[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
BREAKING UP HEALTH CARE MONOPOLIES:
EXAMINING THE BUDGETARY EFFECTS
OF HEALTH CARE CONSOLIDATION
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HEARING
BEFORE THE
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, D.C., MAY 23, 2024
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Serial No. 118-14
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Printed for the use of the Committee on the Budget
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on the Internet:
www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
55-835 WASHINGTON : 2025
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COMMITTEE ON THE BUDGET
JODEY C. ARRINGTON, Texas, Chairman
RALPH NORMAN, South Carolina BRENDAN F. BOYLE, Pennsylvania,
TOM McCLINTOCK, California Ranking Member
GLENN GROTHMAN, Wisconsin JANICE D. SCHAKOWSKY, Illinois
LLOYD SMUCKER, Pennsylvania EARL BLUMENAUER, Oregon
MICHAEL C. BURGESS, Texas DANIEL T. KILDEE, Michigan
EARL L. ``BUDDY'' CARTER, Georgia SCOTT H. PETERS, California
BEN CLINE, Virginia BARBARA LEE, California
BOB GOOD, Virginia LLOYD DOGGETT, Texas
JACK BERGMAN, Michigan JIMMY PANETTA, California
A. DREW FERGUSON IV, Georgia JENNIFER WEXTON, Virginia
CHIP ROY, Texas SHEILA JACKSON LEE, Texas
BLAKE D. MOORE, Utah ILHAN OMAR, Minnesota,
DAVID G. VALADAO, California Vice Ranking Member
RON ESTES, Kansas DAVID J. TRONE, Maryland
LISA C. McCLAIN, Michigan BECCA BALINT, Vermont
MICHELLE FISCHBACH, Minnesota ROBERT C. ``BOBBY'' SCOTT,
RUDY YAKYM III, Indiana Virginia
JOSH BRECHEEN, Oklahoma ADRIANO ESPAILLAT, New York
CHUCK EDWARDS, North Carolina
Professional Staff
Gary Andres, Staff Director
Greg Waring, Minority Staff Director
C O N T E N T S
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Page
Hearing held in Washington, D.C., May 23, 2024................... 1
Hon. Jodey C. Arrington, Chairman, Committee on the Budget... 1
Prepared Statement of.................................... 4
Hon. Brendan F. Boyle, Ranking Member, Committee on the
Budget..................................................... 7
Prepared Statement of.................................... 9
The Alliance to Fight for Health Care, submission for the
record..................................................... 12
American Academy of Family Physicians (AAFP), submission for
the record................................................. 21
American College of Emergency Physicians (ACEP), submission
for the record............................................. 35
Americans for Fair Health Care (AFHC), submission for the
record..................................................... 43
AHIP, submission for the record.............................. 47
American Hospital Association (AHA), submission for the
record..................................................... 51
American Optometric Association (AOA), submission for the
record..................................................... 57
Coalition for Patient-Centered Care (CPCC), submission for
the record................................................. 61
Federation of American Hospitals (FAH), submission for the
record..................................................... 65
The US Oncology Network, submission for the record........... 70
Ms. Beth Waldron, submission for the record.................. 76
Dr. Chapin White Ph.D., Director of Health Analysis,
Congressional Budget Office................................ 79
Prepared Statement of.................................... 81
Dr. Benedic Ippolito Ph.D., Senior Fellow in Economic Policy
Studies, American Enterprise Institute..................... 84
Prepared Statement of.................................... 86
Dr. Adam Bruggeman M.D., Orthopaedic Surgeon, Texas Spine
Care Center................................................ 94
Prepared Statement of.................................... 96
Ms. Sophia Tripoli MPH, Senior Director of Health Policy,
Families USA............................................... 110
Prepared Statement of.................................... 112
Hon. A. Drew Ferguson IV, Member, Committee on the Budget,
submission for the record.................................. 168
Hon. A. Drew Ferguson IV, Member, Committee on the Budget,
submission for the record.................................. 171
Hon. A. Drew Ferguson IV, Member, Committee on the Budget,
submission for the record.................................. 177
Hon. A. Drew Ferguson IV, Member, Committee on the Budget,
submission for the record.................................. 179
Hon. A. Drew Ferguson IV, Member, Committee on the Budget,
submission for the record.................................. 185
Questions submitted for the record........................... 193
Answers submitted for the record............................. 202
BREAKING UP HEALTH CARE MONOPOLIES:
EXAMINING THE BUDGETARY EFFECTS
OF HEALTH CARE CONSOLIDATION
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THURSDAY MAY 23, 2024
House of Representatives,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
210, Cannon Building, Hon. Jodey Arrington [Chairman of the
Committee] presiding.
Present: Representatives Arrington, Norman, McClintock,
Grothman, Burgess, Carter, Good, Ferguson, Roy, Moore, Estes,
Fischbach, Brecheen, Edwards, Boyle, Kildee, Peters, Panetta,
and Balint.
Chairman Arrington. Good morning. This hearing will come to
order. Welcome to the Committee on the Budget's hearing on
``Breaking Up Health Care Monopolies: Examining the Budgetary
Effects of Health Care Consolidation.''
I would like to welcome our panel of expert witnesses: Dr.
Chapin White, Director of Health Analysis at the Congressional
Budget Office; Dr. Benedic Ippolito from the American
Enterprise Institute; Dr. Adam Bruggeman from Texas, sorry--
that wasn't in the script, that just kind of came out--an
orthopaedic surgeon at the Texas Spine Care Center; and then
Ms. Sophia Tripoli, Senior Director of Health Care Policy at
Families USA and a former policy analyst, also, I believe, at
the Centers for Medicare and Medicaid Services.
So thank you all for being here. Thank you for lending your
counsel and your insight and we appreciate your time.
Well, I am going to yield myself such time as I may consume
for an opening statement. I will try to keep it within the five
minutes.
This is a very important topic and important to me
personally. Our national debt is approaching $35 trillion.
These are stunning statistics and should be sobering for every
American. We are adding $8 billion to the debt every day. Our
gross debt-to-GDP is over 123 percent, which is higher than it
was when we were fighting a world war and we are in relative
peace and prosperity. We are in a bad way in terms of our
Nation's fiscal health and it is rapidly declining.
Even worse, so far this year, we are paying almost 60 cents
on the dollar just to service the debt. That is the interest on
the debt which, by the way, this year will exceed what we spend
on all of national defense.
There are also payments thus far this year. Our interest
payments to date, this year are more than we spent on Medicare
as well as our national security for this great Nation. Hard to
believe.
In order to reverse the curse we must address the biggest
driver of our debt: Federal health care spending. In fact, the
Congressional Budget Office projects the spending on major
health care programs will nearly double and grow from $1.7
trillion in 2024 to $3.2 trillion in 2034, three times larger
in ten years, Federal health care spending, than what we spend
on national defense.
National health expenditures, which include everything from
patient out-of-pocket cost to Federal and state spending on
major health care programs, are projected to grow faster than
our economy over the next decade, rising from $4.5 trillion or
17 percent of total economic output to 20 percent of our
economic output or GDP and would be over $7 trillion.
Health care spending is expected to grow at 5.4 percent
over the next ten years while GDP is going to grow--projected
to grow up 4.6. Simply put, this isn't sustainable for the
Federal budget, it is not sustainable for patients, nor is it
sustainable for our taxpayers.
This hearing today is important. We are going to focus on
one of the key issues plaguing our broken health care system
and driving the increased Federal spending, which is increased
consolidation in health care markets, ``Big Medicine'' as I
like to call it.
Big Medicine consolidation across health care markets
ranging from hospitals purchasing independent physician
offices--we will delve into that--to insurance companies
acquiring pharmaceutical benefit managers and even pharmacies
themselves down the supply chain, and then we have other
trends, but the data spells out a troublesome picture of the
current state of health care markets and the impact of
consolidation on spending. In fact, CBO stated that
consolidation has increased Federal health spending and cost
for patients while limiting their choices and decreasing
patient access to quality care.
There were over a thousand hospital mergers between 2002
and 2020, and research has revealed the average price of
hospital services increased in that period of time by $521
after hospital mergers occur. Additionally, 41 percent of
physicians are now vertically integrated with a hospital or
health systems, an increase of 12 percent over ten years.
In cancer care alone, in cancer care alone, over 700
independent cancer clinics were acquired by hospitals over the
period of 2008 to 2020. The cause and effect of this is clear.
Prices for physician services in areas with high market
concentration are between, statistically, 14 percent and 30
percent higher than in areas with less consolidation.
