority for the AHA and our members.

    The AHA supports a Federal-level solution to protect all patients 
from surprise medical bills, including individuals who receive health 
care coverage through plans regulated under the Employee Retirement 
Income Security Act of 1974 (ERISA) and those who live in states that 
have not yet enacted comprehensive protections.

    Our preferred solution is simple: Patients should not be balance 
billed for emergency services, or for services obtained in any in-
network facility when the patient could reasonably have assumed that 
the providers caring for them were in-network with their health plan. 
In these situations, patients should have certainty regarding their 
cost-sharing obligations, which should be based on an in-network 
amount. Once the patient is protected, hospitals and health systems 
should be permitted to work with health plans on appropriate 
reimbursement. We strongly oppose the imposition of arbitrary rates on 
providers, along with untested proposals such as bundling payments or 
``network matching,'' which would significantly increase complexity in 
the system and may, ultimately, be unworkable. We encourage the 
Committee to use this opportunity to help simplify the health care 
system rather than add more complexity.
   Notice and Disclosure Prior to Post-stabilization Out-of-Network 
                                Service.
    The committee's discussion draft would require that hospitals, 
prior to the provision of any out-of-network post-stabilization 
service, provide the patient with: notice of out-of-network services 
with the option to affirmatively consent to them; a list of in-network 
hospitals or practitioners with the option for referral; and the 
estimated amount such provider would charge for out-of-network 
services. Hospitals and health systems recognize the importance of 
patients receiving care from in-network providers; therefore, most 
hospitals have some form of notice-and-disclosure protocols in place. 
In addition, many states have laws to require notification of network 
status, including requiring of estimates of fees for potential out-of-
network care. While providing the patient such network status 
information is important, it is not in and of itself a solution to 
surprise medical bills. In addition, the provision, as written, should 
be revised to be a shared responsibility between the providers and the 
patient's insurer. For example, the out-of-network hospital is not 
going to have access to information on in-network alternatives, which 
should be the responsibility of the insurer to provide. We encourage 
the Committee to focus on fully protecting patients by prohibiting 
surprise bills and expanding notice-and-disclosure requirements to 
insurers as part of the solution.
                      Addressing Payment Disputes.
    The committee's discussion draft outlines three options to resolve 
payment disputes between providers and health plans: an in-network 
guarantee; an independent dispute resolution process; and a benchmark 
rate.

    Option 1 would require that in-network facilities guarantee to 
patients and health plans that every practitioner caring for the 
patient in the facility is considered in-network. Some have described 
this approach as ``network matching,'' where the facility-based 
practitioner would be required to contract with every plan for which 
the facility has a contract.

    The AHA opposes this option because it interferes with the 
fundamental relationship between hospitals and their physician partners 
and severely limits practitioners' ability to negotiate contract terms 
with insurers. Providers consider a number of factors besides 
reimbursement when determining whether to contract with a payer, 
including whether the payer is a fair business partner in terms of 
administrative burden and processes. In addition, providers and health 
plans should be able to develop networks that meet consumers' needs, 
and neither party should be compelled to enter into a contract based on 
the decision of a third party. It is also important to note that this 
proposal represents a prescriptive, national application of an unproven 
approach that will certainly have negative unintended consequences. In 
addition, it could result in significant economic harm to rural 
hospitals and communities.

    In Option 2, an independent dispute resolution process would be 
established for payment disputes above $750. Plans, facilities and/or 
practitioners would submit their best offer to the arbiter consistent 
with ``baseball-style'' arbitration. The arbiter could take into 
consideration information that would include the median in-network rate 
for services in the geographic area. The arbiter's decision would be 
binding and the losing party would pay the arbitration costs. Balance 
bills valued at $750 or less would be paid at the median contracted 
rate for that service in the geographic area.

    The AHA believes that hospitals and payers should be left to 
negotiate reimbursement for out-of-network claims without government 
interference; however, there may be a role for an alternative dispute 
resolution process for physician claims. Several states have passed 
laws to establish such a process to mediate out-of-network claims 
between physicians and health insurers. Prominent among these processes 
is ``baseball-style'' arbitration, and New York is one such state that 
frequently is referenced as having a successful process. One study 
noted that the New York law reduced out-of-network billing by 34 
percent. \1\ A more recent study found that, ``as of October 2018, IDR 
[New York's independent dispute resolution entity] decisions have been 
roughly evenly split between providers and payers, with 618 disputes 
decided in favor of the health plan and 561 decided in favor of the 
provider... Additionally, insurers and physicians appear to be making 
`a real concerted effort' to work out their payment disputes before 
filing with IDR.'' The study also noted that, while it may be too soon 
to know if the arbitration process leads to higher out-of-network 
prices, there had not yet been an inflationary impact on insurers' 
annual premium rates. \2\
---------------------------------------------------------------------------
    \1\  Surprise! Out-of-Network Billing for Emergency Care in the 
United States; Zack Cooper, Fiona Scott Morton, and Nathan Shekita; 
NBER Working Paper No. 23623 July 2017, Revised January 2018.
    \2\  New York's 2014 Law to Protect Consumers from Surprise Out-of-
Network Bills Mostly Working as Intended: Results of a Case Study; 
Corlette, S. and Hoppe, O.; Georgetown University Health Policy 
Institute--Center on Health Insurance Reforms; May 2019 https://
georgetown.app.box.com/s/6onkj1jaiy3f1618iy7j0 gpzdoew2zu9
---------------------------------------------------------------------------
    For arbitration to work within the context of a Federal solution to 
surprise medical billing, it would need to be designed effectively and 
accommodate existing state programs. In our comments to the Committee, 
we identify several features that are important to include, such as 
ensuring that patients are removed entirely from the process.

    In addition, the AHA appreciates the work done by the Senate 
Bipartisan Working Group in S. 1531 that has developed such a model. We 
encourage the Committee to look at the features of S. 1531, with some 
modifications, as an option for determining out-of-network 
reimbursement for physicians. That proposal allows a market-based, 
flexible and efficient negotiation to take place. However, while much 
of the structure of the process outlined in S. 1531 is positive, we do 
believe that an automatic payment prior to initiating the dispute 
resolution undermines a provider's opportunity to negotiate fair 
reimbursement.

    In Option 3, the health plan would pay the out-of-network 
practitioner and/or the facility based on the median contracted rate 
for services in the geographic area. We urge Committee Members to 
reject a legislative proposal like Option 3 that would have the 
government dictate rates between two private entities. Health plans and 
hospitals have a longstanding history of resolving out-of-network 
emergency service claims, and this process should not be disrupted. We 
are particularly concerned that any attempt at setting a reimbursement 
standard in law will have significant consequences, including by 
disincentivizing insurers to maintain adequate provider networks. 
Growth in the use of no-network, reference-based pricing models in the 
commercial market suggests this already is a growing strategy, and one 
that would accelerate if the insurer could simply point to a 
government-dictated rate or methodology. In addition, this proposal 
does not allow for future adjustments short of another act of Congress.

    Also, this approach could be particularly devastating to rural 
hospitals, which already are operating with thin margins, as it would 
put further downward pressure on their financial resources, and make it 
even more difficult to attract and compensate an adequate health care 
workforce. Medicare and Medicaid made up 56 percent of rural hospitals' 
net revenue in 2017 and, as these programs already pay less than the 
cost of care, further reduction on the commercial side will increase 
the already heavy financial burden rural hospitals are facing. More 
than 40 percent of rural hospitals have negative total operating 
margins and 107 rural hospitals have closed since 2010, including 10 
this year alone.
                         Air Ambulance Billing.
    The committee's discussion draft begins to address concerns 
regarding out-of-network billing for air ambulances; however, the draft 
only addresses issues regarding price transparency and does not 
prohibit balance billing by these providers. The AHA believes Congress 
has a real opportunity to put forward a Federal solution to address 
growing concerns over surprise billing for air ambulance services. We 
encourage Congress to address air ambulance service issues while 
developing legislative solutions related to surprise medical billing. 
More specifically, we ask that the Congress extend similar consumer 
protections from out-of--network billing to air ambulance services and 
include air ambulance services in network adequacy requirements.
               Reducing the Prices of Prescription Drugs
    The AHA applauds the Committee's continued work to lower the price 
of prescription drugs for both patients and the providers who care for 
them, and supports the drug pricing proposals included in the Lower 
Health Care Costs Act. Each of the proposals in the legislation seek to 
increase competition and protect access through appropriate market-
based solutions.

    Specifically, we support the inclusion of provisions aimed at 
restoring clarity and transparency to both the Purple and Orange Books. 
Abuse of patent and exclusivity law remains a significant barrier to 
lowering drug prices, and the Committee's proposals to restore 
transparency related to patent and exclusivity periods for biological 
products and small molecule drugs is a critical component of removing 
those impediments. We thank the Committee for its inclusion of several 
proposals focused on fostering increased competition, as well as 
ensuring patient access to affordable medicines on which they rely. In 
addition, we support the Committee's plan to facilitate the increased 
utilization of biosimilar products, when appropriate, by requiring that 
the U.S. Food and Drug Administration (FDA) establish educational tools 
for both biosimilar and interchangeable products. We also support the 
Committee's recognition of a longstanding issue concerning the drug 
approval process--abuse of the 5-year New Chemical Entity (NCE) 
exclusivity. This proposal would rightfully establish a process to 
properly apply the NCE designation, granting exclusivity to only the 
most novel drugs that are developed.

    However, we suggest the Committee consider additional ways to 
increase transparency and keep drug prices in check. In particular, we 
support the Fair Accountability and Innovative Research (FAIR) Act, 
which would require drug manufacturers to disclose and provide 
information related to planned price increases. Specifically, this bill 
would increase transparency around the price of certain drugs by 
requiring, for the first time, a justification for the price hike, as 
well as research and development costs, marketing and advertising costs 
and the net profits attributed to the drug. Hospitals, as well as other 
stakeholders, already provide a significant amount of similar publicly 
available data, and it is time to hold drug manufacturers to that same 
standard.

    Hospitals are required by law to submit cost reports in order to 
receive Medicare payment. Hospitals must send expenditures, charges and 
other financial information to Medicare to qualify for reimbursement. 
Specifically, the cost report is a series of forms that collect 
descriptive (ownership status, type of facility, etc.), financial, 
cost, charge, wage index and statistical data. Hospitals already submit 
information similar to what would be asked of pharmaceutical companies 
through the FAIR Act. Specifically, research expenses are described on 
line 191 (``Research'') of Worksheet A (``Balance of Expenses''). 
Advertising and marketing expenses are included in ``Other 
Nonreimbursable Expenses'' on line 194 of Worksheet A. Cost report data 
are public and contained in the Healthcare Cost Report Information 
System (HCRIS) via the Centers for Medicare & Medicaid Services' 
website in raw format. There are a number of private vendors that 
repackage and sell cost report data; however, it is common for analysts 
to work directly with the raw data.

    In addition, non-profit hospitals, must also file Form 990 with the 
Internal Revenue Service. Among other data, the Form 990 collects 
information on both advertising and research expenses. Advertising and 
promotion expenses are described on line 12 of Part IX. Fundraising 
expenses are also described in several places in the 990: direct 
expenses of fundraising events are reported in Part VIII, line 8b of 
the 990; indirect expenses of fundraising events, including advertising 
expenses, are reported in Part IX, column (D). Descriptions of research 
activities, including associated expenses and revenues, are included in 
Part III (``Statement of Program Service Accomplishment'').

    Increased transparency into drug pricing, such as what is already 
provided by hospitals, could be used to hold drug manufacturers 
accountable for fairly pricing products, help calculate the value of a 
drug, and will play a foundational role in supporting future 
policymaking.

    As the Committee continues its work to lower drug prices for both 
patients and the providers who care for them, we urge you to consider 
additional proposals that would be effective. Specifically, we 
recommend the Committee examine responses to pay-for-delay and ever-
greening tactics employed by drug manufacturers, which, contrary to 
congressional intent, are used to extend FDA exclusivity and force 
potential competitors out of the market. We also ask the Committee to 
consider incorporating existing legislation that would align payment 
with the most commonly used dosages for drugs. Far too often, hospitals 
have no choice but to purchase too much of a drug because of 
manufacturer packaging sizes, resulting in increased waste at a high 
cost to patients. Further, as the health care delivery system 
transitions toward more value-based payment models, we urge the 
Committee to pursue comparative effectiveness testing aimed at 
demonstrating the value of new drugs relative to other, more affordable 
options, as well as to consider the implementation of potential risk-
sharing models based on patient outcomes.
                 Improving Transparency in Health Care
    The AHA supports increased consumer access to health care pricing 
information. However, we have serious concerns with some of the 
policies proposed.

    Provider/Health Plan Contract Requirements. The discussion draft 
includes a number of new requirements that would severely impede 
provider and health plan contracting. We do not support these policies 
because they would unnecessarily increase costs, discourage commercial 
health insurers from pursing value-based care arrangements with 
providers and/or put consumers at risk of being subject to practices 
that would limit their access to care. In addition, for some integrated 
delivery systems, some of the provisions would be wholly unworkable and 
result in their dissolution, jeopardizing patient access to high-
quality, integrated coverage and care delivery.

    The provisions in Section 301 are perplexing; hospitals support 
providing consumers with tools to understand the extent of their 
coverage and payment obligations, so it is not clear what the actual 
issues are that the discussion draft seeks to address. With respect to 
HIPAA requirements, the underlying legislation and rules provide a 
consistent and largely workable framework for commercial health 
insurers or any other legitimate business associate to obtain the 
information needed to process claims and provide consumers with the 
services they require. Again, it is not clear what the actual issues 
are that the discussion draft seeks to address and how it would benefit 
consumers.

    Conversely, a number of the provisions in Section 302 would not 
benefit consumers and would harm hospitals and hospital systems, 
including those with integrated health plans. For example, preventing 
providers from declining unfair tiering and/or steering restrictions 
imposed by insurers would undermine the basis for value-based care. Put 
another way, commercial insurers cannot be allowed to have it both 
ways--that is, enjoy the savings from providers shouldering financial 
risk under a value-based care arrangement while simultaneously 
encouraging those same patients to go elsewhere for care.

    Likewise, it would be unfair, particularly to rural and urban 
hospitals, to allow commercial insurers to cherry-pick which hospitals 
in the system they contract with. There are enormous economic 
efficiencies and quality benefits associated with contracting with 
commercial insurers as a system. For example, to promote efficiency and 
maintain quality, many systems do not duplicate services at every site 
of care within the system. That means, excluding one or more of those 
sites would, at best, limit access to care. Moreover, allowing 
commercial insurers to decline to include system hospitals that serve 
vulnerable communities, particularly in rural areas, which is the most 
likely scenario, would put those already vulnerable communities at even 
greater risk by limiting access to care.

    It is incumbent on those who support legislation in the area of 
private contracting to provide data, rather than mere anecdotes, to 
justify such intrusion by the government before the Committee adopts 
such significant change.

    We also are deeply concerned about the provisions in Section 309 
that would prohibit health plans from contracting with providers unless 
the provider agreed to provide enrollees their estimated cost-sharing 
amount at the time of scheduling or within 48 hours of a request. The 
AHA supports policies that encourage the continued development of out-
of-pocket estimates, when appropriate, and many of our members are 
already undertaking these endeavors. However, restrictions on provider-
health plan contracts are not the right approach, especially in light 
of significant movement in this area by the field.

    The AHA agrees that patients should have access to an estimate of 
their out-of-pocket costs. However, there are a number of challenges to 
providing accurate and reliable out-of-pocket cost estimates, not least 
of which is the inherent uncertainty that exists within health care. 
While there are treatments that generally follow a common course and 
are agnostic to patient characteristics, there are many others for 
which the services needed can change over the course of care, depending 
on how a particular patient responds to a treatment and the evolution 
of their disease or injury. For those services for which estimates can 
be generated, hospitals and health systems have typically relied on 
financial assistance staff to help patients navigate their insurance 
benefits and develop out-of-pocket cost estimates. While providers are 
working to develop the ability to provide these estimates in other 
ways, such as through their websites and other online applications, 
there is still much work that must be done directly with patients and 
insurers if complications or questions arise. Therefore, it is not 
always possible to provide estimates within 48 hours.

    Finally, providers must work with payers to obtain all of the 
information necessary to generate an estimate. For example, providers 
need to know a patient's current eligibility, as well as their specific 
cost-sharing obligation and where they are within their deductibles. 
While electronic transaction standards already exist to share this 
information, we hear from our members that health plans often do not 
comply fully with these requests. We, therefore, appreciate that 
Section 501 of the discussion draft would require health plans to 
provide providers with this information.

    All Payer Claims Data base. The discussion draft would establish a 
national all-payer claims data base (APCD) and provide grants to states 
to encourage implementation of their own APCDs. These data bases are 
intended to promote transparency by requiring insurers to submit claims 
data, which are made available to researchers and policymakers for use 
in analysis. They also are intended to enable hospitals, health care 
providers and communities to benchmark their performance against that 
of others.

    The AHA recognizes the potential of APCDs to drive quality 
improvements and cost-containment, as well as helping to identify and 
track issues within the health care system. However, to guarantee the 
integrity of the data and insights that they yield, great care must be 
taken to protect the privacy and security of the data, that data 
released be presented in its full context, and that relevant 
stakeholders be involved in the governance process.

    Should the Committee move forward with this effort, we recommend 
that the privacy and security requirements for receiving, storing and 
transmitting data be strengthened by: requiring privacy and security 
training for staff and authorized users, including Federal agency 
users; and requiring the APCD contractor in the required annual report 
to describe the privacy and security standards around receiving, 
accessing, storing and transmitting data, as well as any privacy or 
security incidents that have occurred. We would also ask that the data 
released by the APCD be put in context, as claims data are highly 
complex and do not always present a full picture of the care and 
services offered by providers. In order to draw meaningful conclusions 
from these data, it is important to understand what is and is not 
included in the data. This means having a clear understanding of any 
limitations or gaps in the data, as well as understanding what other 
factors not represented in the data may impact the findings of 
analyses. Finally, we request that the governance body developed to 
oversee the APCDs include dedicated seats for health care providers who 
could play a valuable role in translating the experience of providing 
care, what occurs in a clinical setting and what is not captured in 
administrative claims data.

    Provider Network Transparency. Section 304 of the discussion draft 
would require that health plans establish processes to ensure patients 
have the most current information on their health care provider's 
network status. The AHA believes that up-to-date provider directories 
play an important role in holding health plans accountable for adequate 
networks. The primary responsibility for ensuring provider directories 
are accurate is with health plans, and the AHA is pleased that the 
discussion draft recognizes this dynamic. However, we are concerned 
that the discussion draft does not hold health plans truly accountable 
for errors in the provider directory. In fact, the discussion draft 
holds providers responsible for refunding patients when an error 
occurs, even though the health plan controls the accuracy of the 
directory. In addition, providers could be subject to civil monetary 
penalties for violations except for one safe harbor that would allow 
the provider to rescind the bill within 30 days of billing. This safe 
harbor time window could be too restrictive, however, in the event that 
the patient does not raise an issue with the bill within the allotted 
timeframe. The committee should hold health plans accountable for the 
accuracy of provider directories rather than rely on the patient and 
the provider to figure out when mistakes are made. That accountability 
should extend to civil monetary penalties for plan errors as well.

    Billing Requirements. Section 305 of the discussion draft would 
require providers to give patients a list of the services rendered 
during a health care visit at the time of discharge and bill the 
patient within 30 business days of the visit. It also would require 
providers to allow patients at least 30 days to pay their bills. Though 
AHA supports the goal of timely patient billing, we have a number of 
recommended changes to the proposed policy to address underlying 
issues. Most critically, the AHA recommends basing the 30-day timeframe 
for sending timely bills on the date the health plan adjudicates a 
claim and sends remittance information to the provider, rather than on 
the date of discharge. In order for a patient bill to be accurate and 
reflect the true out-of-pocket cost, the health plan needs to process 
the claim. Requiring providers to send bills prior to the completion of 
this process would mean that some patients would inevitably receive 
statements with inaccurate balances, causing further confusion and 
directly contradicting the purpose of this legislation.

    We also recommend updating ``upon discharge'' in (a)(1) to ``after 
discharge'' and adding ``as requested'' to this requirement. Often, a 
full list of services received is not available at discharge because 
departments wait until after a patient is discharged to submit final 
charges. Requiring patients to wait until all charges are submitted 
could delay discharge and unnecessarily increase their length of stay. 
In addition, this information may not be of interest to every patient. 
Itemized bills can be provided upon request but should not be mandated 
for every patient.

    Finally, the AHA recommends clarifying that a good faith attempt is 
in compliance with this policy. We are concerned that, without 
clarification, an attempt to comply with this policy could still render 
our members out of compliance if there is no proof of receipt or if a 
bill is returned due to a wrong address. One member has reported that 
between 4 and 6 percent of insured patient bills are returned due to a 
bad address.
                        Improving Public Health
    The AHA supports the provisions of the discussion draft that make 
important investments in public health priorities like maternal health, 
vaccinations and public health data systems.

    Maternal health is a top priority for the AHA and our member 
hospitals and health systems as we seek to eliminate maternal mortality 
and reduce severe morbidity. The causes of maternal mortality and 
morbidity are complex, including a lack of consistent access to 
comprehensive care and persistent racial disparities in health and 
health care. As hospitals work to improve health outcomes, we are 
redoubling our efforts to improve maternal health across the continuum 
of care and reaching out to community partners to aid in that important 
effort.

    The AHA supported legislation enacted last year, the Preventing 
Maternal Deaths Act, which provides funding to develop maternal 
mortality review committees. The Lower Health Care Costs Act builds on 
this initiative by funding programs that develop and disseminate best 
practices to improve maternal outcomes and support state perinatal 
quality collaboratives. Improving maternal outcomes also requires 
better coordination of services for mothers across the continuum of 
care, so we are pleased that the legislation establishes programs that 
promote the delivery of integrated health care services to pregnant and 
postpartum women.

    We commend the Committee on Section 407 of the bill, which would 
authorize Title VII training grants to address discrimination and 
implicit bias. We encourage the Committee to also specify training in 
the areas of cultural and linguistic competence in order to reduce 
health disparities and require the Secretary to work with professional 
medical societies to develop recommendations for continuing medical 
education programs, as many currently practicing medical professionals 
may have not received training in implicit bias or cultural competency.

    In addition, the AHA is pleased that the legislation would bolster 
efforts to address vaccine-preventable illnesses by authorizing a 
national educational campaign to increase the awareness of and combat 
misinformation about vaccinations. We also applaud the provisions that 
would fund much needed modernization of public health data systems used 
by the Centers for Disease Control and Prevention and state and local 
health departments.
              Improving the Exchange of Health Information
    Requirement to Provide Health Claims, Network and Cost Information. 
The draft bill requires commercial health plans in the group and 
individual markets to make certain information easily available, 
including historic claims, encounter and payment data, network 
information and individualized out-of-pocket estimates for common 
procedures and all prescription drugs. As noted in our comments on 
Improving Transparency in Health Care, this information is critically 
important for patients as they make decisions about their health and 
health care. However, it has not always been easily accessible, or even 
reliably accurate. We applaud the Committee's attention to transparency 
in regard to a patient's out-of-pocket costs and its recognition that 
health plans are key players in this effort.

    While we are supportive of this policy overall, we are concerned 
about the privacy and security of a patient's health information when 
entered into a third-party application--a key tenant of this proposal. 
We encourage the Committee to extend HIPAA protections to third-party 
apps that access patient data via these APIs, ultimately promoting the 
safety and security of this data, regardless of where it resides.

    Recognition of Security Practices. The AHA is pleased the draft 
legislation would incentivize strong cybersecurity practices by 
encouraging the Department of Health and Human Services to consider 
entities' adoption of recognized cybersecurity practices when 
conducting audits or administering fines related to the HIPAA Security 
Rule. Hospitals and health systems understand it is our responsibility 
to protect patient information and, more importantly, their safety 
against cyber threats. Despite complying with HIPAA rules and 
implementing best practices, hospitals and health systems will continue 
to be the targets of sophisticated cyberattacks, and some attacks will 
inevitably succeed. The AHA believes that victims of attacks should be 
given support and resources, and enforcement efforts should rightly 
focus on investigating and prosecuting the attackers.
                               Conclusion
    We thank you for the opportunity to share the hospital and health 
system field's suggestions and concerns as they relate to the Lower 
Health Care Costs Act of 2019. We appreciate that the issues of health 
care costs and affordability are a priority for the HELP Committee, as 
they are for our patients and members. We look forward to working on 
legislative solutions that address the issues raised in the Committee's 
legislative proposal, while preventing unintended negative consequences 
on the health care system.
                                 ______
                                 
                   [summary statement of tom nickels]
    Tom Nickels, executive vice president, will be appearing on behalf 
of the American Hospital Association (AHA). The organization represents 
nearly 5,000 hospitals and health systems, along with their clinician 
partners. The AHA testimony focuses on feedback on the Committee on 
Health, Education, Labor and Pension's Lower Health Care Costs Act of 
2019. We appreciate the opportunity to provide these comments and 
support the Committee's efforts to examine the cost of health care in 
America.

    Regarding surprise medical bills, the AHA supports a solution to 
protect patients and remove them from the middle of any reimbursement 
disputes. The preferred solution: patients should not be balance billed 
for emergency services, or for services obtained in any in-network 
facility when the patient could reasonably have assumed that the 
providers caring for them were in-network with their health plan. In 
these situations, patient cost-sharing obligations should be based on 
an in-network amount. Once the patient is protected, we believe 
Congress should allow providers and payers to determine fair and 
appropriate reimbursement. We strongly oppose the imposition of 
arbitrary rates on providers, along with untested proposals such as 
network matching. However, an arbitration system for physician services 
without a benchmark rate could be appropriate. We encourage the 
Committee to use this opportunity to help simplify the health care 
system rather than add more complexity.

    The AHA expresses serious concerns about several proposals that 
would allow the government to intrude into private commercial contracts 
between providers and insurers, which could undermine value-based 
purchasing arrangements aimed directly at improving the quality of care 
while reducing costs. We have particular concerns about the impact on 
rural communities. We strongly urge the Committee to remove these 
provisions.

    The AHA appreciates the Committee's efforts to invest in public 
health, including modernizing the public health data system and 
improving maternal health outcomes. We also support provisions aimed at 
increasing competition in the prescription drug market and ensuring 
patient access to these drugs and make suggestions for other provisions 
for the Committee to consider, such as the Fair Accountability and 
Innovative Research (FAIR) Act. We appreciate the Committee's focus on 
the importance of ensuring the privacy and security of patient health 
information and are pleased the draft legislation would incentivize 
strong cybersecurity practices.
                                 ______
                                 
    The Chairman. Thank you, Mr. Nickels.
    Ms. Mitchell, welcome.

STATEMENT OF ELIZABETH MITCHELL, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, PACIFIC BUSINESS GROUP ON HEALTH, SAN FRANCISCO, CA

    Ms. Mitchell. Thank you, Senator Alexander, Senator Murray, 
Senator Collins--my heart is still in Maine--and Members of the 
Committee. Thank you for this opportunity.
    I am President and CEO of the Pacific Business Group on 
Health. We are a non-profit coalition of large public and 
private purchasers seeking to achieve higher quality and more 
affordable care on behalf of our employees. It is an honor to 
be here. This is the right discussion to be having. Thank you 
for your bipartisan leadership.
    PBGH members collectively spend over $100 billion annually, 
purchasing health care on behalf of their employees, 
collectively for over 15 million Americans. Our members are 
deeply committed to the health and well-being of their 
employees and buying health care services that promote optimal 
health.
    But even the largest private purchasers of health care in 
the world cannot overcome the current industry consolidation, 
opacity, anticompetitive practices, and egregious pricing in 
U.S. health care. It may seem somewhat surprising that an 
organization representing large private-sector companies would 
seek policy intervention into the market, and it is surprising. 
My members are committed to private-sector, market-driven 
solutions, but in much of U.S. health care the market is simply 
broken.
    A functional market does not regularly drive families into 
bankruptcy, it does not depend on Go Fund Me campaigns for 
treatment costs, and it does not absorb a decade of U.S. wage 
growth.
    If the world's largest and most sophisticated companies are 
challenged by high-quality and affordable care, it is simply 
unfair to expect that of small businesses or families. The 
dysfunction is so profound that we are seeking your support to 
make a functional market in the U.S. health care system 
possible, and we believe that this bill goes a long way to 
achieving that.
    There are several important points but three that I want to 
highlight. There is strong evidence that cost-effective 
delivery, high-quality care is possible, and it should be 
expected. Although we prefer market solutions to the problem of 
high cost, government action is needed. We also support your 
efforts to control drug pricing, and we would urge you to go 
even further and to include provisions that support primary 
care and mental health.
    Most importantly, we want to say that it is possible, and 
we have bold innovations driven by our employer members, most 
notably Walmart's recent pilot with Centers of Excellence for 
specialty services. This is a program, the Employer Center of 
Excellence Network, designed by Walmart, administered by PBGH 
and our TPA, for hip and knee replacements and surgeries. We 
set high-quality standards, vet and select the best facilities 
in the country, and support employees to use these.
    I provided for your reference a recent Harvard Business 
Review article on the results of the program, but it is 
important to highlight that patients who participated reported 
98 percent satisfaction and better patient-reported outcomes. 
Readmission and complication rates were markedly lower. The 
program results demonstrate that it is possible to save money 
by reducing unnecessary services and improving outcomes and 
patient experience, while highlighting that the practices this 
bill seeks to address are barriers to widespread adoption of 
this model.
    Additionally, we strongly support the elements that would 
remove gag clauses on the sharing of price and quality 
information by providers. It's hard to imagine that providers 
are barred from sharing information about quality and cost with 
patients. We strongly support the elements of the bill that 
would ban anticompetitive contracting practices, including 
anti-tiering, all-or-nothing, and similar clauses that are used 
to gain market power and raise prices regardless of quality or 
variable performance. We urge Congress to enable Medicare 
beneficiaries to identify and seek care from high-performing 
centers in a similar program.
    We also strongly support the protection of patients from 
out-of-network deductibles, surprise billing, and we support 
Option 3, a benchmark for payment. We strongly recommend 
setting payments based on average payments to specialty 
physicians; i.e., 125 percent of Medicare rates. While it may 
be unusual to have us ask for price setting, we believe that 
this fairly captures the costs. We also think this is the most 
straightforward, efficient, and transparent approach to 
regulating these prices.
    A second-best solution would be the use of payments based 
on median contracted payment rates, although we are concerned 
that the resulting benchmarks under this method would reflect 
prices that are already too high.
    We strongly also recommend that the definition of services 
in surprise billing be expanded to include ground and air 
ambulance services. We are pleased that you have acknowledged 
that this is a problem, and we understand that states are 
limited in addressing this problem due to Federal 
jurisdictional authority, and it is up to Congress to fix this 
directly.
    We strongly support all of the transparency initiatives, 
including the establishment of an all pair claims data base, 
but would urge you to consider complete data access, including 
pricing in allowed amounts, for the greatest utility of this 
data base. We would ask that physicians and patients have key 
roles in the governance of such a data base, and that these 
data sets are mutually accessible and coordinated with regional 
State data bases.
    We look forward to additional questions and discussion of 
most of the provisions in this bill.
    Particularly and finally, we strongly support everything 
included in the bill that would address drug pricing and would 
ask you to actually go further. We also strongly support the 
elements that would require transparent reporting from pharmacy 
benefit managers to plan sponsors. The lack of transparency 
makes it impossible for most employers to even know prices, 
rebates, and other pricing complexities, much less negotiate 
lower prices.
    Thank you.
    [The prepared statement of Ms. Mitchell follows:]
                prepared statement of elizabeth mitchell
    Chairman Alexander, Ranking Member Murray, and Members of the 
Senate HELP Committee, thank you for the opportunity to share the 
experiences of large purchasers of health care in seeking to reduce 
health care costs and improve quality. It is an honor to have been 
invited to participate in today's discussion.

    My name is Elizabeth Mitchell. I am the President and CEO of the 
Pacific Business Group on Health, a coalition of large public and 
private purchasers of health care. We thank you for your leadership and 
for your consideration of our comments.

    The most important points I want to make today are:

          We have strong evidence that cost-effective delivery 
        of high-quality care is possible and should be expected.

          Although we prefer market solutions to the problem of 
        high costs, many parts of the health care market are 
        fundamentally broken. Government action is needed to ensure 
        healthy competition among providers, health plans, suppliers 
        and manufacturers in the health care sector. And in some cases, 
        the only solution is price regulation.

          In addition to the key elements of the Committee's 
        draft legislation--most of which we support--we encourage the 
        Committee to incorporate stronger steps to contain out-of-
        control drug prices and to add a component to increase 
        investment in primary care.

    It may seem surprising that an organization representing some of 
the largest private sector employers in the world would be seeking 
policy intervention into the market. And it is. My members are 
committed to private sector market-driven solutions. But in much of US 
healthcare, the market is broken. A functional market does not 
regularly drive families in to bankruptcy; it does not depend on Go-
Fund-Me campaigns for treatment costs; it does not absorb a decade of 
US wage growth. A functional market does not require the world's 
largest employers to absorb annual cost increases of 4-20 percent with 
no corresponding increase in quality or outcomes. Imagine any other 
industry in which prices increase steadily with no visibility and no 
accountability for quality or value. The dysfunction is so profound 
that we are seeking your support to make a market-based solution--a 
functional market in US healthcare--possible.

    PBGH members collectively spend over $100 billion annually 
purchasing healthcare on behalf of their employees. Collectively that 
means buying healthcare for over 15 million Americans. And our members 
are deeply committed to the health and well-being of their employees 
and buying the healthcare services that promote optimal health. But 
even the largest private purchasers of healthcare in the world cannot 
overcome the industry consolidation, opacity, anti-competitive 
practices and egregious pricing in US healthcare. If large employers 
can't buy affordable high-quality care on behalf of their employees, it 
is almost a cruel joke that we would expect that of small businesses, 
municipalities, or families.

    We do and will pay for high value care. We have stellar examples of 
bold innovations driven by our employer members to buy high quality 
care. The Employers Centers of Excellence Network (ECEN)--managed by 
PBGH on behalf of our members--has shown significant improvements in 
health outcomes and costs. \1\ ECEN sets high quality standards, vets 
and selects the best providers and facilities in the country for 
specific procedures, and encourages employees to use these Centers of 
Excellence (CoEs) for needed care. The ECEN program results demonstrate 
that it is possible to save money by reducing unnecessary services, 
while improving outcomes and patient experience.
---------------------------------------------------------------------------
    \1\  Slotkin, Jonathan R., MD, et al. ``Why GE, Boeing, Lowe's, and 
Walmart Are Directly Buying Health Care for Employees'', Harvard 
Business Review, June 8, 2017. Accessed online 10/9/17 at https://
hbr.org/2017/06/why-ge-boeing-lowes-and-walmart-are-directly buying-
health-care-for-employees.
---------------------------------------------------------------------------
    Even when factoring in travel expenses and waived co-pays, 
negotiated bundled payments for surgical procedures performed by CoEs 
cost considerably less, on average, than what members currently pay for 
these services. The cost equation improves even further, since these 
high-quality procedures produce quality outcomes that can mitigate 
costly revisions and infections. Much of the cost reduction comes from 
avoiding unnecessary procedures, with top-performing surgeons using 
evidence-based medicine to determine surgical appropriateness. Think 
about this. This is just a glimpse in to the unnecessary services being 
delivered in this country by providers and facilities that are paid 
only if they administer treatment--and the more treatment, the more 
they are paid.

    Furthermore, the ECEN program convenes all participating hospitals 
and their surgeons annually to compare best practices across the 
network, and 98 percent of patients recommend the ECEN program. The 
good news is that through this program we are also starting to 
demonstrate the ultimate win-win-win in healthcare: better outcomes, 
much better patient experience at significantly lower costs. Better 
care can and does cost less. It is my position that if everyone had 
access to the performance information to choose the best care--and the 
resources and wherewithal to hold the system accountable--we could move 
the entire market. This is what we should all be working towards.

    Unfortunately, we also have alarming examples of system failures. 
Just this part Friday I was meeting with one of my large employer 
members who is committed to offering high quality affordable care to 
his many employees across the country. He shared the story of one 
employee who had recently had a kidney transplant and was on a critical 
medication. This employer has paid approximately $138,000 every 2 weeks 
($3 million during the last 12 months) on one patient for this drug and 
its administration at the provider's office. Because this employer has 
a Specialty Pharmacy, the plan is now able to source this drug directly 
from the manufacturer for $26,092 each 2 weeks and, at the patient's 
request, have a nurse provide infusions in the patient's home. They 
also agreed to waive all patient cost share if she agreed to change the 
place of service for exactly the same medication. It was a ``Win-Win'' 
for the patient and plan. The drug is still expensive, but it is a 
savings of over $200,000 per month. In another example this same 
employer had a pediatric patient receiving medication administration 
from a hospital in California at a cost of $750,000 annually. The 
employer searched the local market for alternatives and, with the 
agreement of the family, changed the treatment location to another 
California hospital. That same medication for that same patient at a 
different hospital cost only $250,000 per year. You might say that is 
an example of the market working. The buyer figured out a smart way to 
obtain a better price. But this situation is rare and depends on 
transparent information and market leverage that very few have. Imagine 
a small employer, or an employer without transparent pricing 
information--or an individual patient--trying to achieve this kind of 
savings. It simply is not possible in the US healthcare market. The 
market needs to work for everyone. We believe that many of the 
proposals in this bill would begin to enable a more rational, 
functional--and fair--market.
                   Recommendations for Policy Action
    Our policy recommendations build on the testimony submitted by 
David Lansky, PBGH's former President & CEO, to the Senate HELP 
Committee in July 2018, as well as the letter we sent on March 1, 2019, 
in response to the Committee's request for information, and our June 5 
comments on the Committee's discussion draft of the Lower Health Care 
Costs Act of 2019. These recommendations are based on the principles 
and key levers that can drive change and improvement in our health care 
system that we described in the earlier testimony and follow-up 
letters.

    In particular, we applaud the Committee's recognition of the 
importance of a healthy, functioning marketplace to drive lower costs 
and improved quality. We believe the following are essential for a 
healthy competitive marketplace:

          Full and transparent information regarding provider 
        performance on cost, quality outcomes and patient experience.

          Competitive marketplaces among providers, health 
        plans, suppliers, etc., including regulation and enforcement as 
        needed to prevent anti-competitive behaviors.

         Comments on Specific Elements of the Discussion Draft
    In addition to the consumer protections in the draft bill, PBGH 
endorses the intent to hold down overall health costs. In nearly all 
cases, large employers are seeking market-based solutions to the 
Nation's increasing health care costs, but we believe that public 
policy interventions are needed when markets fail. This has clearly 
happened in the case of certain facility-based physician services and 
ambulance services. In a recent paper on surprise billing by my 
colleague Benedic Ippolito from the American Enterprise Institute, this 
market failure occurs when ``consumers cannot feasibly avoid providers 
who deliberately chose to be out-of-network''--for instance, in 
emergency situations. ``Similarly, even for elective admissions to the 
hospital, it is typically not possible to choose many ancillary 
providers.'' \2\ In these situations, it is difficult for even the most 
innovative purchasers to achieve high quality and affordable care and 
coverage for their employees. In the specific case of surprise bills, 
policymakers must take steps to protect consumers and hold down the 
overall costs of care.
---------------------------------------------------------------------------
    \2\  Benedic N. Ippolito and David A. Hyman, ``Solving Surprise 
Medical Billing''. American Enterprise Institute (AEI) Economic 
Perspectives, March 2019. Accessed online at http://www.aei.org/
publication/solving-surprise-medical-billing/ on June 15, 2019.
---------------------------------------------------------------------------
               Reducing the Prices of Prescription Drugs
    The cost of drugs is an increasingly serious problem for employers 
and their employees. Growth in drug spending is expected to exceed the 
growth in total health care spending in future years, driven largely by 
increases in prices for specialty drugs. \3\ As I described earlier, 
large employers are struggling with this cost burden, and they often 
are in a weak position to negotiate prices with drug manufacturers and 
pharmacy benefit managers (PBMs). They recognize that public policy 
changes are needed to address the fundamental problems driving high 
drug prices, and they support policies that would improve transparency 
and increase healthy market competition.
---------------------------------------------------------------------------
    \3\  Kaiser Family Foundation analysis of National Health 
Expenditure (NHE) Historical (1960-2016) and Projected (2017-2026) data 
from Centers for Medicare and Medicaid Services, Office of the Actuary, 
National Health Statistics Group. https://www.healthsystemtracker.org/
chart-collection/recent-forecasted-trends-prescription-drug-spending/--
sf--s=recent+trends#item-growth-prescription-spending-slowed-2016-
increasing-rapidly-2014-2015--2016 (accessed 7/14/18).
---------------------------------------------------------------------------
    We appreciate the Committee's intent to address the problem of high 
drug costs, and several of the elements in the draft legislation would 
be helpful. In aggregate, however, we do not believe that these steps 
would go far enough to rein in drug costs. Specifically:

          We support the reforms of the ``Purple Book'' and 
        ``Orange Book'', which would increase the transparency of 
        patent information and enable manufacturers of generic drugs 
        and biosimilars to develop competing alternatives to expensive 
        brand-name drugs.

          We also support elements of the draft bill that would 
        reduce the blocking of generic drugs.

          We strongly support the elements of the draft bill 
        that would require transparent reporting from pharmacy benefit 
        managers (PBMs) to plan sponsors. The lack of transparency 
        makes it impossible for most employers to even know prices, 
        rebates and other pricing complexities, much less negotiate for 
        lower prices. We also support the proposed prohibition on the 
        use of ``spread pricing'' by PBMs, and the requirement for PBMs 
        to pass-through 100 percent of rebates or discounts to the plan 
        sponsor. These steps will help to align the PBMs' business 
        models with the needs of consumers and purchasers, thereby 
        leading to lower drug costs.

          We understand that the Committee will be considering 
        additional legislation to address the serious problem of high 
        drug costs, and we strongly encourage Congress to take more 
        substantive steps to reduce the cost burden on consumers and 
        purchasers. Specifically, we support legislation that would 
        increase transparency and provide advance notice and 
        justification for significant price increases, reduce the 
        barriers to generic drug development, reduce the barriers to 
        development and use of biosimilars, and prohibit abuse of the 
        patent system to extend exclusivity for brand-name drugs.
                 Improving Transparency in Health Care
    Transparent information on cost and quality is a necessary element 
of healthy functioning markets. We cannot choose and pay for high value 
care if we do not know what it is. The recent RAND study on commercial 
pricing quantified an average 240 percent difference in charges for 
private payers compared to Medicare raising important questions for 
purchasers. Although transparency by itself will not fix the problem of 
high health care costs, it provides an essential foundation. Sadly, the 
people who receive and pay for health care do not have the information 
they need to make critical health care decisions.

          Patients want to know what outcomes they can expect 
        from care, and whether and how outcomes vary across providers. 
        We are strong advocates for the adoption of patient reported 
        outcome measures across all markets.

          Transparent information needs to fully reflect the 
        costs that the employee will ultimately face, taking into 
        account such complexities as their own employer's benefit 
        design, the formulary deployed by their Pharmacy Benefit 
        Manager, the possibility of out-of-network charges, and the 
        aggregation of costs across a complex episode of care. In 
        short, consumers and purchasers want to see meaningful price 
        transparency that reflects total cost of care and the 
        complexities of our payment and cost-sharing systems.

          We support the elements of the draft bill that would 
        establish programs to improve maternal health care quality and 
        reduce maternal mortality and severe morbidity. We encourage 
        the Committee to go further, however, by requiring standardized 
        public reporting of maternal and infant mortality by all 
        providers nationwide.

    In our experience, data access has been a major barrier to 
transparent information and the proposed creation of an all payer 
claims data base may enable more meaningful cost transparency across 
markets.

          We support the elements of the draft bill that would 
        establish a non-governmental not-for-profit organization to 
        create an all-payers claims data base. PBGH has extensive 
        experience with the design and use of these types of data 
        bases. We have provided technical assistance and 
        recommendations to Committee staff on this proposal, and we can 
        provide additional detailed guidance and feedback as needed. In 
        the design of this program, it is essential that users of the 
        information--especially physicians and patients--have a key 
        role in governance.

          We support the key elements of the draft bill that 
        would enable data sharing and require commercial health 
        insurers to make information available to patients through 
        application programming interfaces, while protecting individual 
        patient privacy.

    In addition to improving claims data access, we believe that 
Congress needs to take further action to improve health care 
information that is needed by patients and purchasers. Specifically, we 
encourage Congress to require outcomes-oriented quality measures for 
priority conditions, including maternal and infant care. The Centers 
for Medicare and Medicaid Services (CMS) has taken tentative steps 
toward reducing the burden of quality measurement by increasing the use 
of outcomes measures, but such efforts must be dramatically increased 
and accelerated. The Federal Government can act quickly in three ways:

          Develop the national infrastructure for measurement 
        of outcomes across all major conditions

          Simplify the quality reporting requirements under 
        Medicare to emphasize standardized outcome measures for each 
        condition

          Require the adoption and publication of outcomes data 
        for all Federal payment programs.
                          Competitive Markets
    There is growing recognition that our health care system has a 
serious problem that needs to be addressed--the effect of market 
consolidation on prices. We know the following:

          Market power has enabled providers, drug companies 
        and others to raise prices, and it is largely the result of 
        market concentration. According to a recent paper, ``Hospital 
        prices are positively associated with indicators of hospital 
        market power. Even after conditioning on many demand and cost 
        factors, hospital prices in monopoly markets are 15.3 percent 
        higher than those in markets with four or more hospitals.'' \4\ 
        A recent Kaiser Health News article commented specifically on 
        the problem of high hospital prices in California. \5\
---------------------------------------------------------------------------
    \4\  Zack Cooper, Stuart V. Craig, Martin Gaynor, John Van Reenen, 
``The Price Ain't Right, Hospital Prices and Health Spending on the 
Privately Insured''. NBER Working Paper No. 21815. Issues in December 
2015, Revised in May 2018. http://www.nber.org/papers/w21815
    \5\  Chad Terhune, ``As Hospital Chains Grow, So Do Their Prices 
for Care'', Kaiser Health News, June 13, 2016. https://khn.org/news/as-
hospital-chains-grow-so-do-their-prices-for-care/
---------------------------------------------------------------------------
          Market concentration has been growing in recent 
        years. Most hospital markets are already highly concentrated, 
        and hospitals have also been buying up physician practices. The 
        trends in consolidation are documented in a recent Health 
        Affairs article. \6\
---------------------------------------------------------------------------
    \6\  Brent Fulton, ``Health Care Market Concentration Trends in the 
United States: Evidence and Policy Responses''. Health Affairs 36, no.9 
(2017):1530-1538. https://www.healthaffairs.org/doi/10.1377/
hlthaff.2017.0556

    Most employers believe that the best way to improve value (improved 
quality and patient experience, at lower cost) is through market 
forces, i.e., healthy competition among providers. Unfortunately, real 
competition no longer exists in many markets. In these situations, we 
believe that government action is needed to ensure that competition 
works in a way that benefits consumers and purchasers. Anti-trust 
enforcement is one policy lever, but its effectiveness is limited, 
especially in addressing markets that are already concentrated. Other 
---------------------------------------------------------------------------
actions to address anti-competitive practices are needed.

    We are encouraged that the Committee has recognized this problem 
and proposed policy changes to address it. Specifically,

          We strongly support the elements of the draft bill 
        that would remove gag clauses on the sharing of price and 
        quality information by providers.

          We strongly support the elements of the draft bill 
        that would ban anti-competitive contracting practices by 
        providers, including anti-tiering, ``all-or-nothing'' and 
        similar clauses that are used to gain market power and raise 
        prices.

    We encourage Congress to consider additional steps that would 
address the problem of market concentration and high prices. Among the 
potential policy steps, the following appear to be the most promising 
and feasible.

          Site-neutral payments

          Transparency and standardized provider performance 
        reporting, as described above.

          Promotion of entry of new competitors and reduction 
        of barriers to entry

    In addition, we encourage Congress to enable Medicare beneficiaries 
to identify and seek care from high performing centers. In recent 
years, centers of excellence (CoEs) have become a common feature of 
commercial insurance and private purchaser medical care networks. 
Nearly 90 percent of large employers expect to use such centers to 
improve quality of care and predictability of cost for their employees. 
\7\ Commercial CoE programs have primarily been used for common 
elective procedures and certain medical conditions with high costs and 
variability in quality and price, including hip and knee replacements, 
spine care, heart surgery, bariatric surgery, and some oncology 
services. \8\ As I described above, we have demonstrated that a CoE 
programs can generate superior quality outcomes, reduce costs for 
patients and employers, and improve patient experience.
---------------------------------------------------------------------------
    \7\  National Business Group on Health, Large Employers' 2018 
Health Care Strategy and Plan Design Survey. https://
www.businessgrouphealth.org/news/nbgh-news/press-releases/press-
release-details/'ID=334
    \8\  The NBGH survey cited above reports 77 percent of employers 
using (47 percent) or considering COE for orthopedics; 77 percent for 
bariatric; 62 percent for cardiac; 56 percent for cancer.
---------------------------------------------------------------------------
    We believe that a well-designed CoE program within traditional 
Medicare would offer:

          Better health outcomes than typically achieved by 
        most fee-for-service providers

          Lower beneficiary expenses through reduced cost-
        sharing

          Program cost savings through more appropriate and 
        higher quality care

          System-wide quality and affordability improvements 
        due to provider competition.

    By setting a high bar and stimulating healthy competition among 
providers, a CoE program would be a catalyst for change that would 
eventually ``lift all boats'' by improving quality and affordability 
system-wide.
                     Ending Surprise Medical Bills
          We strongly support the protection of patients from 
        out-of-network deductibles in emergencies and from other 
        surprise bills and balance billing. We strongly recommend, 
        however that the definition of services in these sections be 
        expanded to include ground and air ambulance services. Surprise 
        medical bills for these services can amount to hundreds or even 
        thousands of dollars in medical costs that consumers are 
        unprepared to pay. We are pleased that the Committee has 
        acknowledged this as a problem, but the transparency 
        requirements for ambulance services in the draft bill are 
        simply inadequate to protect consumers and purchasers from 
        unaffordable and unpredictable ambulance costs. We understand 
        that states are limited in addressing this problem due to 
        Federal jurisdictional authority; it is up to Congress to fix 
        this problem directly

    With regard to the three payment options presented in the draft 
bill, we offer the following comments:

          PBGH supports Option 3--Benchmark for Payment. We 
        strongly recommend setting payments based on the average 
        payment to specialty physicians, e.g., 125 percent of Medicare 
        payment rates. A second-best solution would be the use of 
        payments based on median contracted payment rates in each 
        geographic area, although we are concerned the resulting 
        benchmarks under that method would reflect prices that are 
        already too high.

          Option 2--Independent Dispute Resolution. We believe 
        that an arbitration process would not achieve the aims of the 
        bill to adequately protect consumers, payers and purchasers 
        from high costs. In fact, it would add significant 
        administrative costs and burden to physicians and health plans, 
        the last thing we need in our already administratively complex 
        health care system. Furthermore, we are concerned that the 
        arbitration process would be opaque, and the outcomes would be 
        uncertain.

          Option 1--In-network Guarantee. We appreciate the 
        Committee's attempts to develop a creative approach to this 
        problem, but we are skeptical that this would produce the 
        needed cost reductions. While some economists have assumed that 
        without the ability for emergency physicians and other 
        facility-based providers to stay out-of-network, they will have 
        less bargaining leverage, and therefore prices will be lower. 
        Based on the real-world experiences of PBGH members, however, 
        we are not confident that this would happen, especially in 
        markets in which dominant hospitals and physician groups have 
        strong market power. We anticipate that the physicians would 
        negotiate with the hospitals or health plans to maintain the 
        current high prices, thereby locking in the current 
        unaffordable costs to consumers and employers. This would 
        likely be a serious problem for small rural hospitals that are 
        often in a weak bargaining position with local physician 
        specialty groups.

    Additional Policy Recommendation: Primary Care The U.S. health care 
system needs to dramatically increase investment and support for 
primary care--the foundation of good health for all Americans. This 
includes integrated behavioral health because behavioral healthcare is 
primary care. The evidence is clear; we know that the decisions made in 
primary care practices have outsize influence on downstream medical 
care. A Stanford University study published last year showed that high 
value primary care for a commercially insured population can lead to 
spending that is 28 percent lower than average value primary care \9\. 
The savings are clustered in four areas: unnecessary surgical and other 
specialty procedures (41 percent), low value prescribing (26 percent), 
avoidable hospitalizations and ED visits (17 percent), and unnecessary 
testing (8 percent). The high value primary care practices did see 
their patients more often, resulting in higher spending on office 
visits, but only by 2 percent.
---------------------------------------------------------------------------
    \9\  Melora Simon et al, ``Exploring Attributes of High-Value 
Primary Care'', Ann Fam Med 2017;15:529-534. https://doi.org/10.1370/
afm.2153.
---------------------------------------------------------------------------
    Rebalancing spending away from specialists and the hospital setting 
and toward primary care in the community is important. Employers 
encourage their employees and dependents to affiliate with effective 
primary care practices, but we are concerned that the national 
imbalance between primary and specialty care can only be corrected with 
strong signals from the Medicare program. We are encouraged by the 
recent announcement by the Centers for Medicare and Medicaid Innovation 
(CMMI) to launch pilot programs for advanced primary care models.

    In addition, we believe Medicare should authorize payment models 
and increase payment rates for advanced primary care models that 
achieve high quality outcomes and reduce total cost of care. The 
Medicare Payment Advisory Committee (MedPAC) and other experts have 
observed that certain procedures and specialty services are overpriced, 
based on the relative value units (RVUs) used to calculate payment 
rates to physicians. It appears that the Centers for Medicare and 
Medicaid Services (CMS) has relied too heavily on recommendations from 
the AMA/Specialty Society Relative Value Scale Update Committee (RUC), 
resulting in underpayment for critical primary care services. Congress 
and CMS should consider structural and process changes to correct this 
imbalance.
                                Summary
    PBGH members are deeply concerned about high health care costs and 
inconsistent quality. We strongly support public policies that will 
enable health care markets to function effectively, which will make 
health care more affordable and improve the quality of care. We believe 
steps must be taken to end surprise medical bills, reduce drug prices, 
improve transparency and prohibit anti-competitive practices. 
Meaningful, accessible information about prices and health outcomes 
could provide the foundation for real competition between providers, 
and allow patients and employers to make informed decisions about where 
to seek care. We look forward to constructive competition between 
provider organizations based on common, transparent definitions of 
episodes of care or full accountability for populations, so that 
providers are motivated to continuously seek better ways to use 
technology, workforce, and expensive care resources to achieve superior 
health outcomes. Implementation of these and other policies will take 
time and require significant changes by important stakeholders. Yet the 
vitality of our economy, the solvency of our Nation's treasury, and the 
welfare of all Americans depend upon our efforts.