In the prescription drug supply chain, 79 percent of all
drug chains--I am sorry, drug claims are now processed by three
pharmaceutical benefit managers, all of which are vertically
integrated into large health insurance companies.
This vertical consolidation, which some will say is greater
scale, greater efficiency bringing costs down, is actually
shifting incentives and increasing drug costs for Americans.
The House Budget Committee and the House Republican
Conference have been leading the way to combat health care
consolidation through policies and our Reverse the Curse
balanced budget, such as site-neutral payment reform, which is
by the way, a Democrat and Republican idea. I think it actually
emanated with President Obama, but we agree with it.
Equalizing payments for the same service through Medicare
site-neutral reform while ensuring our rural providers are
unaffected is not only common sense, it would save taxpayers
over $150 billion in the 10-year budget window.
More importantly, this policy would end the perverse
incentive that is leading to hospitals acquiring independent
physician offices, leaving the market with less competition,
patients with fewer choices, and then, most importantly, our
reform would ensure seniors will pay less out-of-pocket costs,
and we believe that is the bottom line here in terms of our
success objective.
Lastly, the House Republican Lower Costs, More Transparency
Act passed the House in December. It not only includes
transparency reforms to improve health care markets, it also
included a site-neutral payment for Part B physician-
administered drugs. So we are moving in the right direction in
my opinion for sure.
As Chairman I have made it clear this Committee takes its
fiduciary duties to our taxpayer seriously, both Republicans
and Democrats, which is why we are going to examine the effects
of rising consolidation on the budget and discuss reforms
necessary to reverse this trend, restore market competition,
and reduce health care spending ultimately for the American
people.
That is what we want: access, lower cost. Nobody can afford
health care at this point and I know we are all working towards
that stated objective.
With that, I yield to my Ranking Member and friend from the
Keystone State for his opening remarks.
[The prepared statement of Chairman Arrington follows:]
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Mr. Boyle. Well, thank you, Mr. Chairman, and thank you for
holding this hearing today. When I first saw that you were
holding a hearing called ``Breaking Up Monopolies'' I said, my
God, Jodey is becoming a Democrat. This is great. I welcome
with open arms the road to Damascus.
But I have to say, I appreciate his thoughtful approach in
general, but then specifically to this issue because it is so
complex and, frankly, if there is an area that is hard to
categorize as left or right it is the enormity that is our
health care system.
As we look and take a step back at where we are right now
in the United States in 2024, when it comes to health care,
there are some good news that I hope that we all should be able
to cheer.
First, the national uninsured rate hit an all-time low in
American history last year with a record-breaking 21.3 million
Americans signing up for health care coverage under the ACA.
That is whether we call it Obamacare or originally Romneycare,
the idea at long last has become popular and has worked.
It is one piece of our rather hybrid health care system.
Some people are on a direct government-provided health
insurance such as the VA, some have health care-provided
insurance through Medicare and Medicaid, some on the exchanges
which, of course, I remind everyone again, pool together
private plans, and then, of course, the biggest piece of all is
the employer-provided health insurance.
So we have had very good news. I hope people saw the New
York Times article a couple months ago showing that actually,
health care costs came down far greater in the last decade than
anyone projected. So that is clearly good news that we can
celebrate and that is why we can't turn the clock back and have
to make sure that we preserve the gains that have been made.
At the same time, as we take a step back and look at the
whole system systematically, we spend approximately 17.5
percent of our GDP on health care in the United States.
Germany, the U.K., Canada, France, they are all below 10
percent. So we are spending a much higher percentage of our GDP
on health care than any of our peer countries and we aren't
necessarily getting better health outcomes for those dollars.
Why is that? How can we do better there in terms of
getting, essentially, a better bang for our buck and bring down
the costs?
Now, as we move forward in looking at this, and
specifically the consolidation in the industry that has
happened over the last ten years, we have to realize it is not
just patients that are affected by the industry, but it is
providers and a lot of times it is physicians that are being
affected, indeed adversely affected by this dramatic
consolidation.
You know, doctors who just want to be able to have a
standalone practice are finding that more and more difficult.
Theirs is a perspective that also needs to be listened to. It
is obviously a crucial part of the health care system.
So I hope this is the first of a number of hearings that we
will have in this realm. We all know that as we look toward the
early part of the next decade, we run into funding issues when
it comes to the Medicare trust funds. We are going to clearly
have to be looking at ways in which we can become more
efficient when it comes to Medicare, yet at the same time, make
sure that by a cut here and a cut there to physicians and
doctors, we don't create a death spiral in which we reach the
point where providers actually just want to opt out of the
system altogether.
Let's be wary of death by a thousand cuts as we are looking
to making the Medicare trust funds solvent for the next
generation. I am confident that we can do that.
I end where I began: When you look at all of our peer
countries that have different kinds of systems, U.K. and Canada
is more a government-run. The government has the hospitals, the
physicians are government employees.
I think there are very few people in the United States who
would think that that is an appropriate model for the U.S. that
would work.
You have other hybrid types of systems, though. France,
Germany, Japan, where the government plays a stronger role in
providing insurance for everybody, but it is the private
sector. Doctors and hospitals are privately run within that
system.
Whichever model you choose, all of them seem to be spending
less and are spending less on health care than we are in the
United States. So focusing on what we can do to bring down
costs, be more efficient, and ultimately provide better
outcomes for all in the system, especially patients, is what we
need to do as a country.
And with that, I will yield back.
[The prepared statement of Ranking Member Boyle follows:]
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Chairman Arrington. I thank my friend from Pennsylvania,
and in the interest of time, if any other Member has an opening
statement I ask that you would submit it for the record. I will
hold the record open to the end of the day to accommodate those
Members who may have not yet prepared written statements.
[The information follows:]
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Chairman Arrington. Once again, welcome to the witnesses.
Thank you for being here. You will have five minutes to provide
your opening remarks and then we will get into Q&A.
Dr. White, you may begin when you are ready. I yield five
minutes.
STATEMENT OF DR. CHAPIN WHITE, DIRECTOR OF HEALTH ANALYSIS,
CONGRESSIONAL BUDGET OFFICE
Dr. White. Thank you, Chairman Arrington, Ranking Member
Boyle, and Members of the Committee. I appreciate the
opportunity to appear before you today and in consultation with
the Budget Committee staff I have focused this testimony on
consolidation among health care providers and its impact on the
Federal budget.
The markets for physician and hospital services have become
increasingly consolidated in recent decades. The share of
hospitals affiliated with a health system increased from 53
percent in 2005 to 68 percent in 2022 and the share of
physicians employed by a hospital or health system increased
from 29 percent in 2012 to 41 percent in 2022.
The Federal Government subsidizes health care for enrollees
in private health insurance and for enrollees in public
programs and consolidation increases costs in both cases.
Consolidation can affect the Federal budget by increasing
prices in private health insurance, by increasing the intensity
of services provided through public programs, or by shifting
services to more costly settings.
Consolidation gives providers more bargaining power,
allowing them to negotiate higher prices with private insurers.
Those higher prices increase private insurers' spending on
claims, which in turn increases premiums.
In employment-based health insurance an increase in
premiums shifts a portion of employees' compensation away from
taxable wages to tax-favored health benefits. That shift
increases the Federal deficit.
In nongroup insurance, higher premiums increase premium tax
credits in the health insurance marketplaces. CBO projects that
Federal subsidies for private health insurance will total $6.4
trillion through 2033, so even small changes in prices paid by
private insurers could impact the Federal budget.
In the fee-for-service programs in Medicare and Medicaid,
the Federal and state governments set providers' prices through
laws and regulations and managed care plans tend to follow
those prices. So in that context, consolidation among providers
generally does not increase the prices paid.
However, consolidation can increase spending in Medicare
and Medicaid by encouraging providers to deliver more services,
to provide more intensive services, or to supply care in more
costly settings.
If hospitals acquire physician practices, certain services
provided by those physicians may be billed at hospital
outpatient rates, which include facility fees, and are
generally higher than the rates paid to independent physician
practices.
Physicians whose practices are acquired by hospitals may
send their patients to receive care in hospitals rather than in
less costly settings or they might recommend more costly
treatments. Those changes affect the Federal budget by directly
increasing Medicare and Medicaid spending.
CBO expects that providers consolidation will continue over
the next decade. In 2022, the agency identified several
policies that could reduce that consolidation, including
further equalizing Medicare payments across sites of service
and expanding Federal agencies' antitrust capacity.