    Thank you for your leadership in driving improved value in our 
health care system, and we look forward to working with you and other 
stakeholders to make the improvements that we all need.
                                 ______
                                 
               [summary statement of elizabeth mitchell]
    The Pacific Business Group on Health (PBGH) is a coalition of large 
public and private purchasers of health care. Although we prefer market 
solutions to the problem of high costs, we know that many parts of the 
health care market are fundamentally broken. Government action is 
needed to ensure healthy competition, and in some cases, the only 
solution may be price regulation. With regard to specific elements of 
the Committee's discussion draft:

          Surprise Medical Billing. We strongly support the 
        protection of patients from out-of-network deductibles in 
        emergencies and from other surprise bills. We strongly 
        recommend, however that the definition of services be expanded 
        to include ground and air ambulance services. We also recommend 
        setting payments based on the average payment to specialty 
        physicians, e.g., 125 percent of Medicare payment rates.

          Reducing the Prices of Prescription Drugs. We 
        strongly support the elements of the draft bill that would 
        require transparent reporting from pharmacy benefit managers 
        (PBMs) to plan sponsors, prohibit the use of spread pricing by 
        PBMs, and require PBMs to pass-through 100 percent of rebates 
        to the plan sponsor. In aggregate, however, we do not believe 
        that these steps would go far enough to rein in drug costs. 
        Specifically, we support legislation that would increase 
        transparency and provide advance notice and justification for 
        significant price increases, reduce the barriers to generic 
        drug and biosimilars development, and prohibit abuse of the 
        patent system to extend exclusivity for brand-name drugs.

          Improving Transparency in Health Care. We strongly 
        support the elements of the draft bill that would improve 
        transparency of costs and quality outcomes, including 
        provisions to establish a non-governmental not-for-profit 
        organization to create an all-payers claims database. In 
        addition, we encourage Congress to require outcomes-oriented 
        quality measures for priority conditions, including maternal 
        and infant care.

          We strongly support the elements of the draft bill 
        that would remove gag clauses on the sharing of price and 
        quality information by providers, as well as the elements that 
        would ban anti-competitive contracting practices by providers. 
        We encourage Congress to consider additional steps to address 
        the problem of provider concentration, including site-neutral 
        payments and the promotion of entry of new competitors and 
        reduction of barriers to entry. In addition, we encourage 
        Congress to enable Medicare beneficiaries to identify and seek 
        care from high performing providers and facilities.

          In addition to these elements of the Committee's 
        discussion draft, The U.S. health care system needs to 
        dramatically increase investment and support for primary care. 
        We believe Medicare should authorize payment models and 
        increase payment rates for advanced primary care models that 
        achieve high quality outcomes and reduce total cost of care.
                                 ______
                                 
    The Chairman. Thank you, Ms. Mitchell.
    Mr. Isasi, welcome.

STATEMENT OF FREDERICK ISASI, EXECUTIVE DIRECTOR, FAMILIES USA, 
                         WASHINGTON, DC

    Mr. Isasi. Thank you very much, Chairman Alexander, Senator 
Murray, and Members of the HELP Committee. I am Frederick 
Isasi, Executive Director of Families USA. For nearly 40 years 
we have served as one of the leading national voices for health 
care consumers, both here in
    Washington, DC. and on the State level. Our mission is to 
allow every individual to live to their greatest potential by 
ensuring that the best health and health care are equally 
accessible and affordable to all, and thank you for the 
opportunity to testify.
    The cost and quality of American health care is a profound 
economic and public health problem, and an utterly bipartisan 
issue. Almost half of the public cannot see a doctor when they 
need to because of cost. About a third say that they had 
trouble paying for basic necessities because of health care 
costs. And nearly two-thirds of the public believe that we as a 
nation do not get good value from the U.S. health care system. 
And analyses of the health care system support the public's 
perception.
    Despite spending two or three times more than other wealthy 
nations on health care, we live shorter lives than those in 
other wealthy nations. The U.S. health care system is more 
likely to fail its people, and even our moms and our babies are 
dying at higher rates.
    As a Nation, we can do better for families, and it's well 
past time that the health care system change.
    Families across the country who face ever-increasing health 
care costs often are forced to make untenable decisions: pay a 
medical bill, or buy groceries to feed the family; pay the 
electric bill to keep the heat on, or buy a child's asthma 
medication. At its worst, out of control health care costs and 
lack of high quality can be truly devastating.
    I'd like to talk to you about Deborah, from the Chairman's 
home State of Tennessee, a remarkable woman who shared her 
story with Families USA story bank. Deborah worked hard. She 
went to college. She studied. She graduated, and she for many, 
many years worked in a successful career as a microbiologist 
for the State of Tennessee.
    Then in 2012, after going to the hospital for a routine hip 
replacement, Deborah received a hospital-acquired infection. 
This created a multi-year cycle of infection and illness that 
resulted in her losing her job and losing almost everything she 
had worked for.
    Following the surgery, an infection spread from Deborah's 
hips to her vertebrae and discs, and by 2016 she was at risk 
for full spinal collapse. She had 10 back surgeries, and at 
times she was placed in a drug-induced coma. Today, Deborah is 
bedridden and in extreme pain.
    Since her first surgery, Deborah has moved from employer 
coverage to the Tennessee Health Insurance Marketplace, and now 
Medicare. Despite this coverage, paying for her care has taken 
all of her savings. Deborah told us, 'I had about $2 million in 
surgeries, plus a bunch of other expenses, including an 
intravenous antibiotic that cost about $850 a day. Before this, 
I had a brand new house, I had a brand new car. The car was 
repossessed, and I almost went into foreclosure.
    Deborah was in the hospital when, and I quote, 'the repo 
papers came. I planned my life 20 years ago, and I didn't 
expect this to happen. It hit me so hard, and it took 
everything. This isn't what I thought would happen to me.
    Any of us, any of us could be Deborah. Any of us could be 
building our lives, saving, contributing to society, and then 
because of poor health care quality and out of control costs, 
all that we have worked for can be taken from us.
    It is time for our nation to take a long, hard look at our 
health care system. The system should work for families to 
ensure the best health possible, not threaten our economic 
independence and vitality.
    Families USA strongly supports the Lower Health Care Costs 
Act. It's an important step in the right direction, and we've 
provided written comments with specific recommendations about 
the legislation.
    Before I conclude, I was hoping to briefly focus on the 
legislation's prohibition on surprise medical bills. Your 
legislation would end this practice and the profound financial 
insecurity it creates. The most critical aspect of the 
legislation would ban charging patients out-of-network rates 
while receiving in-network care. This is most critical. The 
legislation also would establish a mechanism to ensure that 
providers can't charge outrageous amounts of money for these 
categories of out-of-network services. Recent studies have 
shown that as providers consolidation has reached all-time 
highs, providers are leveraging the lack of competition to 
charge ever-escalating prices. These prices are a central 
reason why health insurance premiums for all of us continue to 
escalate so quickly. We strongly support and encourage the 
Committee to maintain these provisions in the legislation that 
not only prohibit out-of-network surprise bills but also the 
outrageous sums being charged for these services.
    The work you do in this Committee is absolutely vital to 
the health and well-being of every single person in this 
country. We hope the work will continue and the legislation 
will be enacted this year.
    Thank you again for the opportunity to testify, and I look 
forward to responding to any questions.
    [The prepared statement of Mr. Isasi follows:]
                 prepared statement of frederick isasi
    Chairman Alexander, Senator Murray, and Members of the Committee on 
Health, Education, Labor, and Pensions. I am Frederick Isasi, Executive 
Director of Families USA. For nearly 40 years, we have served as one of 
the leading national voices for health care consumers both in 
Washington, DC. and on the state level. Our mission is to allow every 
individual to live to their greatest potential by ensuring that the 
best health and health care are equally accessible and affordable to 
all. As a former aide to Sen. Jeff Bingaman, a long-time Member of this 
Committee, it is my honor to have the opportunity to speak with you 
today.
          The Larger Context of Health Care Costs for Families
    The cost of American health care is a profound economic and public 
health problem: 44 percent of the public report not seeing a doctor 
when they need to because the costs are too high; 30 percent say the 
cost of medical care interferes with basic needs like food, housing, 
and heat; and nearly two-thirds believe that, as a country, we do not 
get good value from the U.S. health care system. \1\ As a Nation, we 
can do better for America's families, and it's well past time for the 
health care system to change.
---------------------------------------------------------------------------
    \1\  NORC at the University of Chicago and West Health Institute, 
Americans' Views of Healthcare Costs, Coverage, and Policy, March 2018 
http://www.norc.org/PDFs/WHI--20Healthcare--20Costs--20Coverage--
20and--20Policy/ WHI--20Healthcare--20 Costs--20Coverage--20and--
20Policy--20Issue--20Brief.pdf.
---------------------------------------------------------------------------
    Over the last 40 years, health care spending in the United States 
has increased six-fold, from $1,797 per person in 1970 to $10,739 in 
2017 (using constant 2017 dollars). \2\ During that same period of 
time, the U.S. more than doubled the percentage of its gross domestic 
product (GDP) on total health care spending from 6.9 percent of its GDP 
in 1970 to spending nearly 18 percent of its GDP on health care in 
2017. \3\
---------------------------------------------------------------------------
    \2\  Rabah Kamal and Cynthia Cox, ``How Has U.S. Spending on 
Healthcare Changed Over Time?'' Peterson-Kaiser Health System Tracker, 
December 10, 2018, https://www.healthsystemtracker.org/ chart-
collection/u-s-spending-healthcare-changed-time/itemhealth-spending-
growth-has-outpaced-growth-of-the-u-seconomy--2017.
    \3\  ibid.
---------------------------------------------------------------------------
    This increase in national health care spending has outpaced the 
growth of the U.S. economy, with per capita national health 
expenditures growing faster than inflation from 1980 to 2008 and again 
from 2014 to 2015. \4\ And, U.S. health care costs are high not only by 
historical standards, but also compared to other industrialized 
nations. Among industrialized countries, the United States ranks 
highest for the amount spent on health care but lowest on fundamental 
health outcome indicators. For example, a recent study in The Journal 
of the American Medical Association found that, although U.S. per 
capita spending on medical care is nearly twice that of 10 of the 
highest-income countries, the United States has the lowest life 
expectancy and the highest infant mortality and maternal mortality 
rates. \5\ Our country also ranks near the bottom of the list of 
wealthy nations in terms of access, equity, outcomes, and 
administrative efficiency. \6\
---------------------------------------------------------------------------
    \4\  ibid.
    \5\  Irene Papanicolas, Liana R. Woskie, and Ashish K. Jha, 
``Health Care Spending in the United States and Other High-Income 
Countries,'' JAMA 319, no. 10 (2018): 1024, https://jamanetwork.com/
journals/jama/article-abstract/2674671.
    \6\  Eric C. Schneider, Dana O. Sarnak, David Squires, Arnav Shah, 
and Michelle M. Doty, ``Mirror, Mirror 2017: International Comparison 
Reflects Flaws and Opportunities for Better U.S. Health Care,'' The 
Commonwealth Fund, July 2017, http://interactives.commonwealthfund.org/
2017/july/mirror-mirror/
---------------------------------------------------------------------------
    High and rising health care costs are a critical problem for 
national and state governments, and affect the economic vitality of 
middle-class and working families. Over the last 40 years, these 
families have experienced stagnating wages and income. From 1973 to 
2013, hourly wages rose 9 percent in real terms, while workers' 
productivity increased 74 percent. In comparison, from 1948 to 1973, 
wage growth kept pace with workers' productivity: Wages and 
productivity increased 91 percent and 96 percent, respectively. \7\ 
Stagnation in wage growth is particularly evident in trends in annual 
pay increases for middle-and lower-income Americans. Since 1979, annual 
increases for the top 1 percent of America's earners increased by a 
startling 138 percent, while the bottom 90 percent saw their wages 
increase by only 15 percent. \8\ While there are many contributors to 
this half-century long trend of lower wages, there is evidence that the 
rapid growth in U.S. health care costs has created sustained downward 
pressure on wages and incomes. \9\, \10\
---------------------------------------------------------------------------
    \7\  Lawrence Mishel, Elise Gould, and Josh Bivens, ``Wage 
Stagnation in Nine Charts,'' Economic Policy Institute, January 6, 
2015, https:// www.epi.org/publication/charting-wage-stagnation/.
    \8\  ibid.
    \9\  Josh Bivens, ``The Unfinished Business of Health Reform: 
Reining in Market Power to Restrain Costs Without Sacrificing Quality 
or Access,'' Economic Policy Institute, October 10, 2018, https://
www.epi.org/publication/ health-care-report/.
    \10\  Katherine Baicker and Amitabh Chandra, ``The Labor Market 
Effects of Rising Health Insurance Premiums,'' Journal of Labor 
Economics 24, no. 3 (2006): 609-634, https://sites.hks.harvard.edu/fs/
achandr/JLE--LaborMktEffectsRisingHealthInsurancePremiums--2006.pdf
---------------------------------------------------------------------------
    Between 1999 and 2016, the total cost of a family employer-
sponsored health insurance plan rose from $5,791 to $18,142 in real 
2016 dollars. \11\ Thus, the high cost of health care also is a 
critical problem for employers. As wages remain relatively flat and 
health care costs increase, a growing number of families struggle to 
afford health insurance deductibles and cost-sharing. These people are 
commonly referred to as the ``underinsured.'' Currently, 45 percent of 
U.S. adults were underinsured--an estimated 87 million people. 
Distressingly, this is more than triple the rate of underinsurance in 
2003. \12\
---------------------------------------------------------------------------
    \11\  Gary Claxton, Matthew Rae, Michelle Long, Anthony Damico, 
Heidi Whitmore, and Gregory Foster, ``Health Benefits in 2017: Stable 
Coverage, Workers Faced Considerable Variation in Costs,'' Health 
Affairs 36, no. 10 (October 2017): 1838-47, https://
www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2017.0919.
    \12\  Sara R. Collins, Herman K. Bhupal, and Michelle M. Doty, 
``Health Insurance Coverage Eight Years After the ACA,'' The 
Commonwealth Fund, February 7, 2019, http://www.commonwealthfund.org/ 
publications/issue-briefs/2019/feb/health-insurance-coverageeight-
years-after-aca.
---------------------------------------------------------------------------
    Families across the country who face high and rising health care 
costs often are forced to make untenable decisions: pay a medical bill 
or buy groceries to feed the family; pay the electric bill to keep the 
heat on or buy a child's asthma medication; seek treatment for a 
substance use disorder or postpone treatment because an employer 
doesn't offer health insurance. These tradeoffs have a direct impact on 
individuals' and families' ability to live healthy lives.

    To illustrate the myriad ways our health care system is failing so 
many people, allow me to take a moment to tell you the story of Debra, 
from Tennessee, a brave woman who shared her story with Families USA's 
story bank program:

          For many years, Debra had a successful career as a 
        microbiologist for the State of Tennessee. A hip replacement in 
        2012 kicked off a multiyear cycle of infection and illness that 
        resulted in her leaving her job and losing almost everything 
        she had worked for. Following the surgery, an infection spread 
        from Debra's hips to her vertebrae and disks, and, by 2016, she 
        was at risk of a full spinal collapse. She's had 10 back 
        surgeries and, at times, has been in a drug-induced coma. 
        Today, Debra is bedridden.

          Since her first surgery, Debra has cycled from employer-
        sponsored coverage to COBRA coverage, a plan through the 
        Tennessee marketplace, and Medicare. Paying for her care has 
        taken all her savings. ``I had about $2 million in surgery, 
        plus a bunch of other expenses''--including an intravenous 
        antibiotic that cost about $850 per day. ``Before this, I had a 
        brand new house. I had a new car. The car was repossessed, and 
        I almost went into foreclosure,'' Debra says. She was in the 
        hospital ``when the repo papers came. I planned my life 20 
        years ago, and I didn't expect this to happen. It hit me so 
        hard, and it took everything. I worked for over 30 years, and 
        this isn't what I thought would happen to me.''

    Any of us could be Debra. Any of us could be building our lives, 
saving, contributing to society and then, because of poor quality and 
out-of-control costs, all that we have worked for could be taken from 
us. It is time for our Nation to take a long hard look at our health 
care system. The system should work for families to ensure the best 
health possible, not threaten their economic independence and vitality.
   The Public Across the Political Spectrum Want and Need You to Act
    A recent survey found that 60 percent of Americans believe the 
government should be responsible for ensuring that all Americans have 
health care coverage. \13\ Furthermore, almost 80 percent of Americans 
believe the government should help to ensure that everyone has access 
to affordable, quality health care. \14\
---------------------------------------------------------------------------
    \13\  Donna Rosato, ``Feeling Squeezed: Healthcare Is Top Concern 
in CR's New Consumer Voices Survey,'' Consumer Reports, May 18, 2017, 
https://www.consumerreports.org/healthcare/healthcaretop-concern-in-
consumer-reports-new-consumer-voices-survey/.
    \14\  Jocelyn Kiley, ``Most Continue to Say Ensuring Health Care 
Coverage Is Government's Responsibility,'' Fact Tank (blog), Pew 
Research Center, October 3, 2018, https://www.pewresearch.org/ fact-
tank/2018/10/03/most-continue-to-say-ensuring-health-carecoverage-is-
governments-responsibility/.
---------------------------------------------------------------------------
    Despite the public's overwhelming support for universal and 
affordable access to health care, the interest of families and health 
care consumers is often absent in the decisions made by policymakers, 
particularly with respect to complicated and detailed health care 
payment and delivery system policies. Public policy research has found 
that well-organized groups representing specific business interests 
have substantial influence on U.S. policy, while consumers have little 
or no independent influence. \15\ And, within this dynamic, the health 
care industry often has the unique ability to command the attention of 
policymakers--indeed, health care stakeholders spend more money 
lobbying Congress and the administration than any other industry. \16\
---------------------------------------------------------------------------
    \15\  Martin Gilens and Benjamin I. Page, ``Testing Theories of 
American Politics: Elites, Interest Groups, and Average Citizens,'' 
Perspectives on Politics 12, no. 3 (September 2014): 564-581, https://
www.cambridge.org/core/ journals/perspectives-on-politics/article/
testing-theories-of-american-politics-elites-interest-groupsand-
average-citizens/62327F513959D0A304D4893B382B992B
    \16\  Center for Responsive Politics, Ranked Sectors, 2019, https:/
/www.opensecrets.org/lobby/ top.php'indexType=c&showYear=2019.
---------------------------------------------------------------------------
    Consider, for example, the market failures and lack of competition 
that fuels ``surprise'' medical bills from out-of-network providers and 
ever-rising drug prices. Or, examine the way in which health care 
prices are established in the Medicare Physician Fee Schedule--the 
model for how most physician services are reimbursed by the Medicare 
program and most typically used as the foundation by which prices are 
established in Medicaid and even in commercial insurance. Prices are 
determined by physician specialty societies that have a vested interest 
in maximizing prices to generate their income rather than what is in 
the best interests of their patients. Meanwhile, primary care 
physicians who are on the front lines in providing cost-effective, 
patient-centered, community-based health care are paid among the lowest 
prices compared to other physicians. \17\
---------------------------------------------------------------------------
    \17\  Leslie Kane, ``Medscape Physician Compensation Report 2018,'' 
Medscape, April 11, 2018, http://www.medscape.com/slideshow/2018-
compensation-overview-6009667
---------------------------------------------------------------------------
    Other anti-consumer distortions permeate much further into our 
health care system. For example, the system fails to address the 
fundamental needs of consumers when patients and health care providers 
lack access to timely, effective, and interoperable health care data. 
These data are the foundation for consumers to make informed decisions 
about their care. Data are critical for society to understand who 
provides high-quality and high-value care, for policymakers to 
establish evidence-based legislative and regulatory initiatives, and 
for innovators to be rewarded for improving the Nation's health and 
health care systems.

    It is for these reasons that just last month, Families USA launched 
a new national coalition called Consumers First: The Alliance to Make 
the Health System Work for Everyone. Consumer's First is dedicated to 
uprooting the fundamental economic distortions in the Nation's health 
care system to ensure that the best health and health care are 
accessible and affordable for every person across the country.

    Consumers First is operated by a steering committee comprised of 
leading national health policy organizations that are working to ensure 
that the U.S. health care system provides affordable, high-quality care 
for America's families, children, seniors, and adults. These include 
organizations represent consumers, employers, organized labor, primary 
care providers, and children. \1\ In its Call to Action, Consumers 
First identified six policy areas ripe for immediate action to benefit 
consumers. Namely:
---------------------------------------------------------------------------
    \1\  The Steering Committee of Consumers First consists of: 
Families USA; American Academy of Family Physicians; American Benefits 
Council; American Federation of State, County and Municipal Employees; 
American Federation of Teachers; First Focus Campaign for Children; 
Pacific Business Group on Health.

---------------------------------------------------------------------------
          Economic Distortions in Prescription Drug Pricing;

          Distortions created by provider payment systems, 
        including Medicare;

          Increased Health Care Industry Consolidation;

          Federal tax policy of nonprofit health care 
        institutions and insurance plans;

          Flawed workforce policy; and

          Inadequate access to data and lack of transparency. 
        \18\
---------------------------------------------------------------------------
    \18\  Frederick Isasi, Robert Berenson, and Sophia Tripoli. 
``Consumers First, Our Call to Action.'' Families USA, 2019, https://
familiesusa.org/sites/default/files/product--documents/Consumers-
First--Our-Call-to-Action--Report--Final.pdf

    We are delighted that the HELP Committee is seeking, in bipartisan 
fashion, to address several of the issues identified by Consumers 
First.
                    The Lower Health Care Costs Act
    First, I want to state clearly: Families USA strongly supports the 
Lower Health Care Costs Act discussion draft circulated by this 
Committee. We applaud the Committee for working in a bipartisan fashion 
to develop legislation that has the potential to be meaningful and 
enacted this year. We have a number of recommendations to improve this 
legislation, summarized below, and transmitted in full to the Committee 
in our attached comment letter dated June 5, 2019, but we are very 
pleased that the Committee is taking real action to improve health care 
for millions of struggling families across the country. We encourage 
you to continue to work diligently to finalize this legislation this 
year.

    Below, I have provided a summary of our comments on each of the 
five titles included in the Lower Health Care Costs Act. In addition, 
we've attached our more detailed comment letter as an appendix.

    Title I: Ending Surprise Medical Bills

    Surprise out-of-network bills are a clear example of how distorted 
economic incentives in the health care sector are overwhelming the 
interests of patients. They are the result of a systemic problem in our 
health care system that places families directly in the middle of a 
tug-of-war between health care providers and insurers over the price of 
services. \19\
---------------------------------------------------------------------------
    \19\  Loren Adler, Matthew Fiedler, Paul B. Ginsburg, Mark Hall, 
Erin Trish, Christen Linke Young, and Erin L. Duffy. ``State Approaches 
to Mitigating Surprise Out-of-Network Billing.'' USC-Brookings 
Schaeffer Initiative for Health Policy. 2019, https://
www.brookings.edu/wp-content/uploads/2019/02/Adler--et-al--State-
Approaches-to-Mitigating-Surprise-Billing-2019.pdf.
---------------------------------------------------------------------------
    The rate negotiated between providers and insurers for services is 
at the center of their business models. Larger hospital systems have 
significant leverage, allowing them to command top dollar for in-
network rates. Insurers are often forced to pay their high charges for 
in-network status, or insurers may simply walk away from the 
negotiation. \20\ On the other hand, when hospitals are smaller, 
insurers hold the leverage. Those hospitals must choose between 
accepting lower negotiated rates than they desire, or walking away from 
the negotiation and providing care out-of-network. \21\ In general, 
compared to in-network providers, out-of-network providers charge 
nearly three times as much for care. \22\ These prices are not 
disclosed to patients in advance. This leaves families with balance 
bills that average over $600, but can exceed $20,000, despite the fact 
they are being provided within in-network facilities. \23\ Providers 
and payers should not be permitted to walk-away from negotiations for 
services that are occurring in relation to other in-network services 
and simply leave families to bear the financial burden.
---------------------------------------------------------------------------
    \20\  Robert Berenson, Robert, Paul Ginsburg, Jon Christianson, and 
Tracy Yee. ``The Growing Power Of Some Providers To Win Steep Payment 
Increases From Insurers Suggests Policy Remedies May Be Needed.'' 
Health Affairs. 2017, https://www.healthaffairs.org/doi/full/10.1377/
hlthaff.2011.0920.
    \21\  Commonwealth of Massachusetts Health Policy Commission. 
``Community Hospitals at a Crossroads: Findings from an Examination of 
the Massachusetts Health Care System.'' Commonwealth of Massachusetts. 
2016, https://www.mass.gov/files/documents/2016/07/xf/community-
hospitals-at-a-crossroads.pdf.
    \22\  Cooper, Zack and Fiona Scott Morton. ``Out-of-Network 
Emergency-Physician Bills--An Unwelcome Surprise'' New England Journal 
of Medicine. 2017, https://www.nejm.org/doi/full/10.1056/NEJMp1608571.
    \23\  ibid.
---------------------------------------------------------------------------
                 Surprise Billing Action is Needed Now
    Among the many valuable provisions included in the Lower Health 
Care Costs Act, a prohibition on surprise billing is probably the most 
significant and badly needed today. The statistics are staggering: One-
in-five emergency department visits results in a surprise medical bill. 
\24\ More than one-in-five lab claims (22.1 percent) incurred at in-
network hospitals are billed as out-of-network. \25\
---------------------------------------------------------------------------
    \24\  Ibid.
    \25\  Kennedy, Kevin, Bill Johnson, and Jean Fuglesten Biniek. 
``Surprise out-of-network medical bills during in-network hospital 
admissions varied by state and medical specialty, 2016.'' Health Care 
Cost Institute. 2019, https://www.healthcostinstitute.org/blog/entry/
oon-physician-bills-at-in-network-hospital
---------------------------------------------------------------------------
    Behind each of these statistics, however, is the story of a real 
person who has been harmed by a surprise bill. Allow me to highlight 
the experience of Nicole, from Colorado.

          Nicole woke up in the middle of the night with intense 
        stomach pain. After first visiting a freestanding ER, she was 
        told she needed an emergency appendectomy, and she went to the 
        local hospital. She did her due diligence to confirm repeatedly 
        that the hospital and its providers accepted her insurance. 
        However, months later, she received a surprise bill from the 
        surgeon for $4,727. While the hospital was in-network, the 
        surgeon was an independent, out-of-network provider.

          Nicole explained the situation to the insurer, but they 
        continued to demand payment. She declined to pay the bill, and 
        within 2 years, a credit agency representing the surgeon took 
        her to court, and won the full amount, including interest. As a 
        result, a lien was placed on her home, and the collection 
        agency garnished her wages by 25 percent each month. This came 
        right as she was pregnant and about to go on maternity leave.

    The disagreement over the payment rate between providers and 
insurers has dominated the debate on surprise billing on Capitol Hill 
this year. The irony is that for decades, it has been families who have 
been harmed by surprise bills when powerful industries cannot agree on 
a payment rate. Now, the same powerful industries are fighting over 
this legislation and families' voices are once again overshadowed.

    Whatever reimbursement methodology you choose, it is critical to 
millions of people like Nicole across the country that you enact 
legislation this year. Every day that goes by, families across the 
country are receiving devastating surprise bills that threaten to send 
them to medical bankruptcy. Families USA has been fighting surprise 
medical bills for three decades and we have never been this close to 
stopping one of the most egregious business practices harming 
consumers. You have come this far--please do not fail your constituents 
now.
    Lower Health Care Costs Act's Protections against Surprise Bills
    Your legislation, as drafted, provides strong consumer protections 
by ensuring no one will pay more toward their care than their in-
network cost-sharing (including copayments, coinsurance, or 
deductibles) in a surprise billing situation regarding emergency 
services (regardless of the state in which the patient resides), non-
emergency services at in network facilities, and out-of-network 
services after an enrollee has been stabilized. We support the clear 
indication that cost-sharing amounts count toward the in network out-
of-pocket maximum and deductible. Finally, we support the clear 
specification that referrals for diagnostic services are included in 
these protections.

    In addition to recommending a few clarifying changes as reflected 
in our attached comment letter, I would note one particular change to 
ensure the best possible consumer protections across the country. 
Namely, we urge the Committee to clarify that Federal law applies to 
surprise bill situation unless, in the judgment of the Secretary, state 
law is equally or more robust. For state law to take precedent, it must 
have as robust consumer protections and payment cost-controls as the 
Federal law. This will prevent the potential for state laws to 
undermine Federal law on surprise billing and therefore leave consumers 
unprotected and vulnerable to premium increases. Additionally, even if 
states have their own surprise billing laws, Federal law should apply 
to any health plans that states cannot fully regulate, such as self-
insured, ERISA-regulated plans.
                       Payment Mechanism Options
    Your legislation contemplates three different options for 
establishing a mechanism for settling out-of-network bills between 
plans and providers.

    Overall, we are very concerned about any out-of-network payment 
mechanism that would serve to further inflate costs, which would then 
be passed onto consumers in the form of higher insurance premiums. Due 
to its ability to hold down costs, and therefore protect consumers from 
premium inflation, and its administrative simplicity, Families USA 
supports your third option--a benchmark payment rate based on median 
in-network contracted rates. Conversely, we strongly oppose basing 
benchmark rates on billed charges due to its inflationary effects.

    While we believe Option 3 is the strongest of the three 
alternatives you propose, we believe both an in-network guarantee 
(Option 1) and independent dispute resolution (IDR) (Option 2) also 
hold promise and represent improvements upon the status quo.

    The in-network guarantee could provide a significant degree of 
simplicity and clarity for consumers who would know that any provider 
or service they access in an in-network facility (such as diagnostic 
imaging or laboratories) would be considered in-network. However, we 
recognize that the in-network guarantee model marks a dramatic shift 
from the health care system as it operates currently, and thus could 
present substantial implementation challenges.

    IDR is not likely to contain costs as significantly as a benchmark 
mechanism and creates additional administrative burdens. However, if 
implemented properly, it would lower costs in surprise bill situations 
relative to the status quo. We are pleased that the dispute resolution 
entity would be an unbiased entity, tied neither to insurers nor 
providers, and will consider the median in-network rate. However, we 
recommend explicitly requiring that if pursued, an IDR entity may not 
consider billed charges in its deliberations. Billed charges are often 
wildly inflated above the cost of care and what the provider has agreed 
to in-network negotiations. As a result, considering billed charges 
would drive up health care costs and therefore premiums for consumers.
                   Surprise Bills for Air Ambulances
    Air ambulances are a vital link in our Country's trauma care 
system, saving thousands of lives every year. However, Air ambulance 
services are particularly likely to lead to surprise medical bills. 
Nearly seven out of ten of air ambulance patient transports that people 
often require in life-or-death situations are out-of-network, and 
balance bills from these air ambulance providers are rarely below 
$10,000. \26\
---------------------------------------------------------------------------
    \26\  U.S. Government Accountability Office. ``Air Ambulance: 
Available Data Show Privately Insured Patients are at Financial Risk.'' 
GAO. 2019. https://www.gao.gov/assets/700/697684.pdf.
---------------------------------------------------------------------------
    Congressional intervention is needed to address this problem, as 
states are preempted from fully solving this pressing issue. Whether in 
this bill or future legislation, Federal protections should hold 
consumers harmless from paying more than in-network cost-sharing for 
air ambulance transport when they have no option for in-network 
airlift. Additionally, Federal preemptions that prohibit state 
regulation of air ambulance rates and networks should be eliminated. In 
the meantime, greater transparency of air ambulance costs, as proposed 
in this draft legislation, is beneficial.
          Title II: Reducing the Prices of Prescription Drugs
    In 2015, the United States spent $457 billion on prescription 
drugs--which accounted for nearly 17 percent of overall personal health 
care services. \27\ The benefits of pharmaceutical drug therapies are 
substantial, but these benefits often come with significant financial 
costs to patients and to payers, and their prices are not always 
justified. For example, between 2012 and 2016, people with diabetes saw 
the price of insulin--a 100 year-old drug--double from $344 to $666 per 
prescription. \28\ It is hard to understand how a drug so old can cost 
so much, until one looks at the financial practices of drug companies: 
On average they spend less than a quarter of their revenue on 
innovation \29\ and nine out of 10 of the largest drug companies spend 
more on marketing than creating new drugs. \30\ What's more, drug 
companies spent $172 million on lobbying in 2018--more than any other 
industry. \31\
---------------------------------------------------------------------------
    \27\  Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation, ``Observations in 
Trends in Prescription Drug Spending,'' March 8, 2016, https://
aspe.hhs.gov/ system/files/pdf/187586/Drugspending.pdf
    \28\  Amanda Frost and John Hargraves, ``Price of Insulin 
Prescription Doubled Between 2012 and 2016,'' HealthyBytes (blog), 
Health Care Cost Institute, November 29, 2017, https://
www.healthcostinstitute.org/blog/entry/price-of-insulinprescription-
doubled-between-2012-and-2016
    \29\  Florko, Nicholas. ``A new study sparks a war of words over 
the drug industry's commitment to research.'' STAT News. May 14, 2019. 
https://www.statnews.com/2019/05/14/war-of-words-over-pharma-
commitment-toresearch/.
    \30\  Richard Anderson, ``Pharmaceutical Industry Gets High on Fat 
Profits,'' BBC News, 2014 https://www.bbc.com/news/business-28212223
    \31\  Center for Responsive Politics, Pharmaceutical Manufacturing: 
Lobbying, 2018. https://www.opensecrets.org/ industries/
lobbying.php'cycle=2018&ind=H4300.
---------------------------------------------------------------------------
    While most other Federal reimbursement for health care is based on 
a set of standards, the government has no ability to establish a 
rational price for drugs in the Medicare program. For drugs without 
sufficient competition, it is clear that some prices are wildly 
inflated and those prices are not associated with production costs, 
efficacy, value, or need. \32\
---------------------------------------------------------------------------
    \32\  Henry Waxman, Bill Corr, Kristi Martin, and Sophia Duong, 
``Getting to the Root of High Prescription Drug Prices,'' The 
Commonwealth Fund, July 10, 2017, https://www.commonwealthfund.org/
publications/issue-briefs/2017/jul/getting-root-high-prescription-drug-
prices
---------------------------------------------------------------------------
    Families USA supports the measures included in the legislation that 
lay a foundation of Federal reforms on prescription drug costs. In 
particular, the bill includes several measures to bring generics to 
market faster, providing lower cost alternatives to costly, 
monopolistic brand-name drugs. In particular, we support provisions 
like Section 201 and 202 that will provide greater transparency on 
patents for biologics, including on exclusivity periods and when they 
expire, so that generic manufacturers have the timely and accurate 
information they need to bring competition to market.

    We also support sections 203, 204, and 205, which include important 
measures to prevent gaming that can delay the availability of generics. 
We recommend that the Committee supplement these provisions, whether in 
this legislative package or elsewhere, with the CREATES Act and 
legislation to completely ban so-called ``Pay for Delay'' practices, 
which would also make important progress in bringing generic drugs to 
market faster.

    The bill would also be improved by facilitating greater 
transparency in how prescription drug prices are set. S. 1391, the FAIR 
Drug Pricing Act, sponsored by Sen. Tammy Baldwin, would require drug 
manufacturers to justify price increases of more than 10 percent in a 
single year or 25 percent over three consecutive years. We would also 
support a requirement that drug companies justify launch prices over a 
specified amount. One option would be mandated justification on launch 
prices that exceed the threshold in Medicare to qualify as a specialty 
drug, currently $670 per month ($8,040 annually).

    While we support the prescription drug provisions in the Lower 
Health Care Costs Act, they will not significantly reduce the 
escalating cost of drugs without overarching reforms that will directly 
lower list prices. Some of these provisions may fall outside of the 
Committee's jurisdiction. We urge the Committee to work with Senate 
leadership and ensure that policies that allow for government oversight 
of drug pricing be enacted this year. In particular, we urge the Senate 
to consider legislation to allow the Federal Government to directly 
negotiate the price it pays for prescription drugs in Medicare Part D. 
S. 377, the Medicare Negotiation and Competitive Licensing Act, 
sponsored by Sen. Sherrod Brown, is one such example.
            Title III: Improving Transparency in Health Care
    Meaningful improvements in all of the areas included in your 
legislation--including prescription drug prices, surprise billing, and 
improved public health--all require better access to and flow of health 
care data. Today, health care costs and measures of quality and 
effectiveness are often inaccessible and nearly impossible to share. 
\33\
---------------------------------------------------------------------------
    \33\  Kamal and Cox. Op. Cit.
---------------------------------------------------------------------------
    Consumers face many barriers to being informed purchasers of health 
care when they do not have access to price and quality information in 
the health care system. We also believe that it is critical to ensure 
that health care providers, payers, researchers and policymakers have 
access to underlying cost and quality data in order to make informed 
and effective health care payment and delivery system policies.
                          Banning Gag Clauses
    Families USA supports Section 301 of the legislation, removing 
barriers to obtaining accurate and complete health care price and 
quality information including banning gag clauses included in executed 
contracts between insurance plan issuers and providers or provider 
networks. Increasing the transparency of such information will not only 
enable consumers to be more informed purchasers of health care but it 
would also unveil fundamental information that policymakers, 
researchers and other stakeholders need in order to identify health 
care markets with the highest prices and then build policy that 
encourage competition.
                  National All-Payer Claims Data base
    Further, we strongly support Section 302 of the bill, which would 
establish a national all-payer claims data base (APCD) that receives 
and utilizes health care cost and quality information to generate 
reports available to the public and to researchers.

    Your legislation could be meaningfully strengthened by making the 
following additions to the bill text:

          Require that price and quality data be collected and 
        accessible through the APCD in manner that allows for research 
        and analysis. Some in industry argue that the collection and 
        dissemination of price data could result in increased prices 
        because industry negotiators will drive toward the highest 
        prices being paid. While this is a valid concern, with simple 
        protections price information can be collected and provided to 
        researchers and governments to study health care cost and value 
        without unveiling prices to industry negotiators.

          Specify the categories of claims data that the APCD 
        will utilize to include: medical and clinical, prescription 
        drug, dental, behavioral health, and available social services 
        data.

          Establish a mechanism in statute or direct the 
        Secretary to establish a mechanism through rulemaking that will 
        require health plans, hospitals, health care providers to share 
        claims data with this new entity.

          Direct the Secretary to establish national 
        interoperability standards to facilitate data sharing between 
        health care industry entities and with state APCDs.

          Require that the establishment of a board of 
        directors or other governance structure over the APCD equal 
        representation of consumer groups in its composition.

          Require in statute that the Advisory Committee 
        include at least 12 percent representation by consumer health 
        care organizations and at least 12 percent representation by 
        consumer groups whose missions are to reduce racial/ethnic 
        health disparities.

                          Provider Directories
    Inaccurate provider directories cause consumers to struggle to 
obtain needed medical care and to pay high out-of-network costs for 
care due to no fault of their own. Studies have found that for some 
specialties, directory information is accurate less than half of the 
time. \34\ We applaud the HELP Committee for including this issue in 
the Lower Health Care Costs Act. Our attached comment letter includes 
more detailed recommendations on how to ensure directory accuracy 
requirements are sufficient, but I would like to highlight two specific 
recommendations for your attention:
---------------------------------------------------------------------------
    \34\  Claire McAndrew. ``Improving the Accuracy of Health Insurance 
Plans' Provider Directories.'' Families USA. 2015. https://
familiesusa.org/sites/default/files/product--documents/ACA--Provider--
20Directory--20Issue--20Brief--web.pdf.
---------------------------------------------------------------------------
    First, we recommend clarifying the legislation to ensure that 
providers would be prohibited from balance billing consumers in 
instances when consumers received inaccurate information about their 
network status. Providers should be required to provide notice about 
their network status at least 7 days before delivering care. If a 
patient does not provide advanced consent to receiving out-of-network 
care at least 7 days before a service, a provider should be prohibited 
from balance billing.

    Second, all provider directories should be required to include a 
prominent notice of consumers' rights to pay no more than in-network 
cost-sharing if they receive out-of-network care due to a provider 
directory inaccuracy, and how to contact the health plan if they 
believe they relied on inaccurate information. Without such a notice, 
consumers are unlikely to know of their rights as proposed in this 
draft legislation.
                   Title IV: Improving Public Health
    Families USA strongly supports the HELP Committee's attention to 
critical public health problems that our Nation currently faces. 
Maintaining a robust and effective public health infrastructure is 
essential to ensure that America's families have access to the health 
and health care they deserve. From the importance of vaccinations, to 
addressing the high rates of maternal mortality, to addressing the 
impact of discrimination on health in our health care system, we 
support efforts that enable our public health infrastructure to respond 
quickly and effectively to emerging public health challenges.

    Achieving health equity is central to becoming a nation where the 
best health and health care are equally accessible to all. Throughout 
our history, people of color have been systematically denied a fair 
opportunity to be as healthy and productive as possible and reach their 
full potential. Consequently, these communities continue to struggle 
with deep and persistent health inequities. In addition to facing 
disproportionate barriers to high-quality, affordable health care, 
communities of color, and other underserved communities, also face 
significantly higher health risks, and markedly lower opportunities to 
improve their health. As a result, these communities are more likely to 
suffer from a myriad of serious health conditions, like diabetes, 
asthma, and many cancers, among others. This drives higher rates of 
poor health status and premature death, even among infants.

    In our attached comment letter, Families USA identified a number of 
improvements to this title to help ensure that policies to improve 
public health are culturally tailored, evidence informed, and address 
social determinants of health. One of the central challenges in 
improving health care equity in the United States is the relative 
paucity of data that is stratified by race, ethnicity, gender, sexual 
orientation, and disability status. To improve data stratification, we 
recommend that Section 405, which would provide data system 
modernization grants to public health departments, include community-
based organizations as grant recipients; and require that the grants 
include building capacity to collect and report data by race, 
ethnicity, gender, sexual orientation, and disability status.
         Title V: Improving the Exchange of Health Information
    Today, health care data are often inaccessible and nearly 
impossible to share. \35\ The flow of well-managed and protected health 
care data should be viewed as central to improving health care quality 
and driving down costs across the system. Because health care data are 
not considered for their impact of the public good, they have been used 
to drive the business interests of some companies, instead of being 
used to drive better value across the system. \36\
---------------------------------------------------------------------------
    \35\  Miriam Reisman, ``EHRs: The Challenge of Making Electronic 
Data Usable and Interoperable,'' P&T 42, no. 9 (September 2017): 572-
75, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5565131/.
    \36\  ibid.
---------------------------------------------------------------------------
    For those who suffer from poor-quality care and unnecessarily high 
costs in our health care system, this dynamic must change. Access to 
interoperable and transparent data enables employers, purchasers, 
providers, and other actors to encourage the use of higher value care. 
Hence, it is vital that data be made more broadly available and 
interoperable across the payment and delivery system.

    Among several additional comments Families USA made in its attached 
comment letter (including comments on to improve patient privacy), I 
would like to highlight two recommended improvements to Section 501.

    First, we recommend the legislation be updated to be made 
consistent with a recent Centers for Medicare & Medicaid Services (CMS) 
proposed rule regarding application programming interfaces (APIs): To 
be consistent with the CMS proposed rule, we recommend including 
language that requires payers (including dental plans) to include the 
following data sets price and cost data:

          Adjudicated claims (including cost);

          Encounters with capitated providers;

          Provider remittances;

          Enrollee cost-sharing;

          Clinical data, including laboratory results (where 
        available);

          Provider directory data;

          Drug benefit data including pharmacy directory and 
        formulary data; and

          Dental claims data.

    Second, while we support requiring payers to provide data to 
consumers through APIs, we have serious concerns about the oversight 
over third-party apps to ensure that consumers' privacy is protected. 
With the rapid proliferation of health technology innovations over the 
last decade, it is critical that third-party apps and any other 
entities that may be involved with consumer health data are subject to 
the highest standards of protection and security for consumer health 
data.

    We recommend the bill text stipulate that HIPAA be used as a 
framework for a comprehensive privacy structure for third party apps 
and any new entities that would create, store or transfer health care 
data.
                         More Action is Needed
    The Reducing Lower Health Care Costs Act is an ambitious piece of 
legislation--particularly so as a bipartisan bill in these most 
contentious of times. You deserve commendation for your leadership. 
That being said, with our health care system so rife with economic 
distortions, misaligned incentives, and bloated prices, the bill should 
best be thought of as a down payment on future reforms. Once this 
legislation is passed into law, we look forward to working with you on 
continuing to address the many ways in which the needs of children and 
families are not being met by our current health care system. Among the 
policies we believe Congress must take up are:

          Legislation to directly lower prescription drug 
        prices, including by allowing the Federal Government to 
        leverage its power to negotiate through the Medicare program.

          Legislation to establish a national health care 
        workforce strategy, including funding for the national health 
        workforce commission

          Changes to graduate medical education policy

          Better oversight of non-profit hospitals to ensure 
        they are meeting the needs of their local communities

          Further efforts to improve data interoperability and 
        transparency, including through a federally mandated 
        interoperability standard.

    Once again, thank you for the opportunity to testify before this 
Committee, and for your leadership on these vital issues for America's 
families.
                                 ______
                                 
                 [summary statement of frederick isasi]
    The cost of American health care is a profound economic and public 
health problem: A recent survey conducted by NORC at the University of 
Chicago found that 44 percent of the public report not seeing a doctor 
when they need to because the costs are too high; 30 percent say the 
cost of medical care interferes with basic needs like food, housing, 
and heat; and nearly two-thirds believe that, as a country, we do not 
get good value from the U.S. health care system.

    Families USA strongly supports the Lower Health Care Costs Act 
discussion draft circulated by this Committee. We encourage you to 
continue to work diligently to finalize this legislation this year.

          Title I: Surprise Medical Bills--Among the provisions 
        included in the discussion drat, a prohibition on surprise 
        billing is probably the most significant and badly needed.

          Among the three reimbursement options contemplated in 
        the draft, Families USA recommends Option 3--a benchmark 
        payment rate. We believe the other two options are less 
        effective, but if structured correctly, would represent an 
        improvement on the status quo for consumers.

          We recommend the HELP Committee address air ambulance 
        surprise billing, either within this legislation or in future 
        legislation.

          Title II--Reducing the Price of Prescription Drugs: 
        Families USA supports the policies in the discussion draft, but 
        recommend the Committee go further by mandating improved 
        transparency requirements; passing the CREATES Act; and passing 
        legislation to ban so called ``pay-for-delay'' agreements 
        between brand and generic manufacturers. To ensure truly 
        meaningful reductions in drug prices, the Senate must should 
        pass legislation to allow Medicare to directly negotiate the 
        price of Part D drugs.

          Title III--Improving Transparency in Health Care: 
        Families USA supports the provisions in Title III. We make 
        specific recommendations on how to improve several sections, 
        including strengthening the all-payer claims data base, and 
        clarifying that consumers given false information in provider 
        directories are not subject to balance bills.

          Title IV--Improving Public Health: We support the 
        provisions in Title IV. We make specific recommendations on how 
        to ensure public health improvements also improve health care 
        equity.

          Title V--Improving the Exchange of Health 
        Information: We support the provisions in Title V. We make 
        specific recommendations on how to improve application 
        programming interfaces to ensure patient privacy and align with 
        current administration rulemaking.
                                 ______
                                 
    The Chairman. Thank you very much.
    Ms. Bartlett, welcome.

STATEMENT OF MARILYN BARTLETT, SPECIAL PROJECTS COORDINATOR FOR 
  THE COMMISSIONER OF SECURITIES AND INSURANCE, OFFICE OF THE 
               MONTANA STATE AUDITOR, HELENA, MT

    Ms. Bartlett. Chairman Alexander, Senator Murray, 
distinguished Members of the Committee, I am honored to speak 
today about my success in lowering health care costs for 
Montanans. When I was appointed Administrator at the Montana 
State Employee Health Plan, reserves were projected to be at 
minus-$9 million in less than 3 years. Instead, the reforms 
that we implemented resulted in a reserve balance of $112 
million to the positive in that timeframe.
    I then joined Montana Insurance Commissioner Matt 
Rosendale's office to research and draft legislation aimed at 
lowering prescription drug costs. The Montana State Plans 
Prescription Drug Benefit was provided through a purchasing 
cooperative with seven different contracts. I researched the 
contracts; I researched the data files. I found spread pricing, 
limited data access, arbitrary changes to pharmacy 
reimbursements, and limited rebate pass-through, so I 
terminated these agreements and we contracted with Navitus, a 
PBM that offers a transparent full pass-through model with 
audit ability.
    When CVS refused to accept our level of reimbursement, I 
kicked them out of the network and immediately saved $1.6 
million for Montanans. In just the first year on our new 
program, we saved $7.4 million, 23 percent. Now, that might not 
sound like a lot to some of you from much larger states than 
Montana, but in the U.S. the privately insured market has $140 
billion in pharmacy spend. A 23 percent reduction could 
generate $32 billion in savings.
    As proposed, your bill addresses spread pricing and rebate 
pass-through to generate health care savings. The bill also 
addresses compensation disclosure for brokers and consultants. 
The current system is flawed. The broker/consultant acts as the 
buyer's agent but most often is paid by the seller through 
confidential agreements. My colleagues found up to 17 
undisclosed revenue streams for brokers, consultants, TPAs, 
associations, and others costs within employer plans.
    I needed consultant expertise to help us make the change 
that had to take place in the Montana plan. I contracted with 
Alliant, who had my back the whole time, and the contract only 
allows for direct compensation to them from the plan.
    Compensation disclosure for brokers and consultants is a 
good step. However, I recommend that the Committee strongly 
consider extending these requirements to all third parties that 
provide products or services to a plan.
    The bill includes traditional transparency provisions 
intended to put downward pressure on costs by increasing 
competition. In my experience, I found that these transparency 
efforts are only effective in reducing total costs if you also 
pay attention to the prices. The prices must be fair.
    As I delved into our claims data, I found extraordinary 
variations in prices charged by similar hospitals for identical 
procedures. The Rand 2.0 study confirmed this level of 
variation across the United States. Hospitals develop a secret 
chargemaster for the prices that you cannot see, so they set 
prices by the chargemaster. The insurance company or the TPA 
comes in and negotiates a secret discount off of that 
chargemaster. When I delved into our information, it was very 
plain to see that we had no control.
    I contracted with Allegiance Benefit Management Plans as 
our TPA. Together we negotiated reimbursement rates as a 
multiple of Medicare and contracted with all Montana hospitals, 
including our 48 rural critical access hospitals. Medicare 
pricing is a common publicly available reference, and we paid a 
multiple of it. We are now paying a transparent and a fair 
price, and this change on its own saved millions of dollars for 
our health plan and for Montanans.
    Hospital payments consume 40 to 50 percent of a plan's 
resources, so I urge the Committee to consider provisions to 
force hospitals to justify their prices, not just disclose 
them.
    I am an accountant; I follow the money. I saved Montana 
State Employee Plan millions of dollars while not raising 
employee or employer contributions over a 5-year period. I did 
this by analyzing data, demanding transparency and fair 
pricing, finding the right partners, and taking the money out 
of the system and getting it back to the taxpayers and the 
members. It was my fiduciary duty to do so.
    The bill before you demands better business practices from 
the health care industry, and I thank you for that.
    [The prepared statement of Ms. Bartlett follows:]
                 prepared statement of marilyn bartlett
    Chairman Alexander, Ranking Member Murray, distinguished Members of 
the Senate Health, Education, Labor, and Pensions Committee.

    I am honored to speak to you today about my success in lowering 
health care costs for Montanans. As Administrator of the Montana State 
Employee Group Health Plan, I turned the Plan from pending bankruptcy 
to a large surplus in less than 3 years. I then joined Montana 
Insurance Commissioner Matt Rosendale's office, researching and 
drafting legislation and regulations specifically aimed at lowering the 
cost of prescription drugs for Montanans. Many of the concepts I 
implemented and policy we developed are found in the Lower Health Care 
Cost Act of 2019 (LHCCA).
                        Prescription Drug Costs
    Sections 301, 302, and 306 of the LHCCA, are critical components of 
the reforms required to lower prescription drug costs. I particularly 
praise the emphasis on contracting practices in Section 302, and the 
prohibition on spread pricing and restrictions on prescription drug 
rebating in Section 306.

    When I assumed the position of Plan Administrator in late 2014, I 
found that the prescription drug benefit was provided through a 
purchasing cooperative and governed by 7 separate contracts. Through 
contract and data analysis, we found the model capped rebates at $22/
per script; included spread pricing; duplicated services; and 
restricted data access. I canceled these contracts and contracted with 
Navitus, a PBM that offered a transparent, full pass-through model, 
that eliminated spread pricing and guaranteed the Plan received all 
rebates. The PBM's only compensation was the contracted administrative 
fee paid by the Plan. The contract requires full audit access, allowing 
the Plan to properly exercise its fiduciary responsibility over 
employee and taxpayer funds.

    In just the first year under the new PBM contract, we saved $7.4 
million. This may sound like a small number to many of you, but the 
savings of 23 percent is huge. According to CMS, US pharmacy drug 
spending in the privately insured market is $140 billion; a 23 percent 
reduction could generate $32.2 billion savings for American employers 
and consumers.

    Though many employers are afraid of disruption and have been 
convinced they cannot take on the big players in the system, when CVS 
would not accept the stated level of reimbursement, I kicked them out 
of the pharmacy network, and immediately saved Montanans $1.6 million/
year. The provisions of sections 301, 302, and 306 of your bill take on 
these nefarious contracting schemes we find in health care and will 
assist employers in their negotiating power with vendors and middlemen.
                   Broker and Consultant Compensation
    Section 308 of the LHCCA addresses disclosure of compensation for 
brokers and consultants of health care products and services and is a 
big step in the right direction.

    As a new Plan Administrator, I was initially unaware of the sheer 
volume of products and services brokers, consultants, carriers, third-
party administrators (TPA), product vendors and others are constantly 
pitching and marketing to health care purchasers and payors.

    The Plan had 4 separate wellness products, which were not 
coordinated nor designed to work together. Brokers and vendors had 
promised their product(s) would lower costs, but the services weren't 
integrated and Plan costs were certainly not decreasing. It was just 
product applied upon product without digging into the root cost 
problems.

    The Plan was under contract with a large broker/consulting firm, 
and the contract was vague regarding potential compensation from third 
parties. The firm agreed to complete an analysis of our prescription 
drug benefit for an additional $25,000, and their review concluded the 
existing contracts were good and costs were appropriate. Since my 
analysis showed the opposite, I terminated that broker/consultant 
contract.

    I then contracted with Alliant, a mid-sized firm with extensive 
experience in reference-based pricing, pharmacy contracting, data 
analytics, and public entity health plans. The contract prohibits the 
consultant from receiving commissions, discounts, rebates, or other 
kickbacks from third party vendors related to the Plan's consideration, 
contracting, or performance.

    The current system is flawed, as the broker or consultant is acting 
as the buyer's agent yet is paid by the seller. My colleagues found up 
to 17 undisclosed revenue streams in one employer health plan, adding 
hidden costs to health care.

    Section 308's requirements for disclosure of compensation for 
brokers and consultants is a very good first step. However, I recommend 
that the Committee strongly consider including disclosure of 
compensation to all third parties that provide a product or service to 
a plan.
                                Pricing
    Sections 303, 305, 307, and 309 of the LHCCA are traditional 
``transparency'' provisions that are intended to put downward pressure 
on costs by increasing visibility on them. In my experience, I found 
that transparency efforts are only effective in reducing health care 
costs if the prices are fair.