We concluded that adopting a broad set of such policies
would avert up to a quarter of the growth in consolidation. We
estimated that the resulting reduction in Federal subsidies for
private coverage would shrink the Federal deficit in 2032 by
0.2 percent to 0.6 percent.
The effects of the policy CBO identified would be limited
for two main reasons. First, health care provider markets are
already highly consolidated and undoing that consolidation
would be difficult, particularly within a 10-year budget
window.
Second, some of the factors that drive consolidation are
not amenable to change by legislation. For instance, providers
might still seek to expand service lines or achieve economies
of scale and providers would still benefit from consolidation
because they would gain bargaining leverage with private
insurers.
CBO focuses principally on the effects of provider
consolidation on the Federal budget, but policies that promote
competition may have other effects outside the agency's
purview, such as fostering greater patient choice or provider
independence.
Thank you. I look forward to questions.
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Chairman Arrington. Thank you, Dr. White, and now we will
yield five minutes to Dr. Ippolito.
STATEMENT OF DR. BENEDIC IPPOLITO, SENIOR FELLOW IN ECONOMIC
POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE
Dr. Ippolito. Well, thanks very much, Chairman Arrington
and Ranking Member Boyle, and Members of the Committee. My name
is Ben Ippolito. I am an economist at the American Enterprise
Institute.
Any effort to seriously address the long run fiscal
imbalance is going to have to grapple with health care in the
U.S. Current spending on Medicare/Medicaid and the ACA alone by
the Federal Government exceeds the entire discretionary budget
at this point, let alone other Federal spending, including what
Dr. White was referring to in the tax exclusion and the cost of
supporting the employment-based system.
I want to emphasize the Chairman mentioned that we have
accrued this debt in relatively placid times. I will also
highlight we have had relatively slow growth of health care
costs by U.S. historical standards over the last 15 years or
so, with the exception of COVID.
The fact that national health expenditures have hovered
around 17 or so percent of GDP for more than a decade is
historically anomalous, and so, if we resume more typical
growth rates, the budget challenge is going to grow much, much
more pronounced over time.
Consolidation is, of course, one of many factors that leads
to rising health care costs, and it does so in at least a few
ways I will highlight. The first is that consolidation in many
forms, including providers, but other forms--insurers, PBMs,
things like that--tends to increase commercial health care
costs.
Those costs are reflected in premiums--higher premiums and
lower wages that reduce income taxes collected by the Federal
Government. The cost of that provision is over $300 billion
today and every time commercial health care costs grow, the
cost of that tax exclusion grows as well.
Secondly, consolidation can increase spending in public
programs directly, and perhaps most notably, Medicare pays
higher rates if a service is delivered in a hospital outpatient
department than a physician's office, and while that does make
sense for lots of services, for relatively routine things that
can be produced or done in a variety of settings, things like
drug administration, that makes a lot less sense.
That gives a major incentive for hospitals to acquire
physicians' practices and bill at the higher Medicare rate.
That directly increases Medicare spending, both to the
government and to beneficiaries. It also has the effect of
encouraging consolidation and increasing provider market power
in the commercial space, thereby increasing commercial health
care spending as well.
There is a host of policies that can affect consolidation
in health care markets. I am going to focus on sort of
conceptual goals. The first is do no more harm. Try to end
incentives that further incentivize consolidation in these
markets.
Dr. White already mentioned we are at a place where many
markets are already relatively consolidated. Further
consolidation is very painful.
Things like the lack of site-neutral payments in Medicare
or the structure of the 340B drug discount program are examples
of program features that tend to reward consolidation. Another
one that is not a single policy is administrative costs. Adding
additional administrative burdens, reporting requirements that
are onerous to physicians, tends to make it more challenging.
It is easier for a large system to absorb those kinds of
things efficiently than it is for a single standalone office.
So anything that reduces those kinds of administrative burdens
tends to help.
Second, antitrust agencies have to at least be aware of
concerning transactions and that includes the now-common
situation where entities accumulate large market shares through
many less transparent small transactions. That is somewhere
where Congress can help those agencies.
Finally, to the extent you can, there is value in trying to
moderate how much consolidated entities can leverage their
market power, and there are some contracting provisions that
you can think about that tend to work in that direction.
I am going to conclude with a pragmatic point, which is
that efforts to address these issues often raise concerns about
reduced access if they cause some financially vulnerable
entities to close, particularly hospitals, and that is a real
concern.
However, I do not think that is a compelling argument for
inaction. Congress can instead pass legislation that
comprehensively addresses poorly designed incentives that
encourage consolidation and, if needed, subsidize or help out
those rural or otherwise distressed providers directly in ways
that do not further incentivize consolidation.
And so accommodating those kinds of concerns does not need
to derail necessary work to try and keep Federal health
spending on a sustainable path. I thank you for having me and
look forward to questions.
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Chairman Arrington. Thank you, Dr. Ippolito.
Dr. Bruggeman, we yield five minutes now for your opening
statement.
STATEMENT OF DR. ADAM BRUGGEMAN, M.D., ORTHOPAEDIC SURGEON,
TEXAS SPINE CARE CENTER
Dr. Bruggeman. Thank you, Chairman Arrington, Ranking
Member Boyle, and distinguished Members of the House Budget
Committee. Thank you for the opportunity to testify today on
the critical topic of consolidation in our health care system.
My name is Dr. Adam Bruggeman. I am an orthopaedic spine
surgeon from San Antonio, Texas. I also chair the Advocacy
Council of the American Association of Orthopaedic Surgeons,
and I am here to share my perspective of consolidation as a
physician and an owner of an individual, independent medical
practice.
I have witnessed firsthand the alarming trends of
consolidation sweeping across the U.S. health care system. From
2019 to 2021, there was a 25 percent increase in hospital and
corporate-owned practices. Hospitals and large corporations are
rapidly acquiring independent practices, undermining
competition, and driving up costs for patients and payers
alike.
A mounting body of evidence reveals that consolidation
drives up prices for health care services, including for common
orthopaedic procedures like knee replacements and spinal
fusions, which are approximately 30 percent higher in
concentrated markets compared to competitive ones.
Research also indicates hospitals engaging in consolidation
impose prices 40 percent to 50 percent higher compared to what
they would have charged had they not merged. The evidence is
clear. Consolidation leads to higher health care prices and
consequently erodes affordability and access to care.
Allow me to further illustrate the cost of consolidation
with an example from my own backyard. One of my colleagues
recently joined a large hospital system after facing economic
challenges maintaining an independent practice.
This consolidation triggered site-of-service differentials
and the financial toll was staggering in the millions to my
community. One surgeon in one community costing millions in
lost revenue to taxpayers, to local businesses, to employers,
and this scenario is playing out in communities across our
entire Nation.
Consolidation drives up premiums for large employers in the
area providing health insurance to their employees and leads to
higher out-of-pocket expenses for individual patients needing
surgery or other procedures.
So what is driving this consolidation crisis? In today's
health care landscape, physicians across America find
themselves at a breaking point. Overhead costs keep rising. Our
reimbursement keeps falling, and on top of that, we are buried
under piles of bureaucratic red tape that pulls us away from
patient care.
Together these pressures make it extremely difficult for
physicians to keep their independent practices afloat and lead
many to choose employment over owning their own practice. The
consequences of unchecked consolidation extend beyond higher
prices for common procedures.
Unfortunately, we witnessed firsthand the detrimental
effect of consolidation during the recent Change Healthcare
cyber-attack, which directly impacted my practice and
exemplified how consolidation and vertical integration can
amplify disruptions across the entire health care system.
We are now seeing how concentrating more health care
spending through a small number of entities can lead to
singular points of failure. When an adverse event occurs at one
of these consolidated giants, the impacts are more severe. They
are more costly, and they are more difficult to resolve.
To combat consolidation threats to affordability and
access, Congress must enact reforms to overhaul how physicians
are compensated. We are trapped in a vicious cycle. Rising
costs and declining reimbursement are making it harder for
physicians to keep our practices viable, pushing many towards
consolidation, which then in turn drives higher costs for
patients and payers.
Unless we make long-term structural changes to how
Medicare, and by extension the rest of health care, pays,
values the services physicians provide, the idea of the
independent physician will continue to fade from our health
care system.
For that model of health care delivery to continue to be a
financially viable option for physicians we must have some form
of long-term financial security that the current patchwork of
annual short-term payment updates fails to provide to those who
are not salaried employees of larger institutions.
Congress also needs to repeal the moratorium on physician-
led hospitals. Studies show that they provide the same or
higher quality of care at far lower prices compared to
nonphysician-owned facilities. Ultimately, any action must be
coupled with broader reforms to stabilize physician payments
long-term, reduce administrative burdens, and inject
competition into marketplaces to empower physicians to thrive
independently.