    As I delved into claims paid by the State Plan, I found 
extraordinary variations in prices charged by similarly situated 
hospitals for identical procedures. The Rand 2.0 study confirmed this 
level of variation exists across the US.

    Hospitals develop a ``charge master'' for the prices they bill, 
which can be changed at any time and is not accessible by the Plan. A 
carrier or TPA will negotiate a discount off the charge master price, 
which is proprietary and confidential. So, employer plans are required 
to pay an arbitrary charge reduced by a secretly negotiated discount, 
which can change at any time without their knowledge.

    I decided we would adopt a new strategy that would disrupt the 
standard model: Our Plan would set reimbursement for Montana hospitals 
and providers based on Medicare rates for the price reference.

    Medicare offered the following that is absent in the current 
charge-less-discount model:

          Common reference to overcome variation in charge 
        masters and differences in billing practices

          Largest healthcare payer in the world

          Prices and methods are empirically based and 
        transparent

          Medicare prices intended to be fair

          Uses quality measures/value-based payment

    The TPA under contract could not support our new reimbursement 
strategy. I terminated that contract. We then contracted with 
Allegiance Benefit Plan Management as our TPA, and successfully 
implemented contracts with all hospitals in Montana for reimbursement 
as a multiple of Medicare, with no balance billing to members. We are 
now paying a transparent and a fair price for services. This change, on 
its own, contributed millions in savings to the Plan.

    The Lower Health Care Costs Act does not directly address the issue 
of arbitrary hospital pricing, yet hospital pricing typically consumes 
40-50 percent of a Plan's resources. I understand the skepticism around 
using Medicare pricing as a reference. However, researching the MEDPAC 
reports and related methodology showed me it is the best source at this 
time to determine an appropriate cost of services. I believe using this 
reference for reimbursement will force hospitals to analyze their 
costs, adjust pricing accordingly, and move to a transparent, open 
network economic model, promoting competition and lower prices.

    Sections 303, 305, 307, and 309 of the LHCCA add additional 
administrative costs to health care and will only be effective in 
reducing health care costs if intense scrutiny of the opaque cost/
pricing systems occurs and provisions are added to promote fair 
pricing. I strongly recommend that the Committee prioritize efforts to 
force hospitals to justify their prices, not simply disclose them.
                               Conclusion
    In December 2014, actuarial projections showed Montana's Plan 
reserves would be at minus $9 million in 2017 if we didn't make 
significant changes. I disrupted the reimbursement systems for health 
benefits, and we increased the Plan reserves to positive $112 million 
in December 2017. By summer 2017, the Plan had higher reserves than the 
Montana General Fund and was in a position to lend funds to the State.

    I am an accountant. I follow the money. I saved Montana's state 
health plan from bankruptcy by reading contracts, analyzing claims 
data, demanding transparency from hospitals and middlemen, and then 
negotiating better deals. It was my fiduciary duty to do so.

    Currently, in my role as Special Projects Coordinator for the 
Montana Insurance Commissioner, I helped draft and pass legislation 
modeled off my success at the Montana State Health Plan, which when 
enacted WILL lower the cost of health care.

    Attached is a listing of detailed LHCCA recommendations submitted 
to the HELP Committee staff from the Office of Montana Commissioner of 
Securities and Insurance staff.

    The LHCCA demands better business practices from the healthcare 
industry. If Congress passes this bill, American consumers are certain 
to see reductions in healthcare costs, especially in the pharmaceutical 
arena.
                                 ______
                                 
                [summary statement of marilyn bartlett]
    As Administrator of the Montana State Employee Group Health Plan, I 
faced a projected Plan reserve of minus $9 million. I successfully 
increased the Plan reserves to positive $112 million in less than 3 
years. I then joined Montana Insurance Commissioner Matt Rosendale's 
office, researching and drafting legislation and regulations 
specifically aimed at lowering the cost of prescription drugs for 
Montanans. Many of the concepts I implemented and policies we developed 
are found in the Lower Health Care Cost Act of 2019 (LHCCA).

    Prescription Drug Costs. Sections 301, 302, and 306 of the LHCCA, 
are critical components of the reforms required to lower prescription 
drug costs. When I assumed the position of Plan Administrator in late 
2014, the prescription drug benefit was provided through a purchasing 
cooperative and governed by 7 separate contracts, which included spread 
pricing, limited data access, and partial rebate pass-through. I 
canceled these agreements and contracted with Navitus, a PBM that 
offered a transparent, full pass-through model, that eliminated spread 
pricing, guaranteed the Plan received 100 percent of the rebates, and 
provided full data access.

    In just the first year under the new PBM contract, we saved $7.4 
million, or 23 percent of the annual Plan spend.

    Broker and Consultant Compensation. Section 308 of the LHCCA 
addresses disclosure of compensation for brokers and consultants of 
health care products and services and is a big step in the right 
direction.

    The Plan had an existing contract with a large broker/consulting 
firm, which was vague on compensation terms with third-party vendors, 
and I canceled that contract. I then contracted with Alliant, 
prohibiting receipt of commissions, discounts, rebates, or other 
kickbacks from third party vendors related to the Plan.

    Section 308's requirements for disclosure of compensation for 
brokers and consultants is a very good first step. However, I recommend 
that the Committee strongly consider including disclosure of 
compensation to all third parties that provide a product or service to 
a plan.

    Pricing. Sections 303, 305, 307, and 309 of the LHCCA are 
traditional ``transparency'' provisions that are intended to put 
downward pressure on costs by increasing visibility on them. In my 
experience, I have found transparency efforts are only effective in 
reducing health care costs if the prices are fair.

    To set fair reimbursements to Montana hospitals, we contracted with 
Allegiance Benefit Plan Management to adopt a new strategy. We set 
reimbursement levels using a multiple of Medicare pricing. We are now 
paying a transparent and a fair price for services.

    The LHCCA does not directly address the issue of arbitrary hospital 
pricing, yet hospital reimbursements typically consume 40-50 percent of 
a plan's resources. This initial step will move hospital reimbursements 
toward transparent, open networks, promoting competition and lower 
prices.

    Sections 303, 305, 307, and 309 of the LHCCA will only be 
successful in reducing health care costs if the provisions include 
provisions for fair pricing. I strongly recommend that the Committee 
consider provisions to force hospitals to justify their prices, not 
simply disclose them.

    The LHCCA demands better business practices from the healthcare 
industry. If Congress passes this bill, American consumers and 
employers are certain to see reductions in healthcare costs, especially 
in the pharmaceutical arena.
                                 ______
                                 