Allowing these physicians to practice in the setting that
is best for them, for their patients, and for their broader
community should be the absolute hallmark of our health care
system.
With that, I urge the Committee to act and work towards
solutions that promote competition in health care. The
consequences of inaction are simply too high for physicians,
for our patients, for employers, for taxpayers, and,
ultimately, for our Nation's health care standards. Thank you
for your attention to this critical issue.
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Chairman Arrington. Thank you, Dr. Bruggeman.
Ms. Tripoli, the floor is yours for five minutes.
STATEMENT OF SOPHIA TRIPOLI, SENIOR DIRECTOR OF HEALTH POLICY,
FAMILIES USA
Ms. Tripoli. Good morning, Chairman Arrington, Ranking
Member Boyle, Members of the Committee. Thank you for the
opportunity to testify today. On behalf of Families USA, a
leading national nonpartisan voice for health care consumers
working to ensure the best health and health care are equally
accessible and affordable to all, I want to thank you for this
critical discussion.
No American should have to choose between going to see
their doctor and buying groceries to feed their family, yet
almost half of all Americans can't get needed medical care
because of the cost. A third say that the cost of care prevents
them from securing basic needs like food and housing and 40
percent of Americans face medical debt.
As a Nation we spend more than $4 trillion per year on
health care, yet the health of our Nation's families is
suffering. Since 1960, total national spending on health care
as a percentage of GDP increased from five percent to more than
17 percent and is projected to increase to 20 percent, or $7.2
trillion, by 2031.
Health care now accounts for almost one-fifth of our
Nation's economy, yet we have some of the worst health
outcomes, lowest levels of access to care, and greatest
inequities compared with peer countries, and nearly a quarter
of a million people a year are killed by the health care system
from medical errors, infections, and the like. Simply put, our
health care system has lost its way.
Our unaffordable health care spending is primarily driven
by high and rising health care prices. We pay more than
anywhere else in the world for prescription drugs, hospital
stays, specialty care, MRIs, CAT scans, births, and time in the
intensive care unit. These higher prices result in nearly $240
billion in waste annually to the health care system.
Our Nation's high health care prices and abysmal health
outcomes are the result of broken financial incentives that
reward building local monopolies and price gouging instead of
rewarding successes and promoting the health, well-being, and
financial security of families.
Health care industry consolidation has eliminated the
competition and allowed monopolistic pricing to push our
Nation's families to the brink of financial ruin. Nowhere is
this clearer than looking at the price of drugs and hospital
care, which together account for 40 percent of our Nation's
health care spending.
For more than a decade, drug prices increased 20 percent
per year, far exceeding inflation, and since 2015, hospital
prices increased 31 percent nationally accounting for one-third
of U.S. health care spending, growing more than four times
faster than workers' paychecks.
These higher prices are passed on to families as annual
increases in insurance premiums and cost sharing and become
profit margins for large health care corporations. As a result,
we cannot afford to retire when we want, buy a home, send our
kids to college, or even meet basic needs like paying for food
or rent.
The successive spending has created an economic crisis for
the Federal Government, state governments, and taxpayers,
limiting our ability as a Nation to educate our children,
protect our neighborhoods, care for our elderly, and build
critical infrastructure like bridges and roads.
But it doesn't have to be this way. We know what is driving
the crisis and how to fix it. Solutions can be deployed right
away to address the root causes of our Nation's affordability
crisis by ending these pricing abuses and restoring competition
in health care.
This Committee is responsible for advancing budget
priorities that reflect the values of families across the
country and to invest in our country's future, build a strong
economy, and protect and improve health care and other vital
services for America's families.
There is a bipartisan pathway to generate budget savings
without undermining the promises to seniors, veterans, moms and
babies, and people with disabilities.
We urge this Committee to consider well-vetted bipartisan
solutions to increase transparency on prices, health care
quality, and ownership data; to address hospital billing
practices and payment differentials that drive consolidation
and increase costs; to limit anti-competitive behavior in
contracts; and to strengthen FTC and DOJ enforcement of anti-
competitive practices.
I would like to finish my remarks with the story of Ben Los
and his 5-year-old son from Colorado Springs to illustrate the
impact of unchecked corporate health care greed on our Nation's
families. In 2022, Ben and his wife rushed their son to the
doctor after he began experiencing seizures. They were referred
to a specialist in their network who ordered an EEG scan and
assured them that the scan was covered by their insurance.
Two months later, the Los family received a bill for
$2,500. When they called the hospital to ask about the bill
they were told it was a facility fee. The physician service was
covered, but now they had to actually pay the hospital.
Ben elevated the issue to the hospital administration
leadership and was able to negotiate a reduction to his bill
because it was classified as ``charity care.'' Frustrated by
this experience, Ben investigated the hospital, but found it
nearly impossible to determine who actually owned it. It was a
giant black box.
When he finally discovered the owner, he found that this
particular system raked in billions of dollars in profits just
in the first nine months of 2022, yet was claiming they needed
to charge the Los family a $2,500 facility fee to pay their
hospital staff. This is a national scandal.
This Committee has a responsibility to put the needs of our
Nation's families ahead of the greed of big health care
corporations. I thank the Committee for your time, and I look
forward to answering any questions.
[The information follows:]
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Chairman Arrington. I thank the gentlelady, Ms. Tripoli,
for her comments.
Now we will move into the Q&A portion of the hearing, and I
will yield myself five minutes. I find myself in an awkward
situation here where I am agreeing more with the Democrat
witness than maybe in any other hearing.
Ms. Tripoli, I think you did, I mean, price transparency,
market forces, healthy competition, and limiting those perverse
incentives that restrict competition and choice for patients,
and I am going to start with you. I am trying desperately to
find consensus solutions that my Democratic colleagues can
support, my Republican colleagues can get excited about with
respect to a more efficient health care system on the Federal
side.
And there seems to be one big obvious one, and I continue
to give President Obama credit for including it in his budget,
and that is site-neutral payments. I just don't see any
business person in America who would run their business with
that kind of incentive structure where you are paying one
entity more than you are another entity for the same procedure,
same outcome, and in many instances, the same health care
professionals because often those independent physicians and
their health care group is gobbled up by the hospital that gets
paid more in this scenario.
This has been going on for a long time. We could save $150
billion, and we can reduce the cost, out-of-pocket cost for
seniors, and we can just improve the system altogether. It
seems to me the most obvious.
Where are you on that? You were at CMS, presumably this
neutral arbiter on what works, what doesn't work. You have seen
a lot of ideas. Is this an idea worth us considering?
Ms. Tripoli. Well, I certainly can't speak on behalf of
CMS, but I can speak on behalf of Families USA and we
absolutely support an enactment of a comprehensive site-neutral
payment policy. MedPAC has been recommending one for years.
It is very bipartisan. It is a no-brainer. It corrects a
fundamental distortion, an economic incentive in the Medicare
payment system, actually, that incentivizes hospitals to buy up
physician practices, rebrand them as outpatient departments so
that they can generate a higher reimbursement.
And so that policy is all about ensuring you are paying the
same price for the same service regardless of the location of
where you get the service. As you mentioned, it is a huge saver
back to the Federal Government and back to beneficiaries, and
if it were extended into the commercial market there are also
even bigger savings projected as well, but it is absolutely an
essential policy, and we applaud the House of Representatives
for enacting, or for passing a more limited provision, which is
a huge step forward.
Chairman Arrington. And let me be clear. Hospitals have
their role. They need to be motivated and incentivized to do
that very well. Physicians need to be motivated. The ecosystem
has to work.
Pharma produces technologies that save our lives and
improve our quality of lives. Insurance can control cost. You
know, I don't want to demonize any one of those groups, but
their animal spirits in the private sector are going to pursue
profitability and shareholder value. That is what they do.
I don't blame any of them for some of the things that go
on. I blame us for not having the right incentive structure.
Incentives drive behavior. That is what we do as policymakers.
Let's get the incentive right, let's get the behavior right,
and the outcomes will follow, and it is unacceptable that this
great country and our health system is the most inefficient of
all developed nations. I mean, what the heck? Right?
So, Dr. Bruggeman, with site-neutral, I quoted a statistic
of 700 independent cancer clinics, just in the oncology space,
were acquired by hospitals from 2008 to 2020. It seems pretty
significant. Are you seeing this trend in your market there in
San Antonio in the great State of Texas?