    The Chairman. Thank you, Ms. Bartlett. And thanks to all 
the witnesses.
    We will now go to Senator Murray's opening statement, and 
then we'll have questions from the Senators to the witnesses.
    Senator Murray.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Well, thank you very much, Mr. Chairman. 
And thank you to all of our witnesses today for your excellent 
testimony.
    I too have heard from families across my home State of 
Washington who are really struggling to afford health care, and 
I've been absolutely clear from the start, Democrats are at the 
table, we are eager to work with Republicans to bring costs 
down for health care for all.
    The bill that we're talking about today is an important 
step in the right direction. It is also proof that when 
Republicans and Democrats join at the table and put 
partisanship aside, and put our families first, we can find 
common ground and help the people who are looking to us for 
relief on health care.
    People like Stacy. She's a woman from Seattle. She wrote to 
my office about how she got an unexpected ER bill for over 
$1,000 after she had a bike accident because, while the 
hospital she visited was in network, one of the doctors who 
treated her was not. And Stacy also shared with me how her 
mother has struggled with high health care costs too, because 
after her mother was diagnosed with Type I diabetes, she was 
forced to move in with Stacy to afford her insulin.
    Families like Stacy's, and there are so many of them, are 
really looking to us for help. So I'm really glad that our 
legislation works to address surprise billings so patients like 
Stacy will no longer get caught off guard by exorbitant charges 
for out-of-network care through no fault of their own.
    I especially want to thank Senators Hassan, Bennet, Carper, 
Cassidy, Young, and Murkowski for their work on this issue.
    This bill also works to open the doors for a cheaper 
generic insulin which could bring down costs for patients like 
Stacy's mom, and it would make it harder for drug companies to 
game the system and put up roadblocks to competition from 
cheaper generic drugs.
    I want to thank Senators Kaine, Shaheen, Smith, Casey, 
Cassidy, Collins, Enzi, Roberts, and many others for working 
together on many of the ideas in this bill. And those are just 
a few of the many common steps we were able to come together 
on.
    Thanks to the work of Senators Peters and Duckworth and 
Roberts, this bill includes a strong response to the threat of 
vaccine hesitancy and supports efforts to counter 
misinformation and increase vaccination rates in communities 
that are at risk of outbreaks.
    It includes investments in public health data systems 
pushed for by Senators Kaine, King, and Isakson, to better 
protect families against public health threats, and would 
ensure that state, local, and tribal health departments have 
important guidance on obesity prevention efforts thanks to 
Senators Jones and Scott.
    It also includes proposals from Senators Schatz, Kaine, and 
Murkowski to help expand the Echo Telemedicine model which we 
heard about in our hearings on the opioid crisis so it can be 
used to bring care to even more people in more places and help 
address even more health care needs.
    It includes proposals to update electronic health records, 
to make health data more accessible for providers and patients 
alike, and it would take a much-needed step to respond to our 
Country's maternal mortality crisis, including supporting 
investments in care for pregnant women and providing implicit 
bias training to help address the fact that women of color in 
particular are dying at unacceptably high rates.
    Overall, this bill offers a lot of good bipartisan steps. 
So, Mr. Chairman, I hope we can continue to improve it in the 
coming days by continuing to work on proposals such as Senator 
Baldwin, Braun, Smith, and Murkowski's important drug price 
transparency bill.
    But I do want to just say, to be clear, if we're really 
going to bring down costs across the board and help families 
who are struggling, this is no place to stop on this bill; far 
from it, because even as this bill offers families important 
relief on many issues, the Administration's policies are 
undermining health care for tens of millions of people across 
the country. They have rejected Democrats efforts to defend 
protections for people with preexisting conditions coverage for 
people nationwide from a partisan lawsuit that is now moving 
through our courts. President Trump has allowed insurance 
companies to go back to selling junk plans that leave people 
with preexisting conditions vulnerable, and refused to take 
significant action to curb drug prices despite campaign 
promises. And he has slashed investments in helping people 
navigate the health care system and get the plans that are 
right for them.
    To put a finer point on it, when your car is totaled, you 
can't fix the windshield and expect to start driving.
    We have a lot of work ahead to do, and I am really glad 
that we are here together on this legislation, and I'm going to 
keep making it clear it needs to be a first step, not a last 
one. Democrats understand that. I know families do, as well. We 
have a lot of critical work ahead of us beyond this.
    Thank you very much, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    Before you came, I said much the same thing. Health care is 
a big topic, and there are a number of areas on which we 
disagree and which we will continue to debate. But one thing 
we've been able to do--and I thank Senator Murray and the 
Committee Members for this, and the staffs--is identify nearly 
three dozen provisions, about 16 from Republicans, 14 from 
Democrats, and we have a few more that we're working on such as 
the Cassidy-Murphy provision on health care, and another that 
Senator Murphy mentioned. All of these are aimed at reducing 
the cost of health care paid for out of your own pocket.
    These are first steps. I agree with her on that. There are 
other issues that we need to work on, but we've been able in 
this Committee, in fixing No Child Left Behind, the 21st 
Century CURES, opioids, other major issues, to identify the 
things we agree on and move ahead in meaningful ways.
    I thank her for working in that way, and I complimented 
both staffs before she came.
    Now, I only have 5 minutes, just like each Senator does, so 
I hope we can have an efficient back and forth because I've got 
two or three questions I'd like to ask.
    Mr. Cavanaugh, being at CMS, you've seen the health care in 
a broad sense. This legislation basically seems to me to do 
three things: end surprise billing, No. 1; a whole series of 
provisions aimed at transparency, increasing transparency, 
based on the theory that you can't reduce the cost until you 
know the cost; and the third thing is to--and you mentioned 
this yourself as a former regulator--we've got nine provisions 
to try to increase competition for generic and biosimilar 
drugs, which are 90 percent of all the drugs prescribed.
    If you look at those three areas--surprise billing, 
transparency, increasing competition--do you see those as 
meaningful steps, and which ones would have the most impact on 
reducing the cost of what people pay out of their own pocket 
for health care.
    Mr. Cavanaugh. Sure. I actually don't see them as that 
different. I feel like surprise billing is addressing a failure 
of the market where the consumer is not in a position to be an 
informed consumer making choices. They're in distress. They're 
going somewhere without full information. Transparency, again, 
transparency is what makes markets work so that people know 
what they're doing. So these are all, to me, pro-competitive 
policies, and that's why I applaud the Committee.
    If I had to quantify the magnitude, I think the Title 3, 
the ones that are specifically labeled pro-competition about 
certain hospital negotiating tactics, I think that will have 
the most direct and immediate, but I think they're all rowing 
in the same direction.
    The Chairman. Thank you.
    Mr. Nickels, let me ask you this. Transparency is a big 
theme here we've talked a lot about. On the 340B program, 
hospitals put on their websites where the money goes. 340B is a 
law that says drug discounts should go to help low-income 
people. Why shouldn't hospitals be required to report that same 
information to HRSA. Is there any problem with that 
transparency in your view?
    Mr. Nickels. Mr. Chairman, we're all for transparency. We 
have a voluntary initiative among our members. Our 340B 
members, all 1,100 of them, have complied by putting out that 
information.
    The Chairman. Well, then why don't you just take that 
information and give it to HRSA so we can----
    Mr. Nickels. Well, I think our plan is--by the end of this 
summer we will have all that information. We want to give 
people time. It can be complicated, but we do intend on 
providing to HRSA the names of the folks who have signed up and 
access to that data.
    The Chairman. Well, from my point of view--I mean, the 
community health centers have to do that. They have to let us 
know how the money is spent. My own view is that if we're going 
to talk about transparency, and the law says the money is to be 
spent for low-income folks, that we at least ought to see how 
it's spent. That doesn't mean we're going to tell you how to 
spend it. At least we would know how it's spent.
    Mr. Ippolito, let me go back to surprise billing for a 
minute. A lot of Senators have worked on that. You spent some 
time on it. It seems to me that if the problem is out-of-
network doctors, that the solution is to have in-network 
doctors. That seemed to me to be the simplest solution to the 
problem, and it also saves the most money. All three of the 
proposals we put out take the patient out of it. In other 
words, there are no more surprise bills. So the question is how 
do we reduce health care costs the most?
    The other two provisions are the benchmark type provision, 
which the House seemed to prefer, and then arbitration. You 
talked about it some in your testimony, but isn't arbitration 
really a sort of benchmark? I don't see much difference between 
the two. And what are the problems with arbitration, as opposed 
to the House benchmark proposal, or the one that I 
instinctively like the best, which is make everybody in-
network.
    Mr. Ippolito. The short answer to your question is there's 
not much difference in practice between an arbitration system 
and a benchmark system, and the reason is basically that if you 
think about what the arbiter is doing, they have to make the 
same decision that the person choosing to benchmark is going to 
have to make. They've got two offers in front of them; they've 
got to choose which one is more reasonable. Well, the only way 
you can do that, as far as I'm aware, is you have to know what 
the reasonable number is, which one is closer. So when I look 
at that just in terms of practice, I think it's very, very 
similar.
    Now, there are some differences between those two options. 
It tends to be a little less transparent, it tends to be a 
little more expensive, and then over the long term I think a 
number of experts have worried that it might be a little bit 
less predictable about how it's going to evolve over time. I 
know some will disagree with me on that point.
    But generally speaking, the answer is they're quite similar 
at their core.
    The Chairman. Your preference, No. 1, is the in-network 
guarantee; No. 2, the benchmark--well, you tell me what your 
preference is.
    Mr. Ippolito. Yes. So, my ordering is the ordering you were 
just going down. I like the in-network matching specifically 
because it's the way that we solve this problem in every other 
market. When you go get your car replaced, you don't have to 
worry about an unexpected bill from the person who repainted 
the bumper, and it's not because we have an arbitration system 
to litigate bumper bills. It's because we go with all-in 
pricing in most markets. That's how we solve this issue. So to 
me, that seems the most natural approach.
    The Chairman. My time is up. Thank you very much.
    Senator Murray.
    Senator Murray. Thank you, Mr. Chairman.
    Mr. Nickels, Senator Alexander asked you about the 340B 
program, which requires pharmaceutical companies to provide 
discounts on crucial outpatient drugs for providers that serve 
low-income, high-need patients. In other words, 340B is one of 
the most effective programs at managing high drug costs that we 
currently have, and there aren't any taxpayer funds involved in 
providing those discounts; correct?
    Mr. Nickels. That is correct. It's drug company funds.
    Senator Murray. Drug company funds. So I just wanted to be 
clear. We can all debate the best way to oversee this program, 
but we're not talking about wasting taxpayer dollars.
    Mr. Nickels. Correct.
    Senator Murray. Mr. Nickels, hospitals do a lot of 
reporting as part of their participation in Medicare. As part 
of their Medicare cost reports, do hospitals report on labor 
costs, physical plant expenses, marketing costs, and other 
things?
    Mr. Nickels. Yes, all of the above.
    Senator Murray. They do. But Medicare doesn't pay hospitals 
for some of those costs, like marketing?
    Mr. Nickels. Yes. Some of those are unallowable costs, but 
we still report them.
    Senator Murray. But you still report them.
    Mr. Nickels. Yes.
    Senator Murray. Mr. Isasi, Families USA supported the 
establishment of a minimum medical loss ratio for health plans. 
Does the MLR require plans to report on their administrative 
costs, like marketing and executive compensation?
    Mr. Isasi. It absolutely does.
    Senator Murray. It does. So, Mr. Isasi, Senators Baldwin, 
Braun, Smith, and Murkowski do have a bill requiring drug 
companies to report on those types of costs when they make 
price increases over 10 percent. Do you think that is helpful 
information?
    Mr. Isasi. We think it's critically important, and it's 
important to remember that these drugs are life and death to a 
lot of people. This information should be available to the 
public and policymakers.
    Senator Murray. You would support that approach?
    Mr. Isasi. One hundred percent.
    Senator Murray. Okay.
    Mr. Isasi. We also would encourage an examination of launch 
price, as well as increases.
    Senator Murray. Okay.
    Ms. Mitchell, many states, including my home State of 
Washington, have passed legislation to end surprise medical 
bills. Your organization works with large employers to bring 
down the cost of health care. Why is it important to your 
members for the Federal Government to act?
    Ms. Mitchell. Well, we have multi-State employers, and it's 
often variation across states that really increases the 
challenge for them. So we need Federal legislation in this 
area.
    Senator Murray. One of the issues that we are debating is 
what is the appropriate rate for an insurer to pay providers 
for a surprise bill. What impact do you think the proposals 
that we have in our discussion draft will have on enrollee 
premiums and access to care?
    Ms. Mitchell. Well, our experience in California is that it 
has no effect on premiums. We actually believe that we can 
achieve very fair pricing at 125 percent of Medicare. Evidence 
shows that 25 percent of hospitals are actually succeeding 
under Medicare rates. We think that there are significant 
opportunities for business practice improvement and increased 
efficiency among hospitals, but we believe that is a fair rate 
and could be sustained.
    Senator Murray. Okay, thank you.
    Mr. Nickels, the bill that we're talking about here today 
addresses a number of public health issues that are critical to 
conversations regarding health care costs. One issue of 
increasing concern that I've heard so much about is the rise in 
maternal mortality rates. We, I believe, have to do more to 
help reduce those preventable deaths, and many of these deaths 
occur not during childbirth itself but during the weeks and 
months before or after childbirth.
    Can you tell us how hospitals are working with community 
partners to help make sure women have the information and the 
health care they need to avoid unnecessary illness or death 
associated with pregnancy?
    Mr. Nickels. Yes, thank you. You're absolutely correct. 
Two-thirds of the maternal deaths do not occur during 
childbirth in a hospital. It's before and after, as you know. 
And we are working with community partners. We're part of a 
coalition that has been led by ACOG for many years to try to 
address that better. And what your bill does is it provides 
more funding, more focus.
    The Senate took action last year, Senator Capito's bill. 
There is legislation in the House by Representative Kelly that 
we support, and I think we need to do as much to solve this 
problem--and we ought to have a deadline where we really solve 
this problem nationally.
    Senator Murray. Okay. Thank you very much. I appreciate 
that.
    Mr. Nickels, on one other topic, over 1,000 cases of 
measles have been reported in the U.S. in 2019, the greatest 
number in nearly three decades. More than 80 of those were in 
my home State of Washington. Those outbreaks put families and 
communities at risk and put an unnecessary strain on our health 
care and public health care system. I was overwhelmed by what I 
saw in Clark County, where we saw the majority of these and the 
cost that it took to the public health officials, the community 
itself, all of the reporting, looking for people. So I'm really 
glad that the bill we're talking about that's in front of us 
includes provisions to combat misinformation and increase 
vaccination rates.
    How can health care facilities and providers and public 
health professionals work together to increase what we call 
`vaccine confidence'?
    Mr. Nickels. Yes. Again, we are very supportive of the 
provisions in your bill with the Chairman, and I think you go a 
long way in that direction. We hear from our members 
increasingly about the measles outbreak and what it's doing to 
the communities, and what it's doing to their facilities. But 
we all need to work together, and you put your finger on it, 
it's the misinformation that's out there that's causing this 
problem that has to be fixed.
    Senator Murray. Okay, thank you.
    My time is up. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Ms. Mitchell, you've dedicated a substantial portion of 
your career toward promoting more transparency in health care 
pricing, as well as higher quality. And as a result, today the 
State of Maine is one of the best states where you have all-
payer claims data base. I've joined Senators Rick Scott and 
Cory Gardner in introducing a bill that would create a 
consumer-friendly data base for prescription drug prices.
    In your written testimony, you talked about two powerful 
examples of an employer who was over-paying for prescription 
drugs. One was a kidney patient where the employer cost was 
$138,000 every 2 weeks. It now looks like it's going to go down 
to $26,000. The other was a pediatric patient. The cost for the 
employer was $750,000. And now, using a different hospital, 
that cost may be only a third of that amount.
    What led to those success stories? Was it greater 
transparency? Was someone negotiating for the employer? What 
produced those kinds of results?
    Ms. Mitchell. Thank you, Senator Collins. I think those are 
important examples of both the problems in the system and also 
the opportunities to fix them.
    These cases could not have been addressed without 
transparent pricing information, and only these very large 
employers can have access to that information oftentimes. We 
believe that with greater transparency more actors, more 
employers, more insurers, would identify solutions like this.
    I wanted to point out that, particularly in the case of the 
pediatric patient, those annual costs of $750,000 were brought 
down to $250,000 a year, the same drugs, and they were 
administered at home at the request of the family. So this was 
a win-win for the employer and for the patient. We believe that 
transparency would enable more success stories like that.
    Senator Collins. Thank you.
    Mr. Nickels, some of the rural hospitals in Maine are 
worried about increased transparency because their prices, 
because of the smaller patient population that they're serving, 
tend to be higher than their urban counterparts. Now, those 
rural hospitals are really important to communities and allow 
people to live where they can get care.
    How do we balance the need to maintain a rural 
infrastructure for health care and the need to lower prices, 
which is imperative?
    Mr. Nickels. You're absolutely right, and I think we need 
to be very mindful of the impact of any of these policies on 
rural America and the unintended consequences that these 
policies can have. For example, rate setting, which has been 
discussed here a little bit, because rural hospitals--yes, 
their costs are higher, their margins are smaller, they have a 
more difficult time getting staff--physicians, nurses, et 
cetera. We can't have a national rate imposed on them that will 
be basically a race to the bottom. So whatever we do here, 
ending surprise bills, I think everybody agrees on that, and 
the provisions in the bill do that. But there are other 
provisions in the bill like rate setting that worry us a lot, 
particularly the impact on rurals.
    Senator Collins. Ms. Mitchell, let me return to you for my 
final question. Biologics are one of the categories of drugs 
that are most expensive. The Aging Committee, which I Chair, 
has had a number of hearings on this issue, and what we found 
is that the brand-name manufacturer often puts up patent 
thickets that prevent biosimilars from coming to the market. By 
contrast, the biosimilar uptake in Europe is much more 
prevalent than in the United States. In fact, the former FDA 
Commission, Scott Gottlieb, has estimated that if all the 
biosimilars that have been approved by FDA actually made it to 
market in a timely fashion, that American consumers would save 
more than $4.5 billion.
    Do you have any thoughts and do you support the provisions 
in our bill that attempt to prevent the gaming of the patent 
system to delay the advent of biosimilars to the marketplace?
    Ms. Mitchell. Absolutely. We strongly support any of the 
changes that will enable increased access to biosimilars, and 
anything that prevents--we believe there needs to be strong 
action on drug pricing, and we strongly support your 
provisions.
    Senator Collins. Thank you.
    The Chairman. Thank you, Senator Collins.
    Senator Hassan.
    Senator Hassan. Well, thank you, Mr. Chairman and Ranking 
Member Murray, for your work to address rising health care 
costs. I also want to give a special thank-you to your staffs. 
These are complex issues, lots of stakeholders, and therefore 
lots of incoming for your staffs, and they've been just 
terrific.
    Americans have called on Congress to act, and I applaud 
Members of this Committee and both sides of the aisle for 
taking these calls seriously. I'm particularly encouraged by 
the momentum behind our work to end the absurd practice of 
surprise medical bills. People get health insurance precisely 
so they won't be surprised by health care bills, so it is 
completely unacceptable that people do everything that they're 
supposed to do to ensure that their care is in their insurance 
network, and then still end up with large unexpected bills from 
an out-of-network provider.
    As has been mentioned, I've been working with Senator 
Cassidy, Murkowski, and others to address this issue in a 
bipartisan way. We've worked for over a year now on this issue 
and received incorporated feedback from many of you on this 
panel, and I'm very grateful for your testimony. This hearing 
is an important step forward as we work to protect consumers 
and end surprise medical billing.
    Mr. Cavanaugh, I'd like to start with a question to you. My 
colleagues and I in our bipartisan working group agree that 
patients must be removed from surprise billing disputes. But it 
has become clear that there's no benchmark payment rate that 
plans and providers can agree would be an appropriate one-size-
fits-all approach.
    During your time at CMS, you experienced firsthand how 
difficult it is to set uniform payment rates that work well 
throughout the country. Can you briefly touch on why that work 
was so challenging?
    Mr. Cavanaugh. Sure. Thank you, Senator. Again, if you 
think about Medicare Advantage, which is an analogy, in 
Medicare Advantage, if you go out of network, there are limits 
on balanced billing, and there's a set rate that the provider 
will be paid because it's a highly regulated system. But that's 
built on an enormous infrastructure of the Medicare fee-for-
service program that takes thousands of employees in Baltimore 
working every day. So there's an infrastructure that's been 
refined over time. It's not perfect, but it's built on 
something.
    If you were to go the benchmark route, we support all three 
approaches because you're protecting the consumer.
    Senator Hassan. Understood.
    Mr. Cavanaugh. We don't have a preference for that after 
that. But I do think, and the legislation tries to anticipate, 
you will run into as you try to--a benchmark rate is 
essentially rate setting of a sort, and you will run into 
unanticipated consequences, and someone is going to need to 
figure out how to adjudicate all those situations and make 
sure--because you're not building on the Medicare fee schedule, 
which has a whole agency administering it. You're starting from 
scratch.
    Senator Hassan. Briefly, is it fair to say that even when 
you do establish a benchmark, a rate, it's hard to maintain 
that as an applicable rate across the country for all 
providers?
    Mr. Cavanaugh. I think what you're getting at is I do think 
there are some unanticipated consequences from this that, if 
you decide to go that way, we will all learn it will take more 
work than any of us can anticipate, but it is one of the 
approaches.
    Senator Hassan. Yes, thank you.
    Mr. Nickels, we've heard a lot of disagreement throughout 
this process on how to best create a payment resolution that 
works for all parties. So, yes or no, based on your experience, 
do you believe that there is a benchmark rate that you and your 
colleagues in the provider and payer community could agree to 
which Congress could then legislate into Federal law and apply 
across the country?
    Mr. Nickels. We do not.
    Senator Hassan. Given the lack of consensus around what a 
correct benchmark payment rate would look like, it seems unwise 
to me for Congress to legislate an inflexible benchmark, 
especially when we know that if we get it wrong, it would take 
another act of Congress to undo it.
    Do you believe an independent dispute resolution framework, 
similar to what's already in place or in law in 12 States, 
would be workable for hospitals, providers, and payers? And why 
or why not?
    Mr. Nickels. Okay. I believe, as I mentioned, of the three 
options in the bill, that is the most preferable option. We 
would prefer to continue negotiating with our insurance 
colleagues for bills, and we would like to do that. I think 
particularly for physicians, particularly for the rural 
physicians, going back to Senator Collins' question, a dispute 
resolution system, much like in New York State, which has 
proved effective, efficient, et cetera, would be the best 
option that is in the bill.
    Senator Hassan. Thank you very much.
    I yield the remainder of my time.
    The Chairman. Thank you, Senator Hassan.
    Senator Cassidy.
    Senator Cassidy. Dr. Ippolito, how are you? I like much of 
your testimony.
    By the way, Ms. Bartlett, I just read an article about you, 
and I just said be still my heart.
    [Laughter.]
    Senator Cassidy. It is Montana, you know. If I wasn't 
married to my wife, and I don't know your status----
    [Laughter.]
    Senator Cassidy. Dr. Ippolito, two stories. My daughter got 
kicked off of Alice in Wonderland in Central Park, and we took 
her to the emergency room, and she's bleeding from her 
forehead, and the ER said we don't have a plastic guy, go to 
his office. So I went to his office. I got a bill for $3,000 
for glue the guy put in it took him 5 seconds to place.
    I was at a tennis match here in D.C., and all of a sudden I 
get this black spot. I call an ophthalmologist friend of mine. 
He says you're having a retinal tear, go to the ER right away. 
I go to the ER. They say you don't need an ER. We're going to 
hook you up with the ophthalmologist, and go see him tomorrow 
morning, both emergencies. In that case, I think I got a bill 
for $1,500, both out of network.
    Does network matching help me in either of those situations 
in which I was not seen in a hospital but rather referred to 
the physician's office?
    Mr. Ippolito. Yes, that's a very good question. It's a very 
good clarifying question. The in-network guarantee would take 
care of a very large portion of the surprise bills, but they 
are the ones that occur at your in-network facility.
    Senator Cassidy. On the other hand, what Ms. Hassan was 
speaking of, I do gather that under the proposal that she and I 
have, I would have been cared for in both situations in which 
there would have been an in-network price, and so there would 
have been an out-of-network dispute, but I wouldn't have paid 
$3,000 for 20 seconds worth of glue, or $1,500, probably worth 
it because I got my retina back in place--but nonetheless, it 
was out of network.
    I want to say there is a superiority. I think we're naive 
if we don't think there would be more migration out of the in-
network hospital into a setting not covered by an in-network 
rate if we were to put restrictions on that which a physician 
could bill. I mean, we would be naive to otherwise think so.
    Mr. Ippolito. I would clarify one point. The first is that 
both an arbitration and a benchmark system would have covered 
you in that case that you're talking about.
    Senator Cassidy. Arbitration and benchmark would, but not 
an in-network.
    Mr. Ippolito. That's exactly right. So in-network would in 
theory need to be paired with something else.
    Senator Cassidy. The other thing I want to say about 
benchmark is that this is a ratio of--Ms. Moody, would you hold 
that up, please?
    Ms. Moody calls herself Vanna White.
    [Laughter.]
    Senator Cassidy. If you see dark blue has the highest rates 
of care, dark brown has the lowest rates. It's easier to get 
doctors in Florida than it is to get doctors in Alaska, so 
therefore you must pay doctors in Alaska more; market forces, 
if you will. Dr. Cavanaugh would like that. I suspect even in 
Florida there is great variation. If you're in Miami, you 
probably get more docs willing to get work, and if you're in a 
rural area fewer. But I will make the point, as Ms. Hassan did, 
that they have a benchmark would require a complexity that 
would reflect both different states as well as different areas 
within a state, and I do think that's a complexity there.
    Mr. Ippolito. I think it's an important point, and I think 
it's the reason why the benchmark and the arbitration options 
that are included in the bill that we're talking about are 
based on the average in-network rate in the area.
    Senator Cassidy. I'm not sure that our benchmark actually 
is, but we can look----
    Mr. Ippolito. We'll be happy to circle back.
    Senator Cassidy. The other thing I want to dispute, if you 
will, is that you had mentioned in your testimony that--I 
should also raise this. I also want to make the point that the 
purple are states which, as laboratories of democracy, have put 
in arbitration models, and the orange--Tennessee orange, for 
our Chair--are states which have the benchmark, but no State 
has a network matching. So empirically, I want to just say that 
there is a prejudice among our states for--and I see Washington 
State either has UW purple of LSU purple, I'm not sure what 
that is.
    Mr. Ippolito. I would clarify one thing just in the sense 
that the data do indicate that most hospitals do not produce 
out-of-network bills for in-network patients, which really, I 
think, if we were mapping that, would suggest that in all 50 
States----
    Senator Cassidy. I accept that. In fact, I think that's a 
superiority of the dispute resolution. But I have limited time, 
so I want to make one more point. In your testimony you 
suggested that the dispute resolution be more expensive, but I 
will point out that CBO scores the savings of the Hassan-
Cassidy proposal at $17 billion, and the network matching is 
only $9 billion. So it might be expensive, but it's less 
expensive than network matching.
    I'll probably hang for a second round, if there is, but I 
will now yield back.
    The Chairman. Thank you, Senator Cassidy.
    Senator Smith.
    Senator Smith. Thank you, Chair Alexander. It's great to 
have you back. And thank you, Ranking Member Murray. I think 
there's been some really good work done on this bill, and I'm 
grateful for all of you for being here today to testify and 
answer some of our questions.
    I believe that the number-one thing that I hear about from 
Minnesotans across the board is their worries about rising 
health care costs, and often they hone down right away to the 
rising cost of prescription drugs. So I'm really glad that the 
proposal that we have before us includes some good drug pricing 
provisions, and I'm glad that the bipartisan bill that I worked 
on with Senator Cassidy, the Protecting Biosimilars Act, is 
included, which would help more low-cost biosimilars into the 
market, like insulin. And also the proposal, the bill that I 
worked on with Senator Roberts, the Ensuring Innovation Act, 
which would prevent the ability of drug companies to make minor 
tweaks in their formularies and then extend their exclusivity, 
which again I think is an anticompetitive strategy that 
benefits the drug companies and not consumers.
    Mr. Isasi, I know that your organization has done a lot of 
work on the issue of how to lower the cost of prescription 
drugs. I have first a general question. What is your feedback 
on the proposals that we have in this bill, and is there 
anything more that you think--what else do you think we should 
be doing?
    Mr. Isasi. Well, we very much support the proposals in the 
bill which are primarily aimed at transparency. We think that's 
very important. But it is not nearly far enough. We strongly 
support your bill around patent abuses and first filers. We 
also strongly support the notion that price is the problem, and 
we should not get confused, and we need to address drug 
pricing. We need the government to get in there, and a majority 
of Americans, including a majority of Republicans, want the 
government in there to help fight for fair prices.
    Senator Smith. Right, exactly. And I think several of you 
made the point that increased transparency is useful, but that 
is not the only thing that is going to address lowering drug 
pricing. Thank you. I appreciate you mentioning the bill that I 
have. I think it was the very first bill I introduced when I 
came to the Senate, which essentially cracks down on--what it 
says is it would allow subsequent generic--it's a little 
technical, but subsequent generic drug filers to share market 
exclusivity with first filers if they win that litigation, so 
that they don't have the--it actually does something about the 
exclusivity in a way that they think is meaningful to the drug 
companies.
    Mr. Isasi. Right. As you say, it will allow us to refocus 
the drug industry on innovation and not reward smart lawyers.
    Senator Smith. Exactly. Not that we have anything against 
smart lawyers.
    [Laughter.]
    Senator Smith. However----
    [Laughter.]
    Senator Smith. I want to go to another issue that I think 
is really important. It's important to Minnesota. This is 
something that Senator Braun and I have been working on. It has 
to do with the all-payer claims data base. Ms. Bartlett, it 
sounds to me that in Montana you've done a lot of work with 
this. This all-claims data base has been incredibly useful in 
Minnesota to help us get a handle on what's happening with drug 
products like insulin, how much Minnesotans are paying on 
average, and how those prices have risen over time. It has 
given our Department of Health a very, very important tool for 
addressing some of these issues. I think one of you said how 
important it is to look at this information on a regional 
level.
    The bill that we have before us does work to advance the 
work of all-claims, all-payer claims data bases, but I've heard 
some concerns from the Minnesota Department of Health and 
others about how this actually would work in real time and what 
it might do or not do to help states get the information that 
they need.
    I'm going to ask Mr. Ippolito this. You know that some of 
my--a little bit about the concerns that the Minnesota 
Department of Health has had with this. How do you respond to 
the concerns that they have raised, specifically that the 
legislation before us as drafted might not provide states with 
timely access to data that they need, as well as the Federal 
Government, from self-insured plans?
    Mr. Ippolito. Well, there are multiple approaches of 
achieving effectively the same goal when we think about all-
payer claims data bases. As I understand the bill--and I could, 
of course, be misreading, but I understand it as an effort to 
try and create a Federal all-payer claims data base for those 
ERISA-regulated plans but also allow State ones to coexist and, 
in fact, combine their data with the Federal data set.
    Now, the one catch is that I do believe they have to share 
their data with the Federal Government. So to the extent that 
that's a sticking point, I'm certainly amenable to rethinking 
the exact structure. But I do think at a baseline they can 
coexist, at least in theory.
    Senator Smith. Thank you. Well, maybe, as I am about to run 
out of time, Senator Braun may have some questions about this 
as well. But I am very eager to resolve this issue so that some 
of the great work that Ms. Bartlett was talking about can 
proceed at the State level, as well as at the Federal level.
    Great. Thank you. I'm out of time.
    Senator Murray. [presiding] Thank you. The Chairman has 
left for a committee. He'll be back in just a few minutes, and 
in his absence I will continue.
    Senator Braun.
    Senator Braun. Thank you, Ranking Member Murray.
    I wish we did have more than 5 minutes. This is such an 
important topic. And I think, as you can understand, 14 
proposals from the other side of the aisle, 16 from our side, 
this is a big deal.
    I am approaching this as recently a CEO of a company that 
brought health care issues into the C suite 10 years ago. It 
needs to be there, not probably in HR, if we're ever going to 
fix it.
    I want to give you a little bit of history on what I did. I 
was not a member of a group as large as Ms. Mitchell's. I wish 
I had been, but I was simply frustrated as a Main Street 
entrepreneur that every year it was the same issue, premiums 
kept rising. I'd get this smirk of 'You're lucky it's only 
going up 5 to 10 percent a year.
    I want to let the industry know, as well as the American 
public, that we are with you there, that it is a crisis, and I 
would challenge the industry. We shouldn't need 14 proposals 
from one side of the aisle, 16 from this side, to be fixing 
what's 18 percent of our GDP. If it was any other part of our 
GDP, competition and transparency would have gotten rid of the 
whole mess through the process that works elsewhere when you've 
got it.
    Through that frustration, here's what worked for us, and 
I'm seeing some of it being incorporated in these ideas that 
we're talking about.
    I figured out back then--and we haven't talked much about 
the consumer, the user, the employee, completely atrophied in 
terms of being involved in the market because it's been so 
paternalistic. When the insurance companies basically said, 
hey, part of this is the fact that the people that use it never 
ask how much does it cost, they don't want to be involved in 
it, I think that's important.
    I devised a plan that did force skin in the game, gave all 
the tools you could give, including health savings accounts, 
and basically emphasized wellness, not remediation, did 
everything and the kitchen sink, basically cut costs out of the 
gate by 50 percent, and for my employees covering preexisting 
conditions, and no caps on coverage, which we need to do as 
conservatives and Republicans, part of Obamacare. That just 
wasn't going to work due to its structure. We need to get with 
it.
    I've not had a premium increase now into the 10th year 
because I've got my employees engaged. Every time they enter 
the health care system, they at least see how much does it cost 
and look at their alternatives, despite the industry not doing 
much to accommodate it.
    It can be done. We're running out of time. Employers are 
getting frustrated. Most aren't as passionate as I am, or maybe 
the group in California, and there's a clear alternative on the 
other side. I give this as a warning to the industry. You ought 
to be fixing it yourselves, not having us here having to nudge 
you with legislation that wouldn't occur in any other sector of 
our economy.
    My question is going to be directed--first of all, 
excellent slate of witnesses. Maybe there's another round and 
we can get more in. I always stay here until the last person is 
standing. This will be for Ms. Mitchell.
    In your group, which looks like it's got a lot of large 
employers, I'm sure a lot of what I said kind of resonates. 
What have you done to look at the other end of the equation? 
Consumers drive most markets with full transparency and the 
desire to get the best choice of quality and price. Do you 
think the consumer, the employee has atrophied to where if we 
do make it more transparent and we get the industry to ever get 
out of its doldrums, will we have employees, consumers, 
patients be willing to have some skin in the game and help the 
system out as well?
    Ms. Mitchell. Absolutely, and I think patients and families 
absolutely have skin in the game, the health of their families. 
But they are in a completely untenable, unfair situation. They 
have no information. We're talking about providers not even 
being allowed to share information with them, the providers 
that they trust, and we ask them to be responsible consumers 
with no ability to do so, no cost information, no relative 
quality information.
    Our members--and you would always be welcome as an honorary 
member. Our members are trying any innovative approach they can 
to actually work with their employees to address their 
concerns. So we absolutely believe transparency is necessary 
and that we will have active involvement of patients.
    Senator Braun. So what I did is devised a plan with dollar 
one, you do have skin in the game, but then capped costs to 
where you could never go broke because you had a bad accident 
or got sick, and it did work, and I've had it 10 years. I'd 
love to share those details with you.
    But I think you're saying the same thing that I am. We all, 
for families, along with education, it's the most important 
thing out there. And ironically, that's the other thing going 
up faster than health care costs.
    The industry needs to really take this as a warning and a 
challenge. We're going to get some stuff across the finish line 
here. It's only nipping at the flanks. It's not going to happen 
unless we go to the other plan, which is Medicare for all. 
That's basically what all other countries have done. We're at a 
moment in time when we can keep the best of what we've got, but 
it's got to reform itself, or else that will be the only 
alternative.
    Industry, wake up.
    Thank you.
    Senator Murray. Thank you.
    Senator Baldwin.
    Senator Baldwin. Thank you.
    I am certainly encouraged by the Committee's effort to 
address health costs and critical issues like surprise billing, 
but I am very frustrated that we have not begun to hold drug 
companies accountable for jacking up prices of existing 
medications.
    In the past 5 years, prices of brand-name drugs have 
increased at 10 times the rate of inflation, putting life-
saving treatments out of reach for far too many families. 
Meanwhile, drug company CEOs are seeing bigger paychecks. 
Reports show that the median drug company CEO pay increased by 
39 percent in 2018, with some of the highest paid executives 
making $20 to $50 million per year.
    That is why I worked with colleagues on both sides of the 
aisle, including Senators Braun, Murkowski, and Smith, on the 
Fair Drug Pricing Act, to require basic transparency of drug 
companies when they increase prices of existing drugs.
    I really urge the Committee to add our bipartisan bill to 
the Lower Health Care Costs measure that we will vote on in the 
near future.
    Drug companies spent $172 million in lobbying last year. 
They work hard to defend and often distract from their price 
increases, often by citing industry-sponsored statistics that 
show large investments in developing new cures. But we have 
numerous studies showing the opposite. One recent study found 
that nearly 80 percent of every dollar spent by big drug 
companies goes to something other than research and 
development, things like marketing or stock buy-backs.
    The market is clearly broken, and taxpayers deserve to know 
what we are getting for our money.
    Mr. Isasi, why do we need to include the Fair Drug Pricing 
Act in this package to ensure systematic transparency for drug 
price increases? And why is it important for companies to 
report specific metrics, things like research and development 
expenditures, marketing and advertising expenditures, and other 
items?
    Mr. Isasi. Thank you very much for the question. We 
strongly support the legislation that you have worked so hard 
on. We believe it's very important.
    As you point out, this industry is currently broken. We are 
incentivizing smart legal tactics and not innovation, and these 
drugs are life-saving. So at the very least, these companies 
should be able to justify, like insurance plans do, like 
hospitals do, why they're charging what they're charging and 
what the increases are for.
    Senator Baldwin. Thank you.
    To be clear, this bipartisan bill simply asks companies to 
report more information on their pricing decisions to 
taxpayers. Innovative companies who invest significant 
resources in research and development should have the 
opportunity to demonstrate the value of their investment to the 
public, and this bill would do nothing to prevent a 
manufacturer from increasing prices.
    Ms. Mitchell and Mr. Isasi, can you discuss how more data 
on drug pricing decisions and expenditures will help 
policymakers, researchers, and other policy stakeholders make 
better health care decisions?
    Mr. Isasi. This information is critically important. What 
we know is, for example, that most of the drug pipeline has 
dried up. They have converted to generic drugs, right? So these 
drugs you're talking about that have these huge price spikes 
are the ones that have the least amount of competition. They're 
not necessarily the most effective drugs. So we should have 
transparent information about exactly why the price is going 
up, and we would think even further why the launch price 
existed, if this is a real innovation that's adding to American 
families. But without that information, what's happening right 
now is that drug companies are making more and more money not 
because they're saving lives, not because they're curing 
illness, but because they simply are exploiting a distorted 
market.
    Ms. Mitchell. I would simply agree. The problem is the 
pricing, and everything we're talking about--rebates--that's 
just obscuring the actual issue here, which is the pricing. Our 
members are trying to offer discounts. They're basing those on 
estimates because they can't get insight into the actual price 
of the drug. So we absolutely need transparency, but it's just 
the starting point.
    Senator Baldwin. Thank you.
    My time has expired.
    Senator Murray. Senator Romney.
    Senator Romney. Thank you, Ranking Member Murray. I 
appreciate the members of the panel coming together to inform 
us on this most critical issue for the American family.
    I very much sympathize with the comments made by Senator 
Baldwin. Prescription drugs I think is an area of important 
focus for this Committee and an area where an opportunity is 
apparent for us to help the American consumer.
    One of the things that Senator Braun and I have worked on 
as a measure to help in this regard is to assure that 
individuals who are responsible for co-insurance for 
prescription drugs, that co-insurance rate is based upon the 
net price, not the retail price of the drug. So when rebates or 
the like have been provided, that the consumer has the 
advantage of that feature and hope that becomes part of the 
final bill.
    But most of the discussion today has focused on different 
points of view with regards to surprise billing, and so I want 
for a moment to focus on that area.
    Mr. Cavanaugh, you indicated that one of the challenges 
with benchmarking is that you have a huge network of people 
that are responsible for setting Medicare rates, but something 
of that nature doesn't exist if we were to put in place a 
benchmark system. On the other hand, Ms. Mitchell indicated 
that she would set the benchmark based upon the Medicare rates. 
So would that not remove the complication that you're concerned 
about, which is to simply set a benchmark rate and do it based 
upon either 1.25 times the Medicare rate or 1.5 times, or equal 
to, but basically use that as the benchmark figure? Would that 
remove that complexity you were concerned about?
    Mr. Cavanaugh. Sure. Thank you, Senator. The only point I 
was trying to make is in Medicare Advantage there is a 
benchmark rate that operates this way, but it's publicly known, 
like I can go online and tell you today what the benchmark rate 
is in every community for every service. This legislation, one 
of the options would create a new benchmark rate with a 
different methodology, and someone is going to have to go and 
build that and figure out what those rates are. I didn't mean 
to make any bigger point than that.
    Senator Romney. Yes, thank you.
    Ms. Mitchell, do you have any comment on that?
    Ms. Mitchell. Again, we think that this is the most 
straightforward, efficient, and transparent way to come up with 
fair rates, and the evidence supports the rate.
    Senator Romney. Would anyone want to comment on the 
advantage or disadvantage of using that system, which is if you 
could use a benchmark, using the Medicare benchmark and keying 
off of that, as opposed to an arbitration process? I'm 
concerned just at first blush that with an arbitration process 
it's going to be highly complex, with after-the-fact 
negotiations going on and differences in different communities 
and arbitrators that may or may not be familiar with the 
specific circumstances. Wouldn't it just be a lot easier to tie 
into the Medicare rate, one way or the other?
    But if people have differing views--Mr. Nickels, please.
    Mr. Nickels. Thank you, Senator. Yes, I would have a 
different view. So I think our concern is, first of all, it's 
well documented, and Congress' own advisory board, MedPac, says 
that Medicare does not pay the costs for hospitals that are 
fair, and to base anything on Medicare rates I think is a 
mistake.
    Second, there is no difference between that and Medicare 
for all, which was just described earlier, which we have real 
concerns about.
    The third thing I would say is one of our concerns about 
setting a rate is if it's out there, what we want is for 
negotiation to occur between providers and insurers. If there's 
a default rate, why won't the insurer just always go to the 
default rate? There won't be a negotiation. They won't have 
broad networks, which they need. And again, I think we're 
coming back to the same thing as Medicare for all.
    Mr. Ippolito. I'd like to follow-up, if I can, Senator.
    Senator Romney. Please.
    Mr. Ippolito. To be clear, again, when we are going through 
an arbitration process, we're using a benchmark. You've got to 
decide who wins and who loses. So ultimately we're doing the 
same thing. So I would push back and simply say that if you 
think Medicare is too low, and that's completely fine with me, 
then it doesn't mean you can't use Medicare, at least in 
concept. You could say Medicare times 2, Medicare times 3, 
whatever number you think is appropriate. The one advantage 
that has is it isolates it from being gamed by the market 
actors; that is, trying to engage in these kinds of 
shenanigans, to be in or out of network, to affect the 
benchmark rate that is a function of that. So that's the one 
advantage.
    Senator Romney. Ms. Mitchell.
    Ms. Mitchell. Thank you. I concur.
    I would also point out that actually 25 percent of U.S. 
hospitals manage their costs well enough that they are 
successful under Medicare rates, and we're not talking yet 
about costs. The recent report by Rand shows that hospitals 
bill commercial payers and employers an average of 240 percent 
of Medicare, so what is the actual cost to provide that care, 
and how do we agree on a common standard. We believe that 125 
percent is fair.
    Senator Romney. Thank you very much, Mr. Chairman.
    The Chairman. [presiding] Thank you, Senator Romney.
    Senator Casey.
    Senator Casey. Mr. Chairman, thanks very much. I want to 
thank you and the Ranking Member for the work you've done on 
these issues, and the panel for being here.
    We're doing a lot of hearings today, so I've been in and 
out. But, Mr. Chairman, I wanted to raise something that I know 
you're aware of and we're trying to get done, and this is the 
reform in the FDA's authority to regulate over-the-counter 
drugs. All of us, I think, have an interest in making sure that 
any prescription drug is safe and effective according to the 
most up-to-date information available. This is bipartisan 
legislation that Senator Isakson and I have worked on for many 
years now, at least several years, and we're hoping we can get 
it done.
    Mr. Chairman, I just wanted, for the record, to ask you to 
commit to pushing ahead and finding a way to pass this 
legislation, the so-called over-the-counter monograph reform 
legislation.
    The Chairman. You know that I think it's very important and 
would like to find a way to pass it, so thank you for the 
question.
    Senator Casey. I appreciate that, and I'm glad that's on 
the record--not that it was essential, but we're grateful for 
that work and trying to move it forward.
    I wanted to move to a question about some developments that 
have played out over the last several years now, but something 
even more alarming that just arose in the last couple of weeks. 
We know that this Committee is engaged in a process to try to 
bring down the cost of health care, as well as the cost of 
prescription drugs. While that's happening, two things I think 
are undermining those kinds of efforts.
    One is what can only be described as sabotage by the 
Administration, sabotaging the health care system with regard 
to what happens on the exchanges, as well as with regard to 
Medicaid itself. I won't dwell on that today, but we do know 
that from data just released earlier this year, 7 million fewer 
people have health care. There's a good article that describes 
this data that Gallup found. Here's the name of the article, 
dated January 23d, 2019, by Sarah Kliff and the publication 
Vox: 'Under Trump, the Number of Uninsured Americans Has Gone 
Up by 7 Million. That's the title of the article.
    This problem is now compounded by what the Administration 
is undertaking with regard to the official poverty measure. We 
know that if this proposal is adopted and the official poverty 
measure is tied to so-called chain CPI--and I'm reading from a 
letter that I drafted, co-signed by 42 Senators--'Because 
chained CPI shows slower inflation over time, fewer Americans 
would fall below the poverty line in the future.
    Here's what it affects. Health and Human Services bases its 
annual poverty guidelines on the official poverty measure 
thresholds. That will affect Medicaid, the Children's Health 
Insurance Program, the Maternal and Child Health Block Grant, 
the Community Services Block Grant, Head Start, the School 
Breakfast Program, on and on and on.
    This is the letter that we sent to the Administration to 
reconsider this proposal. I ask all of that--and I want to 
direct this question to Mr. Isasi to ask what your view is on 
that in terms of those two what I would call undermining forces 
with regard to what we're trying to do here with regard to 
lowering health care costs.
    Mr. Isasi. Well, first and foremost, Families USA is 
incredibly proud of the work of this Committee in a bipartisan 
fashion to build legislation that will address health care 
costs. But we have to be very clear: what American families 
want is to be able to be healthy, and if they get sick, get 
care and not go bankrupt. So efforts to undermine the ability 
of families to get real, meaningful coverage is the opposite of 
that goal. So we're very deeply concerned. We've seen hundreds 
of thousands of people lose coverage, as you point out. In 
particular, I think one of the most troubling things that we 
care deeply about is the fact that we've seen over 300,000 
children lose coverage. That's totally unacceptable.
    In terms of chained CPI, we're very concerned about this. 
Another half-million Americans will lose coverage because of 
this, and access to the other programs you're describing. Over 
half of those will be children.
    I think this Committee is focused on the notion that 
families want financial security and to know that their health 
care costs aren't going to bankrupt them, and we should all be 
pulling in that same direction. So we're deeply concerned about 
this.
    Senator Casey. Thank you very much.
    Thanks, Mr. Chairman.
    The Chairman. Thank you, Senator Casey.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Thank you. I apologize. I wasn't here to hear your 
testimony. I've had an opportunity to read it and appreciate 
the perspectives that you all lend to this very important 
discussion.
    My colleagues here on the Committee know that every time I 
ask a question when it comes to health care, it's always 
through the lens of what is the impact on our rural areas and 
areas in my State that are beyond rural. So I look at all of 
this through the perspective of one who says we don't want 
anticompetitive provisions, but if I only have one hospital, if 
I only have one clinic, if I only have one provider, how does 
all this work?
    I'm going to start with you, Mr. Cavanaugh. You spoke to 
the potential impacts of the transparency and the 
anticompetitive provisions on rural health providers. When we 
are looking at the various proposals that we have in front of 
us as ways to reduce the cost, I'm curious to know whether your 
review has included situations where you have a community with 
both a single hospital, a single prominent insurer. Who has the 
most negotiating power there? How do you determine an in-
network rate in an area where you don't have in-network 
providers?
    When we talk about similar geographic area, in a lot of my 
communities, in 80 percent of the communities in the state, 
we're not connected by any kind of a road, so how do we define 
this?
    You have looked at this through the regulator's perspective 
and one who is looking at the broader market as a whole now. Do 
you think it is possible for us at the national level to adopt 
a standard payment methodology that can account for this wide 
discrepancy and differences?
    Mr. Cavanaugh. Thank you for the question. Let me preface 
it by saying two things. One, in the context of surprise 
billing, all three approaches are equal in that first and 
foremost they protect the consumer. Alidade represents 
independent physicians in the community. They're not the ones 
involved in surprise billing, so I applaud that. The first 
order of business is to protect the consumer, and they all do 
that.
    After that, you are really, as you accurately point out--
then it's just a dispute between insurers and providers. It 
becomes particularly problematic where either the provider 
community is consolidated, and we are equally concerned when 
the insurer community is consolidated. So some of the 
approaches I think are stronger in a competitive market, 
meaning the approach to use in-network guarantee, makes a lot 
of sense when you've got multiple providers and multiple 
insurers hashing it out. It might become more difficult in a 
rural community where it's just one provider, one----
    Senator Murkowski. But again, I worry that we try to do 
one-size-fits-all because that's most convenient for us back in 
Washington, DC. We want some kind of a standard. But I remain 
concerned that in certain places it's not possible.
    Let me turn to you, Dr. Ippolito. In your written testimony 
you provide a couple of different options when you say, 'In 
order to stay open, hospitals need to ensure adequate staffing 
two ways. One option is to top up the payment rates, an 
anesthesiologist, to ensure they're willing to work. A more 
likely option is demand that insurers guarantee reasonable 
market rates to doctors.
    When you say 'In order to stay open, hospitals need to 
ensure adequate staffing, last week in Tennessee the 107th 
rural hospital in the country closed since 2010. We're going 
the wrong way here in terms of encouraging our rural hospitals 
to keep their doors open. How do you line up your statement 
there with adequate staffing?
    Mr. Ippolito. Well, I think there's a basic economic 
challenge that faces rural hospitals that don't face urban 
hospitals, and I think it's a challenge that exists outside of 
a surprise billing-specific scenario that we were talking 
about.
    Senator Murkowski. Fair enough. But when we're talking 
about surprise billing, how does this keep the doors open?
    Mr. Ippolito. Maybe I should caveat that comment by saying 
conditional on this being a sufficiently robust area that a 
hospital can stay open, then I don't think that any of the 
particular solutions that we're talking about for surprise 
billing are going to be fundamentally problematic.
    However, if there is a concern over a higher-level decline 
in the profitability, or even just the ability to exist of 
rural hospitals, then I certainly hear the concern. I think the 
solution to that is probably not found in anything related to 
surprise billing but something a little more directly aimed at 
those rural hospitals.
    Senator Murkowski. Mr. Chairman, my time has expired. I've 
got a lot more questions, and I'll stick around here to listen 
to others, but thank you.
    The Chairman. Thank you, Senator Murkowski.
    Senator Rosen.
    Senator Rosen. Welcome back, Mr. Chairman, and thank you to 
you and Senator Murray for working together on this important 
package.
    For all of you being here today, I'm going to give a 
special shout-out to Ms. Bartlett, who is a University of 
Nevada graduate. Yes, thank you, thank you. I really appreciate 
that.
    I want to add to Senator Murkowski's rural concerns. What I 
really want to do is focus on Section 404 of the bill today, 
which authorizes grants to expand the use of telemedicine to 
increase access to specialty services in underserved areas. At 
home in Nevada, I hear over and over again that preserving 
access to quality health care is one of the top issues, and 
everywhere in Nevada, like Alaska, is underserved. So this is 
critical to us.
    It is currently drafted--and anybody here can chime in--
that the funds that are authorized can be used for telemedicine 
equipment, training, and program evaluation. So I have kind of 
a two-part question. What else do you think is effective to get 
a telemedicine program up and running? And what do you think 
the minimum time span would be reasonable for a telemedicine 
program, especially once we get some templates done?
    Would anybody like--yes, please.
    Mr. Isasi. The point you're making is incredibly important. 
I spend a lot of time working on rural health care issues, and 
as you point out, what we need in rural America are true 
disruptions that allow for health care to be delivered in high-
quality settings that aren't the old business model of a 
hospital with four walls that is very expensive. So this is a 
really good example.
    As the Chairman mentioned, Project Echo is a phenomenal 
example of a program that allows for--in this case, it started 
in New Mexico, for folks in very rural, frontier communities in 
New Mexico to get better health care than they were getting in 
the hepatitis clinic in Albuquerque, because it does a few 
things. It trains the providers in those communities to an 
evidence-based standard of care. It creates a learning 
community. And then third, it allows providers who have really 
challenging patients to talk to each other and learn. So those 
are all critical elements.
    I think that, as you point out, something like Project Echo 
around this country is an incredible example of how we can get 
high-quality health care to rural America.
    Senator Rosen. Do you think creating templates that we can 
export around the country would be a good working model?
    Mr. Isasi. Absolutely, and there are other examples. 
Mississippi is another. There are wonderful telemedicine 
advances happening in Mississippi as well.
    Ms. Mitchell. If I may, Senator Collins graciously shared 
that I am from Maine. Much of Maine is also frontier, and I 
worked closely with many rural hospitals in the state. We are 
very sensitive to the pressures on those hospitals. They are 
very real. And we hear hospital and physician executives saying 
they have to charge inflated prices to subsidize the care that 
we aren't appropriately paying for, like maternity care or 
primary care. So I agree that we need to look at direct ways to 
subsidize that care, and we need to be thinking about rural 
patients instead of just rural hospitals.
    I also was extremely encouraged in my time on the 
Physician-Focused Payment Model Technical Advisory Committee. 
There were innovative proposals, like hospital at home, that 
were supported by physicians, new ways to deliver care to rural 
patients that needed hospital-level treatment.
    Telemedicine, hospital at home, these innovations are 
absolutely essential to bringing care to those communities.
    Senator Rosen. These are great things. So how can we 
consolidate or find in a common place these kinds of templates 
that other places across America can see the challenges they 
have maybe in a particular disease area that they want to 
improve upon? How do you suggest that we can get these good 
examples and export them to other communities across the 
country?
    Mr. Cavanaugh. Thank you, Senator. Fortunately, this 
Congress has answered that question by creating the Innovation 
Center at CMS, and there are a number of demonstrations now 
underway specific to rural hospitals. One is in Pennsylvania, 
and the other--in Maryland it's a global budget for all 
hospitals, but it really started with global budgets for rural 
hospitals, the notion being don't make these rural hospitals 
dependent on inpatient admissions. Free up those funds so they 
can do all those things Mr. Isasi and Ms. Mitchell mentioned, 
and that should be the platform. These are publicly funded. 
There will be public evaluations. There will be disseminations 
of the learnings. I think you're right, we need to get these 
lessons and these models out to the rest of the country.
    Senator Rosen. In what ways can we here, through this bill 
or others, help you potentiate what's happening across this 
country and export that? What do you need from us?
    Mr. Cavanaugh. I think the Innovation Center has all the 
tools, thanks to this Congress. I think you can continue to 
support them. But, as always, put pressure on them, go faster, 
go better, and be more public.
    Mr. Isasi. I would say one thing we can't lose sight of, 
though, is that--and it's exciting because for all of us, those 
of us who don't live in rural America, these innovations are 
going to be available to us.
    Senator Rosen. Right.
    Mr. Isasi. I mean, this is about need creating really 
interesting disruptions. But scope of practice is something 
that we all have to get a handle on. I think Senator 
Murkowski's State has been a real leader in thinking about new 
ways for a service to be provided by new kinds of providers. I 
think scope of practice is critically important.
    Senator Murray was very involved in creating a National 
Workforce Commission. That commission needs to be funded. We 
need to understand the dollars flowing into workforce and what 
our communities actually need, because right now we have total 
misalignment between the Federal dollars flowing through 
Medicare toward workforce and the needs of our communities.
    Senator Rosen. Thank you. I think my time has expired, but 
thank you.
    The Chairman. Thank you, Senator Rosen.
    Senator Kaine.
    Senator Kaine. Thank you, Mr. Chair, and welcome back. Glad 
we're having this hearing, and appreciate the work of the Chair 
and Ranking in getting our package in a good place where 
hopefully we can move forward with it.
    Since the discussion just recently happened about rural 
hospitals, I just want to follow-up Senator Murkowski and look 
at it a slightly different way.
    Mr. Nickels, your testimony, since 2010, 107 rural 
hospitals have closed, 10 this year, one last night in 
Tennessee, I was not aware of that and I'm sorry to hear it. 
We've had two hospitals close in Virginia, one in Patrick 
County, one in Lee County. There have been really heartbreaking 
stories about the effect of rural hospital closures. I read one 
recently in the New York Times dealing with a hospital in 
southeastern Kansas, where I grew up; another Washington Post 
article dealing with closure of a hospital in Oklahoma.
    There's a solution, not a magic one-item solution, but 
there is a solution for many of these communities. Ninety-three 
of the 107 hospitals that have closed in rural America since 
2010 are in states that have not accepted Medicaid expansion. 
The two hospitals in Virginia that closed, Virginia has now 
accepted Medicaid expansion, but the two hospitals that closed, 
closed years before the State accepted Medicaid expansion, and 
they said to our legislature if you accept Medicaid expansion, 
we can keep the hospital open.
    Now that Virginia has done Medicaid expansion, at least one 
of the hospitals is exploring can they reopen. It's a lot 
harder to reopen a hospital than keep it open. But 
nevertheless, there is a possibility.
    But when we have these discussions about rural health, that 
is a statistically very significant bit of data, 93 of 107 
hospitals that have closed since 2010 in this country have 
closed in states that did not embrace Medicaid expansion.
    Now, I know hospitals don't like Medicaid reimbursement 
rates, and they like Medicare reimbursement rates a little 
better but not much. But the difference between a Medicaid 
reimbursement rate and charity care for which you're not 
compensated is a very significant factor in the bottom line of 
a hospital.
    I'm going to have you speak to this, Mr. Nickels, but I 
just want to say there are some things we can do in this bill, 
and we should. There are some things State legislatures have 
been able to do since the Supreme Court rendered the ruling 
about it being a State option on Medicaid expansion. And when I 
read articles and people are decrying that their community is 
losing a health care resource and people are losing access to 
care that they've had in the community for their entire life, 
and they have it within their capacity not to solve every 
financial woe on a balance sheet but to dramatically affect 
whether the hospital can stay open or not, and yet they are 
choosing to not embrace Medicaid, they are basically consigning 
their rural hospitals to a situation where it is very likely 
that they will continue to close.
    I hope one message that we might deliver from this 
Committee, from Congress, and I certainly am glad that my State 
eventually got this message, is that there's no glory in being 
the last one, the caboose, you know? When Medicaid passed in 
1965, it was an option, not a mandate. It's interesting that 
the last State to embrace Medicaid in 1982, Arizona, it was 17 
years after the majority of states before they finally embraced 
Medicaid. When the Affordable Care Act passed and there was now 
a Medicaid expansion option, where did Arizona fit? They were 
one of the first in, with two Republican houses, with a 
Republican Governor, because what they realized is what did 
they get by being the caboose on Medicaid? What did they get by 
waiting for 17 years? What they got was worse health care for 
hundreds of thousands of people over 17 years. They weren't 
going to be the caboose the second time.
    We've now had 35 States that have done the expansion. Don't 
compete to be the caboose. If you want your rural hospitals to 
have a fighting chance of staying alive, there are other things 
that have to happen too, but Medicaid expansion will keep these 
pillars of rural health care from closing in many, many 
instances.
    Mr. Nickels, you wanted to comment on this.
    Mr. Nickels. Yes, I totally agree there. I mean, there's a 
crisis in rural America, there's a crisis with rural hospitals, 
and there's no question from our members, the ones who are 
feeling it the most are in non-expansion states. Our members 
work in those states to try to convince the legislatures, and 
they have been successful in some, and Virginia was one of 
them. They take the lead in trying to get Medicaid expansion. 
But there's no question when you look at the issue that is 
probably the number-one concern. That doesn't mean things like 
broadband aren't important. That doesn't mean the telemedicine 
provision in this bill isn't important, but there's a lot that 
has to be done.
    My example, and Sean uses an excellent one, there are rural 
models out there that we should be experimenting with. But the 
important thing is that people need to have coverage.
    Senator Kaine. Thank you.
    Thank you, Mr. Chair.
    The Chairman. Thank you, Senator Kaine.
    We have completed our round of questioning, and we have a 
vote at noon. I think Senator Murkowski and Senator Braun may 
have a question they want to ask.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I don't know whether the issue has come up previously in 
the round of questioning, but when we look at some of the 
surprises that come, and Alaska is a very high-cost state, I 
mentioned 80 percent of our communities are not connected by 
roads, so how do we get to the hospital? We fly. It's air 
ambulance, it's Medivac, and it is not unusual for a Medivac to 
be between $50,000 and $100,000. Some Alaskans have--more and 
more are seeking insurance.
    I want to ask this question to you, Ms. Bartlett. You're 
from Montana?
    Ms. Bartlett. That's correct.
    Senator Murkowski. Okay. So you've got big open space out 
there, former State plan administrator. Have you made any 
progress within your State to address air ambulance costs 
within the health plans there? I know that this is not part of 
what we're dealing with, but again, as we're talking about 
those cost drivers, I'm trying to understand if there are some 
areas where we've seen some headway.
    Ms. Bartlett. Thank you, Senator Murkowski. Within the 
State employee health plan, we set reimbursement at 250 percent 
of Medicare, and that's what we paid whether you were in-
network or out-of-network. At the same time, I served on an 
interim committee to deal with this issue, and the result of 
that committee was legislation that did pass in Montana that 
requires initial payment to either be the normal in-network 
payment that would be paid, the billed amount, or a negotiated 
amount, because that allows for the member to be held harmless. 
At that point, the member is definitely held harmless.
    Then if the other party, whether it be the air ambulance or 
the insurance company, believes that it's not a fair amount, 
then it goes to arbitration, and the arbitration oversight is 
the commissioner of insurance.
    Senator Murkowski. That's been working well within Montana?
    Ms. Bartlett. It absolutely is working well. Within the 
State health plan, we immediately saw all of the out-of-network 
air ambulance come in-network except for one, and that 
particular air ambulance service has closed a couple of their 
areas, but they were not in rural places. So we have not had 
lost care at all.
    Senator Murkowski. Thank you for that.
    Mr. Nickels, I wanted to just extend the question that I 
directed to Mr. Cavanaugh earlier about the differences within 
regions, the variations in rural markets. A benchmark payment 
rate based on average negotiated rates for a region, in my 
view, appears to be the most simple and the most predictable 
framework. But do you believe that a benchmark rate based on 
negotiated rates within a region adequately accounts for those 
variations that we see within the rural markets, and can you 
speak more broadly to the impact of such a model where you have 
few providers and few insurers?
    Mr. Nickels. Yes. As you know, we do not support that sort 
of an approach, and we do believe that--and I addressed this to 
Senator Collins and Senator Cassidy when they were here. If you 
set a national rate, it will not acknowledge local conditions, 
it will not acknowledge a place like Alaska. We fear the harm 
it will do most, and Senator Collins mentioned this, is to 
rural America, where prices are higher, margins are smaller, 
and the danger of something going wrong here is far greater 
than it is elsewhere.
    There are some untested ideas being discussed here, and we 
need to make sure that whatever we do does no harm to rural 
America. That's why we think get the patient out of the middle 
of this. We all agree with that. I don't think there's any 
disagreement whatsoever. We think that the approaches that the 
Committee has talked about, that arbitration is the best one. 
Anything with a benchmark rate, however it's described, however 
it's defined, will create, I think, a significant problem for 
rural America.
    Mr. Ippolito. I would like to clarify----
    Senator Murkowski. Mr. Ippolito.
    Mr. Ippolito [continuing]. one thing very quickly, if I 
could. The arbitration system and benchmark system included in 
the HELP bill, both reference the local in-network rate as the 
benchmark rate. So when we think about an arbitration system 
and we think about a benchmark rate, they're both based--at 
least the guidance to an arbiter would be based on the same 
thing that the benchmark would be, which is a local rate. So I 
do think that's worth emphasizing.
    Senator Murkowski. I'm going to ask Mr. Nickels and then 
Ms. Bartlett very quickly to--it sounds like a rebuttal.
    [Laughter.]
    Mr. Nickels. Well, a question that I answered earlier from 
Senator Hassan, that's why we don't like that rate that's in 
the bill as it relates to having a benchmark. We think there 
should be no benchmark. It should be arbitration and 
negotiation between two parties, and one of them will win, one 
of them will lose, there will not be a benchmark. That's why we 
think that that's the better approach. That's in the Cassidy 
and Hassan bill, and your bill.
    Ms. Bartlett. Senator Murkowski, if I may add one thing, 
within Montana this legislation was passed in the 2017 session, 
and there have been no cases go to arbitration.
    Senator Murkowski. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Let me go to the Democrat. Senator Murray, do 
you have any questions?
    Senator Murray. No, Mr. Chairman. I just want to thank all 
of our witnesses for being here and for all of your help and 
input.
    Mr. Chairman, thank you for working so diligently on this.
    The Chairman. Thank you.
    Senator Kaine.
    Senator Braun.
    Senator Braun. I'll make it very quick, one for Mr. Nickels 
and one for Ms. Mitchell.
    David Ricks, Chairman of the Board of Eli Lilly, just came 
out publicly that he wants to get rid of PBM rebates, wants 
them to go directly to the pharmacy and the individual. I 
applaud him for sticking his neck out as a major individual in 
the health care industry.
    American Hospital Association, my local hospital embraced--
I think they called it CareLight or something, but it was still 
the chargemaster being published in its inscrutable form where 
you couldn't understand it.
    Would the American Hospital Association be willing to 
publish in understandable form chargemasters across all 
hospitals? And in talking to a lot of people who really know 
what makes the current system not work, would you be willing to 
expose third-party arrangements between providers and health 
insurance companies? So many people have told me if that ever 
happened, it would break the system and you'd cascade into 
transparency and competition. I know that's a load, but give me 
your quick comment on it, please.
    Mr. Nickels. I hope I can remember all that.
    Senator Braun. Chargemaster first.
    Mr. Nickels. Chargemaster I know is a daunting experience. 
We have worked with CMS to publicize more and more of the 
chargemaster, but I agree with you, I don't think that's data 
that people need. I mean, something that gives people prices, 
to the degree that we can do it, to the degree that we can make 
that simple enough for people to understand, I think that's the 
way that we should go, and we would definitely support that.
    Senator Braun. It's mandatory that you find out how to do 
it.
    Now, what about the third-party agreements between 
providers and insurance companies? You blew the whole system 
with opaqueness. Go ahead.
    Mr. Nickels. That we would disagree with.
    Senator Braun. I figured you would.
    Mr. Nickels. I'm certainly predictable. We've raised 
concerns. I know the Administration has discussed that. The 
ability for two parties to have private contractual 
negotiations is important, and I think even the Federal Trade 
Commission, which has never been the biggest----
    Senator Braun. In a robust competitive market, I'd agree 
with you. In a broken system like yours, you ought to get with 
it.
    Ms. Mitchell, what do you think? You've been wrestling with 
this kind of stuff. Do you see the industry, especially 
hospitals, 30 percent of the health care bill, kind of 
resisting right there in terms of what they think, do you think 
there's any chance that the industry will start coming around 
to where we don't have to legislate them into action?
    Ms. Mitchell. Well, one can hope. I would say that if the 
secret negotiations between providers and plans worked, we 
would not be sitting here. I think everyone in America deserves 
insight and information about their medical care, the quality 
of the outcomes, and the cost. We are all in this together. We 
all have skin in the game. We need a system that is responsive 
to the American people, that requires and presumes transparency 
and accountability.
    Senator Braun. Agree 100 percent. Thank you.
    The Chairman. One question, Ms. Mitchell, then we'll wrap 
up. The bill that Senator Murray and I proposed requires 
pharmacy benefit managers to give employers information on the 
rebates in the system so employers understand what they're 
paying for. So if a pharmacy benefit manager negotiated a $400 
discount and, let's say, a $600 insulin price, the employer 
would know that instead of $600, the price is $200. How will we 
know that the employer will pass that $400 discount on to the 
patient who has diabetes?
    Ms. Mitchell. I think it's an important question, and many 
of our members are doing this now. They are offering and 
extending the rebates to their employees. But as I said 
earlier, they don't have the actual cost and price information, 
so they are using the estimates. The problems with spread 
pricing and rebates off wildly inflated prices make this more 
complex and convoluted. So they are looking for ways to 
decrease these costs for their employees, and transparent, 
clear pricing is part of that.
    The Chairman. Thank you very much.
    I want to thank our six witnesses. I want to thank the 
Senators, especially Senator Murray and our staffs. This is the 
way the U.S. Senate is supposed to work. We've taken an area 
where there's plenty of room for lots of contentious 
discussion, and we have it here in the area of health care, and 
we've said, all right, at least we can see if we can identify 
some ways to reduce health care costs that people pay for out 
of their own pockets.
    We've talked about surprise medical billing. We've talked 
about transparency. There are a number of provisions in the 
bill that you have said increase transparency, and there are a 
number of provisions in the bill that increase competition for 
biosimilars and generic drugs, which are 90 percent of 
prescriptions.
    As Senator Murray said, those are steps in the right 
direction. I hope that our Committee can move ahead next week 
to vote on this. We call it marking it up, giving it to Senator 
McConnell, Senator Schumer, and say let's put it on the floor 
and let's turn it into a law.
    We appreciate the thorough process this has been through, 
16 hearings, hundreds of comments from people who are affected. 
We still have a few things we need to work out, but we end up 
with about three dozen proposals from about an equal number of 
Democrats and Republicans, and we're on a good track, doing 
what the American people expect us to do.
    The hearing record will remain open for 5 days. Members may 
submit additional information for the record within that time 
if they would like.
    Thank you for being here.
    I had the wrong glasses on. Within 10 days.
    [Laughter.]
    The Chairman. The Committee will stand adjourned.