Dr. Bruggeman. Yeah. We are certainly seeing consolidation
and it is consolidation because of other consolidation. When
the insurance carriers, the top three insurance carriers in the
State of Texas control 82 percent of the market, well, what are
physicians to do to try and contract and negotiate? They are
going to have to consolidate.
What are hospitals going to do, which only control 40
percent of the market, the top three only control 40 percent?
They are going to have to consolidate.
So we are seeing consolidation in response to the
incentives, as you said, which is that they are trying to
renegotiate their prices and ensure they increase with
inflation every year.
Chairman Arrington. So can I just summarize and tell me if
this is the right way to look at it, the fact that there is a
disparity in reimbursement and that with respect to hospitals
and independent practices, physician practices, creates an
uneven playing field and then the pressure is all the greater
to not compete, and just, if you can't beat them, join them,
again, which limits our choice and makes the costs go up. Is
that a fair characterization?
Dr. Bruggeman. It is absolutely correct.
Chairman Arrington. Okay.
With that, I yield five minutes to the Ranking Member for
his questions.
Mr. Boyle. Well, thank you and thank you to all the
witnesses for being here and taking the time and your
testimony.
And thank you especially to Ms. Tripoli and your testimony
for putting the human face on this conversation. Sometimes with
all the facts and the figures it can get lost that we are
talking about fellow Americans whose lives are upended
sometimes by our health care system.
In the spirit that the Chairman had with directing his
first question to the Democratic witness, let me return the
favor and direct a question to you, Dr. Bruggeman. While this
wasn't prearranged, we both independently talked about the same
thing in our opening testimony about the fee and the fee cuts
within Medicare for physicians and for providers.
I happen to be a cosponsor of H.R. 2474, which would index,
it would provide annual inflation-adjusted payments to
providers. It would provide that certainty.
It would be indexed to the MEI, the Medicare Economic
Index, in order to help physicians and, again, ensure they
remain in the system and that there is certainty moving
forward.
I was wondering what you think about that approach? How
necessary is it or not at all? And if you could speak more to
that?
Dr. Bruggeman. Yeah. I think we are at a critical juncture
right now. The consolidation is occurring not because
physicians want to give up their practices and become employed.
It is occurring because they have no choice.
We are not seeing an ability to look forward to our future
and see where things are going in health care is going to be a
good place for physicians. Right now if you are a physician,
they are looking at getting less than inflation every year
while your costs are going up.
It just doesn't make any sense. Why would our best and
brightest Americans decide to become doctors in the future? Who
is going to take care of us as we go forward?
We have to have some economic certainty to the future. We
can't fix what we have done before. What happened before is
what it is, but going forward we have to have inflationary
updates.
Mr. Boyle. Well, and you alluded to the consolidation as
playing a role here. So it is a perfect segue. I wanted to
bring in Dr. White.
In your written testimony you shared the striking
statistics. You talked about what a recent trend this has been
over the last decade or 15 years.
The share of hospitals affiliated with a health system
increased from 53 percent in 2005 to 68 percent in 2022, and
the share of physicians employed by a hospital or a health
system increased from 29 percent in 2012 to 41 percent in 2022.
And reading a little bit further along in your testimony,
you predicted, or CBO projected that this trend will not stop
and will continue.
I was wondering if you could provide, you know, kind of
meat on that bone and a little bit more about if we don't do
anything what you would expect the next ten years to look like
and where we would be in 2034 on the physician and hospital
side and the further consolidation?
Dr. White. We expect the trends that you just cited to
continue and the forces are aligned for those trends to
continue. There is bargaining leverage with private insurers.
There is the lack of site-neutrality. There is 340B.
There are administrative burdens that can be especially
heavy for independent practices. There is pressure to join ACOs
and value-based payment arrangements. So there are many----
Mr. Boyle. At roughly the same pace that we have seen in
the last decade?
Dr. White. That is our expectation.
Mr. Boyle. I mean, to the best of, you know, your ability?
Dr. White. Yeah. Yeah. That is our expectation.
Mr. Boyle. And if you were to identify one thing, keeping
in mind that the biggest enemy to the free market is monopoly,
what would be just one thing, if you could, that you would
recommend to Congress to focus on to attempt to disincentivize
the drive to consolidation?
Dr. White. So we would never recommend policy.
Mr. Boyle. I know. Within your ethical constraints as CBO.
Dr. White. Yes, but the policies that clearly play a major
role are a lack of site-neutrality. That clearly is a heavy
thumb on the scale.
There is also just the backdrop of private insurers being
in the position of negotiating prices with providers, and the
bigger those providers are, the more of the market they
control, the more leverage they have. That isn't really
amenable to legislation.
And there is FTC enforcement that is--the policy options
are relatively limited compared to the underlying forces that
seem to all be pushing in the direction of more consolidation.
Mr. Boyle. You know, I just----
Dr. White. I want to make that----
Mr. Boyle. If you spare me here about 30 seconds or so I
will conclude with one anecdote back from when I was a state
legislator in Pennsylvania, and I am from the southeastern part
of the state. This was in Western Pennsylvania.
We had a major issue that concerned really all of us that
in Western Pennsylvania, around the Pittsburgh area, you had
one hospital system. You would know what I am talking about. I
can tell. We had one hospital system that basically gobbled up
every other hospital, and we had one mega insurance company
that gobbled up every insurance company, and those two went to
war with one another.
So you had basically one behemoth over here on the
hospitals, one behemoth over here on the insurers, and they
decided to not basically recognize each other and get into this
Cold War.
Well, who lost in that Cold War? All of the people who
lived in Western Pennsylvania, and it took, over a long period,
frankly, government getting involved to end this death stare
between the two behemoths.
We want to make sure that never again happens whether in
Pennsylvania or anywhere else. With that, I will yield back.
Chairman Arrington. I thank my friend from Pennsylvania,
and now yield to the Chairman of our Health Care Task Force and
a leader on all things health care for the United States
Congress, Mr. and Dr. Michael Burgess of Texas.
Mr. Burgess. Thank you, Chairman. You know, I was going to
let you go on another 15 minutes with that introduction.
Dr. Bruggeman, thank you so much for being here today. I
know how hard it is to take time away from your practice, but I
cannot emphasize the importance of having a practicing
physician on our panel. That is rare. We generally don't
include practicing physicians, but you are on the front lines
and you do interact with patients every day, and it is you more
so than anyone else who understands that you are the advocate
for the patient in this equation. There is no three-letter
acronym who is in charge of you. There is no large Federal
agency who is in charge of you, but you have to sit down and
have that interaction with the patient in the treatment room or
the operating room, and it is that service that you provide.
Without the practicing physician at the forefront of our
system, my thesis is it loses so much inherent good if it is we
just turn it all over to the insurance company or worse. So
thank you for being here. I know what a sacrifice it is and
thank you for being on the front lines every day and taking
care of your patients.
So let's talk just a little bit, I mean, you are on the
front lines. What is it that is the driving force that causes
independent practitioners to give up and join into some large,
consolidated group?
Dr. Bruggeman. I mean, it is just like any other business,
and again, thank you for your remarks, and I am more than happy
to be here and testify on behalf of my patients and my
colleagues.
You know, any business you have got to balance the income
and the expenses, and when your income is constantly going down
and your expenses are constantly going up and you went into
medicine to take care of patients, not to deal with
administrative burdens, people just give up, and they say I am
going to give up autonomy. I am going to give up control of my
practice to let somebody else worry about the balance sheet and
let somebody else worry about all these administrative burdens
because I just want to get back to taking care of patients.
Mr. Burgess. You know, interestingly enough, Scott Copley
when he was at AEI years ago came and talked to our health care
caucus right after the passage of the Affordable Care Act in
2009 and warned us about this legislation more so than anything
else that has happened in his lifetime would drive
consolidation in the health care space, and the results would
not be good and now here we are 15 years later understanding
just what it was he meant by that.
But, Dr. Bruggeman, staying with you for a moment, you
mentioned how--well, let me just ask you because it has kind of
come up in several different ways, and I want to give the
Ranking Member a chance to understand how important the concept
of physician ownership and physician-led organizations in the
health care space, how important that is in being a
counterweight to the forces of consolidation.
Dr. Bruggeman. Yeah. I think, obviously, physicians, when
they start, we take this famous Hippocratic Oath that we are
going to do good for our communities and for our patients, and
so the critical piece of this is that physicians need to lead
health care, and the fact that at some point in time we made a
decision that probably the most important thing they could own,
which is the health care system, the hospitals that we practice
in and we shut that off and said that they can no longer own
them going forward, or if they wanted to expand they can't
expand them and compete.
When we talk about consolidation, if you are able to knock
out all of your competitors and not let physicians build
hospitals, not let physicians expand hospitals, what is going
to happen? We are going to see more consolidation in the
hospital market, which is going to drive up costs, and we know
from all the data physician-owned hospitals provide at least,
if not better quality of care and they do it at a lower cost.
It just makes sense to get rid of that ban.
Mr. Burgess. Yeah. It absolutely does, and it is baffling
to me during the coronavirus pandemic down in South Texas,
Doctors Hospital Renaissance was unable to expand, even though
they were the primary place that was taking care of the massive
numbers of coronavirus patients.
And I do wonder, Dr. White, why CBO has not recognized
this, what Dr. Bruggeman just said?
Dr. White. Thank you for the question. So on physician-
owned hospitals we recognize there is potentially a price
competition effect with the incumbent hospitals.
At the same time, if physician-owned hospitals are allowed
to open new facilities or expand existing facilities we expect
that that would increase utilization and in a sense that is the
flip side of the access. I mean----
Mr. Burgess. Well, let me just stop you there. You expect,
but can you provide us the data? Can you provide us the models
that you have used to make those assumptions? Because I think
they are fundamentally wrong, and I would be happy to debate
that with facts, but not what we expect will happen. I would
like to see actual numbers on that.
Mr. Chairman, thank you for your indulgence. I will yield
back. I will have a number of questions I will submit for
writing. Thank you.
Chairman Arrington. I thank the gentleman from Texas.
I now yield to my friend from Michigan, Mr. Dan Kildee, for
five minutes.
Mr. Kildee. Thank you, Mr. Chairman, and thank you
especially to the witnesses for being here and for this really
important conversation. You are bringing to light, I think,
many of the challenges that we face, and it is hopeful, or we
are hopeful that we are going to be able to address these.
People in Washington do tend to talk a pretty good game. I
think it is more important that we try to roll up our sleeves
and get things done. We did that in the last Congress. There is
a specific area that I would like to focus on.
We delivered on a commitment to do what we can to try to
lower costs for Americans when it comes to their health care.
Last Congress under Democratic leadership we passed the
Inflation Reduction Act, a landmark legislation that included
legislation that I had a hand in drafting to cap the price, the
out-of-pocket price of insulin at $35 a month.
It was originally intended for everyone, but then in this
legislation it applied to seniors and allowed Medicare also at
the same time to negotiate drug prices with pharmaceutical
companies. We got that done in the last Congress. As a result,
Medicare beneficiaries are saving quite literally hundreds of
dollars a month on insulin, something that is necessary to keep
them alive.
And once negotiated prices for the highest cost drugs go
into effect, seniors who rely on those drugs will also see
their savings grow. So for the seniors that I represent back
home, especially those that rely on Social Security and
Medicare to get by, that makes a real difference in their
lives.
Unfortunately, you know, there is some effort to go in the
opposite direction. The Republican Study Committee, as I am
sure most of the Members on this Committee know, have put
forward a plan to repeal those drug pricing provisions.
Obviously, our goal is to increase access to care, increase
the quality of care, increase outcomes, and at the same time
manage costs in a way that make it more affordable for
Americans.
So, Ms. Tripoli, I wonder if you might offer some thoughts
on what the repeal of those very important provisions might
mean specifically to Americans who are living paycheck to
paycheck but also to our health care system writ large?
Ms. Tripoli. Thank you very much for the question. I think
repealing the Inflation Reduction Act or any of the suggested
cuts to some of our most critical health insurance
infrastructure in the country would have catastrophic effects
for not only the affordability of care, which is the number one
access issue that not just seniors but all Americans face right
now in accessing their health care, but it would also have
significant impacts on people's quality of life.
We know that when health insurance is cut from people
mortality goes up, and in terms of the Inflation Reduction Act
in particular, as you laid out, there are really significant
cost-savings mechanisms both to patients and the system.
And if we want to get at the root of what is driving our
Nation's health care affordability crisis, it is not a solution
of cutting back on access to care. It is a solution of getting
at the root cause which is prices.
We have much higher unit prices for health care and drugs
than anywhere else in the world, and it is so tightly tied to
consolidation and the impact of consolidation on those prices.
So real solutions that want to take on health care
affordability should be focused on the root of the problem.
Mr. Kildee. Well, I appreciate that very much, and, you
know, obviously, we have got work to do dealing with some of
these structural challenges.
I hear from the physicians that I know as friends and that
I see back home, a real concern that, you know, Doctor, you
raised about the economic pressures essentially forcing
physicians to make decisions that they otherwise would not
make. So I appreciate that perspective.
My point in my question is that while we do need to deal
with these larger structural questions, there are things we can
do that minimize the out-of-pocket costs for everyday
Americans. We ought to be willing to pursue that.
I know I saw one of my physicians this morning. I had my
pupils dilated, and so I do appreciate the fact that you are
all wearing these bright orange jackets this morning and the
green hair really sets it off, so thank you very much.
I yield back.
Chairman Arrington. For the record, we will be the ones
wearing the orange jackets by the time this is due.
I thank the gentleman from Michigan, and now yield to my
friend from North Carolina, Chuck Edwards, for five minutes.
Mr. Edwards. Thank you, thank you, Mr. Chair.
Dr. White, the National Council on Compensation Insurance
found that hospital mergers can lead to operating cost
reductions and lower patient costs for acquired hospitals of 15
percent to 30 percent due to an improved integration of care
and a reduction in duplicated clinical services.
And that is exactly what I and the folks in Western North
Carolina were promised in 2019 when the largest health care
conglomerate in our district, in my district, merged with
another hospital. However, that couldn't be further from
reality for the citizens of Western North Carolina.
After the merger, prices shot up at the newly owned
facility and were higher than the average list prices of the 11
neighboring hospitals and annual markup prices now average
about 33 percent more every year.
Based on your expertise, can you explain why that might
have become the case?
Dr. White. My understanding of the situation is that
private insurers are negotiating prices with hospitals and the
more hospitals consolidate, the more they lock down market
share, and the more they turn themselves into must-have
systems, the more insurers are at their mercy and are more or
less compelled to include the hospitals in their network, even
if it is at a very high negotiated price.
So I think that is the broader dynamic that the situation
you are talking about illustrates.
Mr. Edwards. Thank you for that.
Dr. Ippolito, did I get that close to right? Beyond the
fiscal repercussions of health care mergers and monopolies, the
citizens in my district have begun grappling with equally
valuable but less easily quantifiable impacts of consolidation
in regards to lower quality of care.
While this metric can't be measured in dollar signs, it
does have an equally tangible and important impact on the
health care and quality of life for citizens in Western North
Carolina. How would you recommend that we quantify quality of
care?
Dr. Ippolito. Well, that is admittedly much more
challenging to do than cost but there has been a large
literature, a large empirical literature, that has tried to do
this, and they focus on a whole bunch of outcomes, mortality,
but other much more less severe outcomes.
And generally what you see is it is very, very hard to find
compelling evidence that there has been a commensurate increase
in quality that accompanies the increase in cost that we
clearly see, and so while it is difficult to measure, the
totality of evidence suggests that there is not clear evidence
that it has improved.
Mr. Edwards. So with your expertise, what do you view to be
the most concerning non-monetary outcomes of health care
consolidation?
Dr. Ippolito. Well, I suppose if I had to rank order,
mortality probably would be at the top. You know, it depends on
the circumstances. It is kind of hard to say in general, but
cost and mortality are the first things I would look at. Beyond
that questions about access certainly come to mind, too.
Mr. Edwards. So do you have any advice for how would you
recommend that this Budget Committee and Congress leverage our
resources to reduce these less tangible negative outcomes
caused by consolidation?
Dr. Ippolito. Well, the Federal Government, generally
speaking, Congress specifically, has more ability to amend or
change the public programs they have oversight over, and so I
would start by focusing on every one of those program features
that encourages greater consolidation and try to cut those off
the best you can, site-neutral payments, 340B program,
administrative burdens in the MIPs programs, things like that.
That is where I would start.
Mr. Edwards. All right. Thank you. Thank you all.
Mr. Chairman, I yield back.
Chairman Arrington. I thank the gentleman, and I now yield
to my friend from California, Mr. Scott Peters, for five
minutes.
Mr. Peters. Thank you, Mr. Chairman, and thanks to all the
witnesses for coming. As you have highlighted for the Committee
today, the United States health care system has become
increasingly consolidated with respect to insurers, physician
services, and the hospital sector.