                           APPENDIX MATERIAL
                           
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                                      Families USA,
                                                      June 5, 2019.
Hon. Lamar Alexander, Chairman
Hon. Patty Murray, Ranking Member
U.S. Committee on Health, Education, Labor, and Pensions
Washington, DC.

    Chairman Alexander and Ranking Member Murray:

    Families USA, a leading national voice for health care consumers, 
is dedicated to the achievement of high-quality, affordable health care 
and improved health for all. We write to comment on the U.S. Senate 
Health, Education, Labor and Pension (HELP) Committee's May 23 
bipartisan discussion draft, the Lower Health Care Costs Act of 2019.

    For decades, America's families have been in need of lower cost and 
higher quality health care. The cost of American health care is a 
profound economic and public health problem: 44 percent of the public 
report not seeing a doctor when they need to because the costs are too 
high; 30 percent say the cost of medical care interferes with basic 
needs like food, housing, and heat; and nearly two-thirds believe that, 
as a country, we do not get good value from the U.S. health care 
system.36 As a Nation, we can do better for America's families, and it 
is well past time for the health care system to change. Families USA 
commends the Senate HELP Committee on the release of the Lower Health 
Care Costs Act, and appreciate the Committee's attention to rising 
consumer health care costs.

    Below are our specific comments on the draft legislation, by title. 
Recommended changes to the legislation are bolded in the text below. 
Recommendations for specific legislative text are in red.
                 Title 1--Ending Surprise Medical Bills
    Families USA strongly supports the HELP Committee's attention to 
the critical consumer problem of surprise medical bills. Consumers face 
surprise medical bills when they receive out-of-network medical care 
due to no fault of their own. Whether due to an emergency visit at an 
out-of-network facility or unexpected care from an out-of-network 
provider in an in-network facility, surprise bills can be hundreds or 
even thousands of dollars and are all too common.36

    Families USA believes that a Federal legislative solution is needed 
to address the problem of surprise medical bills. Consumers in every 
state experience this unfair problem. Even in states that have passed 
laws to address surprise medical bills, many consumers remain without 
sufficient protection, as state laws cannot fully protect consumers in 
self-insured plans that are regulated by the Employee Retirement Income 
Security Act (ERISA).36

    We urge the Senate HELP Committee and the full Senate to pass 
legislation on surprise medical bills swiftly to protect consumers from 
this harmful problem while holding down health care costs overall.

    Our specific comments on Title I of the legislation follow. Our 
comments first apply to options 1, 2, and 3 in the draft legislation 
overall, and we then provide comments regarding the pros and cons of 
the various options.
             Section 102: Protection against Surprise Bills
    We strongly support that the bill clearly protects consumers from 
paying any more toward their care than their in-network cost-sharing 
(including copayments, coinsurance, or deductibles) in a surprise 
billing situation regarding emergency services (regardless of the state 
in which the patient resides), non-emergency services at in-network 
facilities, and out-of-network services after an enrollee has been 
stabilized. We also support the clear indication that cost-sharing 
amounts count toward the in-network out-of-pocket maximum and 
deductible. Finally, we support the clear specification that referrals 
for diagnostic services are included in these protections.

    Families USA strongly supports that this draft legislation applies 
to self-insured, ERISA-regulated plans. We read the draft legislation 
to apply to grandfathered plans, but the language appears ambiguous. We 
urge the Committee to clarify that the legislation does apply to 
grandfathered plans.

    Regarding enrollees who are admitted to hospitals after receiving 
emergency services or who are in labor, we recommend the bill be 
strengthened as follows:

          Insert missing language on page 6, line 16 as 
        follows: Clarify that enrollees cannot be balanced billed 
        unless the ``enrollee, once stable and in a condition safe for 
        transport...'' We believe it is critical that legislation does 
        not put enrollees in a situation to choose between experiencing 
        out-of-network balance billing or transit for which they are 
        not medically ready.

          Indicate that enrollees cannot be forced to choose 
        between balance billing and transferring to another facility 
        unless in-network medical transport is available, or the 
        enrollee can safely be transported by non-medical 
        transportation. Consumers should not be set up to experience 
        surprise ambulance bills under surprise bill legislation.

          In addition to requiring paper and electronic 
        notification, require hospitals to provide verbal notice of 
        enrollees' options.

    We recommend the bill clarify whether the Secretary or the states 
serve as the primary line of enforcement for the law. If states are to 
enforce the law, they may require resources and training from Federal 
agencies. If Federal agencies are to enforce the law, they may require 
additional resources for oversight and enforcement capacity.

    Regarding the maintenance of state surprise billing protections, we 
are concerned about the potential for state laws to undermine Federal 
law on surprise billing and therefore leave consumers unprotected and 
vulnerable to premium increases. Families USA recommends permitting 
states to apply their own surprise bill laws, if state law is equally 
or more robust than Federal law, in terms of both consumer protections 
and a payment rate between insurers and providers that holds costs 
down. Specifically, we urge the Committee to clarify that Federal law 
applies unless, in the judgment of the Secretary:

          State law requires insurers to pay out-of-network 
        providers a lower amount in surprise bill situations, or

          State law implements a baseball style arbitration 
        system that forbids the consideration of billed charges.

    Even if states have their own surprise billing laws, Federal law 
should apply to any health plans that states cannot fully regulate, 
such as self-insured, ERISA-regulated plans.
              Section 103: In-Network Guarantee (Option 1)
    A guarantee that all providers delivering care in a facility are in 
the same insurance network as the facility itself could greatly 
simplify the health care system for consumers. No longer would 
consumers have to worry about navigating complicated provider 
directories or about provider directories inaccurately indicating that 
providers and facilities are in the same networks. Similarly, if both 
the facility and provider were in the consumer's insurance network, 
surprise bills would be cut down dramatically for consumers.