For patients in San Diego and across the United States,
consolidation and vertical integration often lead to higher
costs and less price transparency, which we know is a really
important aspect of competition in markets that are
functioning.
Facility benefit managers, or PBMs, for instance, talk
about their ability to negotiate lower prices for patients, but
too frequently PBMs pocket these discounts and they never make
it to the patient.
Ms. Tripoli, many PBMs, including the three largest, have
vertically integrated with major health insurers. Why do you
believe companies do this? What advantages do you think they
see in consolidating?
Ms. Tripoli. So part of, I think what PBMs are responding
to is the significant consolidation there among drug companies
and drug manufacturers. They are consolidating market power so
that they can negotiate better prices and financial incentives
for their own business practices.
So I think in general the PBM pricing structure is very
opaque, and as you have laid out, the incentive for them to
negotiate lower prices is very, very minimal.
Mr. Peters. Right.
Ms. Tripoli. So driving more transparency around PBM
pricing structures would be an important step for this
Committee to consider.
Mr. Peters. So thank you. I did support legislation like
the bipartisan Lower Costs, More Transparency Act, which passed
the House late last year, that contained rigorous reporting
requirements for PBMs to prevent them from profiteering off
state Medicaid programs and will help people understand better
how they are directly increasing drug costs for patients.
But I have some other ideas before the Energy and Commerce
Committee about how we can keep working on PBM reform. I co-
lead a bill with Congressmember Miller-Meeks that would ensure
PBMs pass their discounts along to patients with chronic
conditions.
Ms. Tripoli, how should Congress keep working to prevent
PBMs from taking massive profits at the expense of patients,
pharmacists, and our health care system? What else would you
like to see us do?
Ms. Tripoli. So in addition to transparency, increased
transparency across the PBM pricing structure, which is really
key, we need a lot more data to understand what the negotiated
rates are, what the list price, what their list prices are.
It is, I would say there are opportunities for addressing
spread pricing and ensuring that the rebates going back to
consumers is a key piece. Yes, absolutely.
Mr. Peters. Great. If the rebates go back to the people who
need them, right?
Ms. Tripoli. That is exactly right.
Mr. Peters. Mr. Chairman, I want to just say two words
about the context of this hearing, too, because, you know,
there are a couple of things that drive this discussion that we
don't talk about.
One is the way we account for costs, which is this year's
money. Imagine a family where the parents come back and they
say we could save this family $10,000 by not fixing the roof,
and then the first rain comes next year and you spend $30,000
on replacing the furniture.
And that is the way we budget here. We look at this year's
money. We give no credit for what today's investments might
save us down the line.
I want to thank Dr. White for his work in talking about the
Baby Bear Project, which I will just introduce you to.
Rady Children's Institute for Genomic Medicine conducted a
study on infants where they did whole genome sequencing for
infants hospitalized in intensive care, 178 critically ill
babies at five hospitals across the state.
They were sequenced to diagnose and guide personalized care
which resulted in shorter hospital stays, fewer unnecessary
procedures, and better outcomes for the children with their
family. Saved $2.5 million in medical costs before you ever
talked about lost earnings and all the things that would have
happened had these kids not been fixed.
This system is resistant to the benefits of innovation in
terms of lowering costs, and I think we have to be aware of
that, and we have to think about what the innovations that are
coming out today at a very rapid pace, how they could be
deployed today and how we gauge the benefits in the future, and
that is something that we have talked about with CBO, but we
have never really got there, and I think it would be really
useful and more realistic in terms of controlling costs.
The other thing is I want to say we are still talking not
about a health care system but a sick response system. We
respond to people being sick.
If you look at the difference in childhood obesity between
now and the 1970s, it is staggering. It is the difference
between five percent and 30 percent. This is going to cost us a
lot of money and we need to look not just at how we respond to
these sicknesses but how we prevent them.
Whether that is the food supply system or whether that is
the level of physical activity that kids get, that is a huge
impact on these costs as well and it actually drives a lot of
it. I think we ought to be looking at that as well.
Maybe a commission, Mr. Chairman, on dealing with these
issues in a large way would be constructive, and I would just
offer that again because we don't seem to do it here. I yield
back.
Chairman Arrington. I would agree with the gentleman and
also say to my friend who mentioned a lack of logic between
what we spend on the leaky roof versus when it collapses and
the Preventive Health Savings Act that we passed on a
bipartisan basis out of this Committee is one way to address
that, whereby the gains may be outside of the 10-year window
but it may be significant, and we need to flex on that, not
just use this sort of cookie-cutter for everything.
Mr. Peters. Mr. Chairman, if I might?
Chairman Arrington. Yeah, please.
Mr. Peters. Just to reemphasize----
Chairman Arrington. Please.
Mr. Peters [continuing]. The Baby Bear Project did that all
within a window within a year and a half. So just we are not
even talking about long, long term.
Chairman Arrington. Yeah.
Mr. Peters. There are a lot of savings we can get now.
Thank you.
Chairman Arrington. Yeah, I agree. I agree on both points.
Now, we will yield five minutes to Mr. Ralph Norman from
the Palmetto State.
Mr. Norman. Thank you, Mr. Chair, and I would like to thank
all the participants today.
Dr. Bruggeman, on a bigger scale, I think you all are, the
physicians in the trenches are in a great spot to really make
some changes, but it is going to take a lot of involvement.
I think in a lot of cases, and I know in South Carolina I
have told many of my friends in the medical field if--and I
have been in on the development end then once I got in politics
I saw what doctors went through from the political end, we are
not putting the right people in office that will advocate for
you.
Everybody, when you are on the backside of the curtain
listening, you all make $20 million a year, you drive expensive
cars and live in 15,000-square-foot houses. Now, you need to--
at the bottom we can talk consolidation. We can talk things we
are going to do, but it is going to take a massive change and
you all are going to have to lead the way because you know
exactly what needs to be done.
In my world if I have a problem with a building I go to my
carpenters that built it. You are the carpenters and so I would
just urge more of your colleagues to get involved, and I know
they are busy but at least have their staff because we didn't
hear from the medical profession, so many things, and you all
in such a good way can make a difference.
This medical field is on a collision course. We can't
afford it. The PBMs, we did two hearings on it, they are not
going to give up their vagueness or their trying to decipher,
you know, what the cost is. It is impossible, and they
negotiate. They make huge money and just to get around the
edges and find out what they are doing is almost impossible,
but it is going to take you all helping us out to say, like, on
the regulations that you are talking about in your world, tell
us specifically what you need us to do in a priority list.
You got people like Jodey and others who will tackle that,
but it is going to have to come from you all.
On the uncompensated care, the billions, I think in 2017
and 2018 it was over $40 billion for uncompensated care. That
is on a collision course because that can't be sustained,
particularly with the 15 million that are now in this country
that are going to be in the emergency rooms, as was the other
day when one of my staffers went. They couldn't get in because
it was flooded.
PBMs, what is your advice on trying to get the PBM crisis
or, I guess, peeled onion back to find out what is actually
going on?
Dr. Bruggeman. Well, as an orthopaedic surgeon I don't deal
with PBMs on a regular basis.
Mr. Norman. Right.
Dr. Bruggeman. I think there are some other experts on this
panel that can probably answer that question better than I can.
Mr. Norman. Yeah, Dr. Ippolito.
Dr. Ippolito. You know, one of the ideas that came up
earlier I think that probably would help is try to make sure
that money that is supposed to be in some way ending up in the
patients' sort of pocket actually gets there, and so I think
one of the things you can do is try and get away from the
current pricing system where we have really high list prices
but where the insurer pays much, much lower net prices and the
only person paying that list price is the patient paying out-
of-pocket. It seems to me that is one of the big frictions and,
frankly, bad features that PBMs seem to help facilitate that.
That would be a step in the right direction.
Mr. Norman. Yeah. You can't understand it and that is for a
reason, and they promote the candidates that get elected who
are going to leave it like that because it is a tremendous.
Any other comments?
Ms. Tripoli. No. I mean, I think the only thing to just add
is there is a bit of an, you know, I think when we are looking
at drugs we have to remember that, like, drug companies, drug
pricings are mostly driven by drug companies, but PBMs, of
course, have a role to play but there is the broken financial
incentive in the PBM pricing structure which is why we need
more transparency.
They are financially incentivized to negotiate higher cost
drugs onto the formularies because their revenue is based off a
percentage of the rebates. So I think we want to--transparency
is a really important piece to just pull back the curtain, as
you suggested, and get underneath the hood, understand what is
going on. Get more information, more data about the pricing
structures so that we can have a much more effective targeted
policy solution.