    However, the in-network guarantee model for addressing surprise 
bills marks a dramatic shift from the health care system as it operates 
currently, meaning it could also face some implementation challenges 
that would need to be addressed to prevent difficulties for consumers. 
For example, if insurers cannot contract with a health care facility 
unless the facility guarantees that all practitioners are in the 
facility's network, will there be facilities that cannot contract with 
insurers at all in rural areas where hospitals face great challenges 
attracting providers, even under current rules?

    We strongly support that in this section, laboratories and 
diagnostic services that are referred by the health care practitioners 
are included in the requirements. However, it is possible that some 
laboratory and diagnostic providers may contract with some, but not 
all, of the same insurers as a referring facility. It should be 
appropriate for a facility to refer a patient to such a lab or 
diagnostic provider as long as the provider accepts the particular 
patient's insurance. Under the bill as written, it appears that 
facilities may only refer to labs or diagnostic providers who accept 
all insurance plans that the facility accepts. This may result in 
consolidation and too much market power to insurers, so we urge the 
Committee to modify the language to reflect alignment with a patient's 
insurance plan, not all insurers that a facility and providers accept.

    Additionally, we believe an addition is required to this section to 
provide information on how a referring practitioner and facility obtain 
information regarding which laboratories and diagnostic providers are 
in-network for patients, as well as who is responsible if a lab or 
diagnostic provider to which a patient is referred does ultimately 
balance bill a patient.

    We strongly support the use of the median in-network contracted 
rate to reimburse providers of out-of-network emergency services.
         Section 103: Independent Dispute Resolution (Option 2)
    Although we believe that a benchmark payment rate is an ideal way 
to resolve payment in surprise billing situations, as if set 
appropriately it is most likely to deter premium increases while 
minimizing administrative burden, independent dispute resolution (IDR) 
can also present an improvement upon the status quo. We support that 
the proposed independent dispute resolution process will still apply a 
benchmark payment rate in a large share of cases. Additionally, we are 
glad that the dispute resolution entity will be an unbiased entity, 
tied to neither insurers nor providers, and will consider the median 
contracted rate.

    However, we recommend explicitly requiring that the IDR entity may 
not consider billed charges in its deliberations. Billed charges are 
often wildly inflated above the cost of care and what the provider has 
agreed to in network negotiations. As a result, considering billed 
charges would drive up health care costs and therefore the premiums 
that consumers pay.
             Section 103: Benchmark for Payment (Option 3)
    Due to its ability to hold down costs, and therefore protect 
consumers from premium inflation, and its administrative simplicity, a 
benchmark for payment is Families USA's recommended approach for 
resolving payment between insurers and providers in surprise billing 
situations. We support setting payments based on median in-network 
contracted rates. Conversely, we strongly oppose basing benchmark rates 
on billed charges due to its inflationary effects.
                       Section 106: Air Ambulance
    Surprise bills for air ambulance are typically over $35,000. As air 
ambulance rides are usually out of network, consumers often have no 
ability to protect themselves from balance bills when in need of air 
lift.36 congressional intervention is needed to address this problem, 
as states are preempted from fully solving this pressing issue.

    Whether in this bill or future legislation, Federal protections 
should hold consumers harmless from paying more than in-network cost-
sharing for air ambulance transport when they have no option for in-
network airlift. Additionally, Federal preemptions that prohibit state 
regulation of air ambulance rates and networks should be eliminated. In 
the meantime, greater transparency of air ambulance costs, as proposed 
in this draft legislation, is beneficial.
          Title II--Reducing the Prices of Prescription Drugs
    High and rising prices of prescription drugs impact families' 
access to the medicines they need and even impact their ability to 
afford other health services and basic necessities. Voters across the 
country are therefore eager for Congress to enact reforms that will 
rein in egregious drug costs that strain family budgets.36

    Families USA supports the measures included in the legislation that 
lay a foundation of Federal reforms on prescription drug costs. While 
we support the prescription drug provisions in the Lower Health Care 
Costs Act, we cannot significantly reduce the escalating cost of drugs 
without overarching reforms that will directly lower list prices. 
Prescription drug reforms must directly target these prices, which 
drive high costs throughout the drug supply chain and health care 
system and keep needed medicines out of reach for families.

    This bill includes many measures to bring generics to market 
faster, providing lower cost alternatives to costly, monopolistic 
brand-name drugs. Specifically, we support provisions like Section 201 
and 202 that will provide greater transparency on patents for 
biologics, including on exclusivity periods and when they are expired, 
so that generic manufacturers have the timely and accurate information 
they need to come to market. We also support sections 203, 204, and 
205, which include important measures to prevent gaming that can delay 
the availability of generics. We recommend that the Committee 
supplement these provisions, whether in this legislative package or 
elsewhere, with the CREATES Act and legislation to completely ban so-
called ``Pay for Delay'' practices, which would also make important 
progress in bringing generic drugs to market faster.

    We urge the HELP Committee and Congress to advance legislation to 
directly lower prescription drug prices, including by allowing the 
Federal Government to leverage its power to negotiate through the 
Medicare program. For more on this issue, please see Reining in High 
Prescription Drug Prices: What Families Need from Congress, by the 
Coalition for Fair Drug Prices, chaired by Families USA.
            Title III--Improving Transparency in Health Care
    Families USA strongly supports the HELP Committee's attention to 
the critical problem of transparency of cost and quality information in 
the health care system. Consumers face many barriers to being informed 
purchasers of health care when they do not have access to price and 
quality information in the health care system. We also believe that it 
is critical to ensure that health care providers, payers, researchers 
and policymakers have access to underlying cost and quality data in 
order to make informed and effective health care payment and delivery 
system policies. While we support efforts to increase transparency of 
cost and quality data across the health care system, Families USA 
believes that transparency alone will not meaningfully bring down the 
costs of health care.
 Section 301: Increasing Transparency by Removing Gag Clauses on Price 
                        and Quality Information
    Families USA supports legislation that removes barriers to 
obtaining accurate and complete health care price and quality 
information including gag clauses included in executed contracts 
between insurance plan issuers and providers or provider networks. We 
believe that increasing the transparency of such information will not 
only enable consumers to be more informed purchasers of health care but 
it would also unveil fundamental information that policymakers, 
researchers and other stakeholders need in order to identify health 
care markets with the highest prices and then build policy that 
encourage competition.
 Section 303: Designation of a Nongovernmental Nonprofit Transparency 
          Organization to Lower Americans' Health Care Costs.
    Families USA supports the designation of a nonprofit, 
nongovernmental transparency organization to support the establishment 
and maintenance of a data base that receives and utilizes health care 
cost and quality information to generate reports available to the 
public. The legislation could be strengthened significantly by making 
the following additions to the bill text:

          Specify the categories of claims data that the 
        nongovernmental nonprofit organization will utilize to include: 
        medical and clinical, prescription drug, dental, behavioral 
        health, and available social services data.

          Require that price and quality data be accessible 
        through the nongovernmental nonprofit transparency 
        organization.

          Establish a mechanism in statute or direct the 
        Secretary to establish a mechanism through rulemaking that will 
        require health plans, hospitals, health care providers to share 
        claims data with this new entity.

          Direct the Secretary to establish national 
        interoperability standards to facilitate data sharing between 
        health care industry entities and with state all-payer claims 
        data bases.

          Require that the establishment of a board of 
        directors or other governance structure over the entity 
        includes equal representation of consumer groups in its 
        composition.

          Require in statute that the Advisory Committee 
        include at least one consumer health care organization, and at 
        least one consumer group whose mission is to reduce racial/
        ethnic health disparities.
Section 304: Protecting Patients and Improving the Accuracy of Provider 
                         Directory Information
    Inaccurate provider directories cause consumers to struggle to 
obtain needed medical care and to pay high out-of-network costs for 
care due to no fault of their own. Studies have found that for some 
specialties, directory information is accurate less than half of the 
time.

    Families USA believes that congressional action is needed to 
guarantee that accurate, comprehensive and easily accessible 
information on in-network providers and facilities is available to 
consumers. We applaud the HELP Committee for including this issue in 
the Lower Health Care Costs Act. Below we outline specific 
recommendations for this section of the draft legislation.

    Regarding the information that consumers must be able to receive on 
in-network providers, we recommend consumers have the ability to obtain 
information over the phone at their request, in addition to online. 
This is important for consumers who do not have Internet access or who 
have disabilities that may make online information challenging to 
receive. Additionally, we recommend that plans be required to make 
information on provider network status available to consumers in their 
preferred language.

    We strongly support that plans may not charge consumers more for 
services than in-network cost-sharing if enrollees can demonstrate that 
they relied on inaccurate information in a provider directory. To 
ensure this section comprehensively protects patients, we recommend two 
additional requirements:

          Providers should be prohibited from balancing billing 
        consumers in instances when consumers had inaccurate 
        information about their network status. Providers should be 
        required to provide notice about their network status at least 
        7 days before delivering care. If a patient does not provide 
        advanced consent to receiving out-of-network care at least 7 
        days before a service, a provider should be prohibited from 
        balance billing.

          All provider directories should be required to 
        include a prominent notice of consumers' rights to pay no more 
        than in-network cost-sharing if they receive out-of-network 
        care due to a provider directory inaccuracy, and how to contact 
        the health plan if they believe they relied on inaccurate 
        information. Without such a notice, consumers are unlikely to 
        know of their rights as proposed in this draft legislation.

    We support requirements that plans verify and update their provider 
directories. However, we believe that the particular verification and 
update standards in the draft legislation are not strong enough to make 
a meaningful impact for consumers and are not in line with other common 
laws and regulations on provider directory accuracy. We urge modifying 
this section as follows:

          Require health plans to verify and update their 
        provider directories at least monthly. This requirement was in 
        place for Federal Marketplace plans until 2017 when CMS removed 
        it and other related provider directory and network adequacy 
        requirements and deferred them to states.36 We strongly support 
        Congress instituting Federal requirements, as not all states 
        have requirements in place. However, a monthly update and 
        verification requirement or more stringent requirements are in 
        place in states like California and Georgia, as well as the 
        District of Columbia.36

          Add additional specificity on steps required to 
        verify and update a provider directory: Most health plans 
        already indicate they update their provider directories even 
        more frequently than every month. Problems arise when they are 
        only updating directories based on information they directly 
        receive from providers, and not doing any audits of whether old 
        information has been remaining in the directories untouched for 
        months or even years. Provider directory updates require active 
        processes from insurers in order to be effective. Therefore, we 
        recommend that the legislation require the following to ensure 
        updates and verification are meaningful:

          Require each health plan to place a prominent link 
        and phone number on the directory where consumers can report 
        inaccurate information. Require each health plan to investigate 
        reports, and if applicable, remove inaccurate information 
        within 1 month.

          Replace the requirement that plans remove providers 
        from the online directory if providers have not verified 
        information within 6 months with a requirement that plans 
        proactively contact any providers who have not filed claims 
        within the past 2 months to verify their network status. If 
        network status cannot be verified, plans should remove the 
        providers from the directory within 1 month of the attempt to 
        contact the provider.

          Require an annual audit of the plan directory: At 
        least annually, health plans should be required to do a 
        comprehensive audit of their provider directories, contacting 
        all providers listed and verifying their network status. Any 
        providers who do not respond in within 2 months should be 
        removed from the directory.

    We support states enacting their own provider directory laws, if 
those laws are more robust than Federal law. However, we recommend 
clarifying that Federal law will preempt state law if state law does 
not provide standards that are at least as robust as those outlined in 
Federal law.
                 Section 305: Timely Bills for Patients
    Families USA supports requiring health care facilities and 
practitioners to provide to patients a list of services rendered during 
the visit to that facility or practitioner prior to discharge, and that 
all bills are sent to patients within 30 business days. We recommend 
adding a requirement that the list of services provided upon discharge 
indicate whether each service was provided in-network or out-of-
network.
Section 306: Health Plan Oversight of Pharmacy Benefit Manager Services
    Pharmacy Benefit Manager (PBM) practices can contribute to the 
problem of high and rising drug costs that are ultimately due to large 
underlying drug prices set by manufacturers. We appreciate the HELP 
Committee's attention to PBM practices.

    We strongly support providing plan sponsors clear and user-friendly 
information about covered drugs and utilization mechanisms for those 
drugs. For the requirement that group plans receive this information, 
we recommend adding a requirement that the information be made 
available to plan enrollees as well, in a reader-friendly format. This 
requirement should apply to individual market enrollees as well.

    We support providing employers with price information about covered 
drugs, as well as information about the rebates that PBMs receive for 
those drugs. However, we are concerned about the information on 
employees' prescriptions that this section makes available to 
employers, without providing clear indications of what the information 
will be used for and with very limited privacy protections. We are 
concerned that providing employers with information about which drugs 
employees are prescribed, and how many employees are prescribed them, 
along with information as specific as prescription fills, will leave 
employees vulnerable to identification by their employer and 
potentially discrimination. Instead of providing employee prescription 
information to employers, we urge the Committee to instead require 
insurers to provide in comprehensive rate review reporting on how much 
they spend on drugs and how much they receive in rebates, as well as 
the share of rebates that are passed on to consumers, in addition to 
providing price and rebate information to employers.

    Families USA strongly supports protecting enrollees from paying 
more for a drug than the actual price paid by the issuer to the 
pharmacy for the drug and from upcharges on drugs dispensed by 
pharmacies wholly owned by the issuer or PBM.
Section 308: Disclosure of Direct and Indirect Compensation for Brokers 
  and Consultants to Employer-Sponsored Health Plans and Enrollees in 
                     Plans on the Individual Market
    Greater transparency about broker compensation can help consumers 
and employers understand the role that compensation may have in how 
brokers provide information about health coverage. Families USA 
supports providing additional information about direct and indirect 
compensation that brokers receive for connecting consumers and 
employers to health care. We recommend that the legislation clarify 
that this section applies to web-based brokers and to the sale of 
short-term plans, association health plans, and other non-ACA complaint 
arrangements that may be sold by brokers.
                   Title IV--Improving Public Health
    Families USA strongly supports the HELP Committee's attention to 
critical public health problems that our Nation currently faces. 
Maintaining a robust and effective public health infrastructure is 
essential to ensure that America's families have access to the health 
and health care they deserve. From the importance of vaccinations, to 
addressing the high rates of maternal mortality, to addressing the 
impact of discrimination on health in our health care system, we 
support efforts that enable our public health infrastructure to respond 
quickly and effectively to emerging public health challenges.
      Section 401: Public Awareness Campaign on the Importance of 
                              Vaccinations
    Families USA supports the development and implementation of a 
public awareness campaign on the importance of vaccinations. As this 
Committee knows well, vaccinations are a foundational component of an 
effective public health infrastructure for any nation to keep its 
citizens healthy, safe and secure. The scientific and evidence-base is 
clear: vaccinations greatly reduce disease, disability, death and 
inequity around the world, and are safe. At a time when our Nation is 
struggling to combat certain disease outbreaks directly resulting from 
lower vaccination rates in certain communities, the need for a robust 
public awareness campaign about the importance, safety and efficacy of 
vaccinations is critically important. In addition to the efforts 
detailed in this bill focused on at-risk populations, we also recommend 
that public awareness campaigns include a broad national campaign to 
help educate the public at large about the importance of vaccinations 
in protecting public health and safety, and to help maintain current 
vaccinations rates at the population level.
   Section 403: Guide on Evidence-Based Strategies for State Health 
                 Department Obesity Prevention Programs
    The obesity epidemic is a critical public health priority and an 
important health equity and child health issue. We applaud efforts to 
develop solutions for this public health challenge. However, we have 
several concerns about how the legislation is currently drafted. Given 
the disparate impact of obesity on communities of color, and the rapid 
growth of obesity rates in children, we would like this legislation to 
strengthen its focus on these populations, understanding the need for 
culturally tailored strategies to maximize effectiveness. Moreover, 
given that there are many social determinants of health that contribute 
to obesity, and the role of family and community in preventing obesity, 
we suggest that there be more input from and coordination with 
representatives and experts from affected communities and expertise in 
community engagement.

    To that end, it is vital that the guide include strategies tailored 
to the specific populations most at need. Given the changing 
demographics of the Nation, ensuring that the strategies that are 
developed and implemented are effective in communities of color must be 
a high priority. No single approach will work to combat the obesity 
epidemic.

    Further, the guide should include strategies based on evidence-
informed practices, mixed method research, and community based 
participatory research. Evidence based medicine is the gold standard to 
which we all should aspire. However, we have concerns that the 
exclusive focus on evidence-based strategies that focus heavily on 
randomized control trials, while ideal, is incompatible with the 
current state of the evidence base in relation to addressing the health 
needs of women, children, and racial and ethnic minority groups. For 
example, Blacks and Latinos make up only 6 percent of all participants 
in federally funded health research even though they comprise nearly 
one-third of our population.

    Our current evidence base does not accurately reflect which 
treatments work well among different racial and ethnic groups. Instead, 
our clinical guidelines and policies have been informed by research 
that only studies the average efficacy and safety of individual 
medications, medical devices, and treatments. While important efforts 
are underway to diversify participation in clinical and health systems 
research, the bulk of the data available is generated from non-
heterogeneous studies where women, children, and racial and ethnic 
minorities are largely underrepresented. Therefore, in order to capture 
emerging evidence generated from these groups, which are badly needed 
given the disparate impact of obesity they face, and the need for 
culturally tailored strategies, we must widen the findings included in 
the guide to encompass evidence-informed strategies.

    Finally, the strategies promoted by the guide should encompass a 
broader definition of interdisciplinary coordination that includes 
additional roles. Interdisciplinary coordination between relevant 
public health officials specializing in fields such as nutrition, 
physical activity, epidemiology, communications, and policy 
implementation is critical. We recommend that the list be expanded to 
include community health workers, and navigators.

    To ensure guide includes evidence-informed strategies; culturally 
tailored strategies based on evidence-generated from populations that 
are representative of those communities; and acknowledge the importance 
of different intervention strategies for adults and children, we 
recommend the following legislative language changes:

          Amend subsection a(1) A. (page 133) to read:

        ``describe an integrated program structures for implementing 
        interventions proven to be effective in preventing, 
        controlling, and reducing obesity that include culturally 
        tailored interventions for specific racial and ethnic groups 
        that bear a disproportionate burden of obesity as well as 
        specific to children; and that take into account community 
        needs and challenges

        Amend subsection a (1) B (ii) to read:

        (I) the application of evidence-based and evidence informed 
        practices to prevent, control, and reduce obesity rates
          Section 404: Expanding Capacity for Health Outcomes
    We support the development of award grants to expand the use of 
technology-enabled collaborative learning and capacity building models 
to increase access to health care services. Health is driven 
predominantly by the factors that influence health such as 
socioeconomic status, stable housing, employment, food security, 
exposure to trauma and violence and other factors. These factors are 
referred to as the social determinants of health. As Congress 
establishes support to use new technology innovations to increase 
access to health care services, it is critical to include specific 
reference to those services not typically defined under the medical 
system, which are predominantly responsible for driving health 
outcomes. Those services include a wide range of social and human 
services including but not limited to housing support, nutritional 
assistance programs, employment services, community-based programs, 
child care services. In addition to the health care services outlined 
in Sec.404(6)(b)(18-23), we recommend that the bill text specifically 
include reference to social services and the social determinants of 
health.
      Section 405: Public Health Data System Modernization Grants
    Families USA strongly supports efforts to help public health 
departments to modernize public health data systems including enhancing 
interoperability of current public health data systems incorporating 
certified health information technology. The ability to safely and 
security collect, store and transfer public health data is critical to 
ensure the health care system is meeting the needs of the 21st century. 
Local health departments often lack the resources needed to invest in 
new technology to support a robust public health data system. 
Similarly, community-based organizations which are often the bedrock of 
the health care system and infrastructure at the community level often 
lack the capitol needed to make investments into health information 
technology and data systems.

    We also believe it is critical to collect and disseminate data that 
is disaggregated to clearly identify variations in treatment responses 
that are often overlooked when only analyzing aggregated data. 
Disaggregating data will enable improved tailored treatment 
interventions that promote high-quality health care for all.

    We recommend that the HELP Committee make the following changes to 
the bill text:

          Include community-based organizations as grant 
        recipients to modernize their health care data systems.

          Require in statute or mandate the Secretary to 
        establish national interoperability standards that include 
        public health data systems and the data systems for community-
        based organizations to ensure these various data systems can 
        effectively communicate with the broader health care system.

          Require in statute that the public health data 
        modernization grants include building the capacity to collect 
        and report data by race, ethnicity, gender, sexual orientation, 
        and disability status.
              Section 406: Innovation for Maternal Health
    We support the efforts to address the high rates of maternal 
mortality in the United States and to improve maternal health. The 
wealthiest nation in the world can do better to ensure the health and 
well-being of our mothers. Importantly, racial and ethnic minorities 
have significantly worse maternal and infant health outcomes even when 
compared to their white counterparts of the same socioeconomic status. 
Black women are twice as likely to suffer from severe maternal 
morbidity or experience infant mortality when compared to non-Hispanic 
whites. We recommend adding language to prioritize activity that is 
culturally tailored to the racial and ethnic groups that are 
disproportionately affected by poor maternal and infant health 
outcomes.

    Additionally, we want to ensure that new programs to improve 
maternal health outcomes address the importance of oral health. Oral 
health coverage and oral health care are critical to supporting a 
woman's overall health and the health of her pregnancy. Untreated oral 
disease has been shown to be linked with various pregnancy 
complications, like preeclampsia, preterm birth, and low birth weight 
infants. Research has also established that a woman's oral health 
status during pregnancy is a good predictor of her future child's risk 
for developing oral disease. We recommend specifically including oral 
health in the establishment of best practices or implementation of 
programs to improve maternal health outcomes both during pregnancy and 
postpartum.
  Section 408: Study on Training to Reduce and Prevent Discrimination
    We applaud the efforts to conduct a study on training to reduce and 
prevent discrimination in the health care system. Establishing training 
that reduces and prevents discrimination and mitigates implicit bias is 
a key strategy for reducing health inequities. This type of training 
should be implemented throughout the provision of all health care 
services since racial discrimination is at the root cause of health 
inequities. We recommend including this type of training throughout the 
provision of all health care services. It is critical that everyone who 
is involved with delivering health care services takes part in these 
trainings since care coordination is a necessity in delivering 
equitable care. We also recommend including a clear definition of 
health professional training programs.
         Title V--Improving the Exchange of Health Information
    Families USA strongly supports the HELP Committee's attention to 
improving the exchange of health information. We believe that to ensure 
good health and high-quality health care, consumers, providers, 
policymakers, insurers and payers must be equipped with the tools to 
address the factors that influence health. Those factors extend beyond 
the medical system, where we know that only 10 percent of a person's 
health is influenced by clinical care. While 60 percent of factors that 
influence health are based on social and environmental factors. The 
health care data system should be equipped to be interoperable across 
the factors that influence health. Families USA believes that we must 
modernize our health care data system to meet the needs of consumers, 
health care providers, payers, researchers and policymakers in the 21st 
century and beyond. As the health care data system is modernized, 
Families USA believes that it is critical to ensure that the privacy of 
consumers is protected and preserved, and that public trust and 
confidence in health information technology and health information 
exchanges is held to the highest standard.
  Section 501: Requirement to Provide Health Claims, network and Cost 
                              Information
    We support efforts to require payers to share certain data with 
patients through application programming interfaces (API). A robust 
data system incorporating APIs will enable consumers to access health 
care data from multiple health care providers including hospitals, 
providing them with a comprehensive view of their health and health 
care. Historical claims, provider encounter and payment data for each 
enrollee is an important step. A recent Centers for Medicare & Medicaid 
Services (CMS) proposed rule, if finalized in its current form, would 
require payers to make the following data sets available through APIs:

          Adjudicated claims (including cost);

          Encounters with capitated providers;

          Provider remittances;

          Enrollee cost-sharing;

          Clinical data, including laboratory results (where 
        available);

          Provider directory data;

          Drug benefit data including pharmacy directory and 
        formulary data.

    While this list of data sets are comprehensive, it does not include 
specific cost and pricing information. Congress is keenly aware of the 
high and rising costs of health care in the United States. These 
uncontrolled costs threaten the affordability of care for families, 
seniors and children, and create unsustainable budget pressures on the 
Federal Government and state governments. As the largest single payer, 
Medicare rates are often used as a standard upon which private payers 
and providers negotiate prices without transparency and oversight by 
the public. Payment rates in private insurance are often substantially 
more than what Medicare pays for services. Further, we know that 
payment rates not only vary by payer but also that there is 
considerable variation in payment rates across geographic areas and 
within health care markets.

    There are several actions Congress could take to address price 
distortions which fall outside the scope of this bill. Within the scope 
of this bill, however, Congress could mandate substantially improved 
price transparency. Requiring payers to include price and cost data 
through APIs would be a groundbreaking development that would not only 
enable consumers to be more informed purchasers of health care but 
would also unveil critical information that policymakers, researchers 
and other stakeholders need to inform better payment policies. To be 
consistent with the CMS proposed rule, we recommend including language 
that requires payers (including dental plans) to include the following 
data sets price and cost data:

          Adjudicated claims (including cost);

          Encounters with capitated providers;

          Provider remittances;

          Enrollee cost-sharing;

          Clinical data, including laboratory results (where 
        available);

          Provider directory data;

          Drug benefit data including pharmacy directory and 
        formulary data

          Dental claims data

    While we support requiring payers to provide data to consumers 
through APIs, we have serious concerns about the oversight over third-
party apps to ensure that consumers privacy is protected and preserved, 
and that public trust and confidence in health information technology 
and health information exchanges are not eroded. Third-party apps are 
notorious for their lackluster effectiveness in protecting and securing 
consumer data. With the rapid proliferation of health technology 
innovations over the last decade, it is critical that third-party apps 
and any other entities that may be involved with consumer health data 
are subject to the highest standards of protection and security for 
consumer health data. We recommend the bill text stipulate that HIPAA 
be used as a framework for a comprehensive privacy structure for third 
party apps and any new entities that would create, store or transfer 
health care data.
    Strengthening the regulatory framework for the health technology 
innovations of today, and the future, must clearly define who governs 
and controls health data; who has access to it; which entities are 
responsible for protecting and securing the data; and the extent to 
which these data and data systems will be interoperable with the health 
data systems within the health care system. Federal laws and 
regulations have not kept pace with rapid innovations in health 
technology. The existing health data regulatory infrastructure already 
contains significant gaps in the privacy and protection of patient-
generated and personally identifiable data. Decisions about whether or 
not these data are subject to HIPAA's privacy and security protections 
is dependent on the role of a covered entity in creating or storing the 
data for a particular patient. The emergence of new health technology 
innovations will continue to challenge the existing regulatory 
framework. We recommend including language mandating the Secretary be 
responsible for strengthening the regulatory framework and 
infrastructure needed to operate an efficient, effective, interoperable 
health care data system that protects and secures consumers health data 
and maintains the highest level of public trust in health care data 
systems and information exchanges for the 21st century and beyond.
    We further recommend mandating the Secretary to develop national 
interoperability standards for which all payers are required to 
participate.
                               Conclusion
    Thank you for the opportunity to comment on this discussion draft 
of the Lower Health Care Costs Act of 2019. We greatly appreciate the 
Committee's efforts to increase access to affordable, high-quality 
health care for everyone. We commend you for your leadership, and we 
look forward to working with the Committee again on this important 
issue.
            Sincerely,
                                          Shawn Gremminger,
                              Senior Director of Federal Relations.

                                 ______
                                 
    [Whereupon, at 11:51 a.m., the hearing was adjourned.]

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