Mr. Norman. I know one of the quickest ways we could make a
dent in the health care controlling the price, put us on that
plan. Let's put Members of Congress on and see how quickly it
gets solved, because the VA has--I mean, veterans get some of
the poorest care. They ought to be getting the superb care.
So put us on the plan and I think maybe we ought to put a
bill out that we do that. I want to thank each one of you for
comment, and I yield back the balance of my ten seconds.
Chairman Arrington. I would like to get that ten seconds
back. That is first time I think that has ever happened. Mr.
Norman, thank you for your input.
Jimmy Panetta, five minutes for my friend from California.
Mr. Panetta. Thank you, Mr. Chairman, appreciate it, and
thanks for having this hearing, something that is so relevant
to my congressional district out there on the Central Coast of
California in the 19th Congressional District.
So thank you to the witnesses for being here. It really has
kind of reached a breaking point when it comes to health care
in my district. I have got providers leaving the market and I
have got patients unable to count on timely access to care.
I think the thing that we can all agree on, patients and
providers and Democrats and Republicans, as you are hearing,
and my constituents and my colleagues here is that Medicare
payments kind of are making the problem worse. The number one
thing I hear in my district from providers and patients is that
Medicare is just out of reach.
Primary care providers are no longer accepting new Part B
patients and specialists don't earn enough from Medicare to
keep their practices open, let alone expand. This is all part
of a bigger issue, as we have been discussing here, is the
failure of Medicare rates to keep up with the cost of care.
Now, I was proud to work across the aisle this last
December with Congressman Greg Murphy from North Carolina on
the Preserving Seniors' Access to Physicians Act, H.R. 6683, a
bill that would offset the nearly 3.4 percent cut to providers
in 2024.
Now, we managed to get about halfway there in the final
Fiscal Year 2024 appropriations package, but that still meant
that doctors who treat my constituents saw another pay cut,
payment cut. According to the California Medical Association,
when we factor in inflation doctors will experience an
effective six percent cut in 2024.
Now, I know all of you, especially Dr. Bruggeman, it is
clear that low Medicare Part B rates impact physician practices
with consolidation, difficulty retaining staff, and, yes,
trouble keeping the doors open amid rising costs. But if you
could, Dr. Bruggeman, what should Congress be doing for this--
any long-term sustainability in Medicare Part B?
Dr. Bruggeman. Yeah. I mean I think there are a lot of
different issues at play. We have heard a lot of discussion
about PBMs and potential savings there. We have heard
discussion about site-neutrality and potential savings there.
I just would encourage that those dollars go into restoring
Part B payments to physicians to normal inflationary increases.
There is just nobody who would stay in business if they made
less money compared to inflation every year, and we have got to
find a way to increase physician payment as it relates to
inflation and use some of the savings from some of these other
concepts to help pay for that.
Keep some of the savings but use some of the savings to
ultimately help pay for those physicians to stay into practice
and stop consolidating, which is ultimately costing us a lot
more money.
Mr. Panetta. Yeah.
Dr. White, is there anything else that you would add to
that or anything different from that?
Dr. White. Our sense is that the relatively low growth in
Medicare physician fees is one factor and the uncertainty from
year to year is one factor in providers thinking about
independent practice versus being part of a system.
But I would just go back to say that there are many factors
other than just the fees. There is the desire for negotiating
leverage from being part of a larger system. There are
administrative burdens from MIPs. There is 340B. There are a
number of factors.
The other thing I want to highlight in the spirit of
managing expectations is from the Federal budgetary
perspective. If the fees paid to independent physicians are
increased, we would definitely look at, is that going to keep
more physicians in independent practice, slow the rate of
consolidation?
We would look at that closely, but I expect that by far the
dominant effect on the budget would just be the direct increase
in fees and Medicare outlays as a result.
Mr. Panetta. Yeah, understood.
Now, Dr. Bruggeman, you talked about tying in inflation,
and obviously that goes back to the Ranking Member's comment
about the Medicare Economic Index in which I think, what this
March, MedPAC also called for indexing Medicare Part B to
inflation and said Congress should finally raise physician care
payments for calendar year 2025.
The biggest obstacle to this effort is, as Dr. White just
kind of talked about, is cost. It costs more money to pay
providers what their services are really worth, and when we
underpay them they go out of business or they just sell their
practice.
Dr. Ippolito, in 30 seconds, can you discuss how indexing
would impact physician practices?
Dr. Ippolito. Well, my expectation is that if you were to
index payments to at least match inflation that you would
likely increase participation in the program and likely on the
margin increase the number of independent practitioners. I
don't have a great sense of what the exact magnitude is but
those would be my initial sense.
Mr. Panetta. Great. Thanks again to all the witnesses. I
appreciate you highlighting not just the issues, but actually
bringing solutions to the table that hopefully we should be
able to work on in a bipartisan fashion.
Thank you. I yield back, Mr. Chairman.
Mr. Carter [presiding]. The gentleman yields.
The Chair now recognizes himself for five minutes for
questioning.
I thank all of you for being here. I am so excited. This is
the most excited I have been for a hearing in years, in fact,
in ten years since I have been a Member of Congress. As many of
you know, I am a pharmacist.
As many of you know, I am the one who had to go to the
counter and tell the patient how much their prescription was. I
was the one who had to watch a senior citizen make a decision
between buying their medicine and buying their groceries. I was
the one who saw the mother in tears trying to figure out how
she was going to pay for the antibiotic for her child.
And I wanted to do something about that, and I have worked
in the Georgia state legislature and I have worked here in
Congress for the past ten years to try to do something about
that.
I am so excited to hear that everyone at least knows what a
PBM is now. When I came here ten years ago I would say PBM and
people would look at me like I had a third eye. Well, that has
changed now, and it is not just--and I really want to
compliment the Chairman for calling this hearing and for the
bipartisanship that you see here because as Representative
Kildee said earlier, we all want the same thing. We want
accessibility, affordability, and quality in health care.
People on this side of the aisle, people on that side,
everyone, everyone in this room. We want that, and we will make
sure we get it, and it is not just in pharmacy. Yes, it is in
drug pricing where you see where the insurance company owns the
PBM that owns the group purchasing organization that owns the
pharmacy that owns the doctor.
Do you know who the largest employer of doctors is here in
America now? UnitedHealthcare. Almost ten percent of all
physicians in America work for UnitedHealthcare. I am just so
excited to hear this.
Dr. White, I want to start with you. We had a hearing--
excuse me, we had a Member Meeting of Energy and Commerce and
we had the Director of CBO with us and we had about 20 of your
staff members here and I asked this question, and I am going to
ask you the same thing. Give me one example of where
consolidation in health care has saved money.
Dr. White. I can't think of one.
Mr. Carter. Thank you very much for that.
Dr. Bruggeman, I described how the insurance company owns
and the vertical integration that exists, and we see it. Again,
we see it in prescriptions and drugs, but we see it all
throughout health care, and this is the biggest problem that we
have got.
Do you believe it is a conflict of interest for the
insurance company to own the pharmacy, to own the PBM?
Dr. Bruggeman. Yes.
Mr. Carter. The vertical integration incentivizes the PBMs
and its plans, not only that but it steers patients. Have you
seen any example of patients being steered by the insurance
companies? Any of you?
Dr. Bruggeman. Yes. I mean, we certainly see that these
insurance carriers will then steer it towards their own
employed physicians or their surgery centers by providing
financial incentives.
Mr. Carter. All right, let's shift gears for a second.
Dr. Ippolito, I am sorry, I know I butchered that, but
nevertheless, 340B. You know, look, the 340B program is a good
program. It was intended for the FQHCs. It was intended for
those who need this program.
It has evolved into something that it was never intended
for, and the current structure of 340B, and have you seen it,
Dr. Bruggeman or Dr. Ippolito? Have you seen where some of
these health care systems are buying out practices for no other
reason except to get the 340B pricing?
Dr. Ippolito. Yes. I have certainly heard the anecdotes,
but I have also seen research that suggests that specialties
that prescribe lots of relevant medications that you get for
340B prices have been acquired by hospital systems specifically
in keeping with that hypothesis. Yeah.
Mr. Carter. And, you know, as the Chairman pointed out
earlier, it is innate in all of us, particularly in capitalism,
and look, I am not opposed to anybody making money. I get it.
We live in a capitalistic society, and I understand that and it
is innate in wanting to make a profit and wanting to get the
lowest price you can, but this is not being passed on to the
patient.
Ms. Tripoli, you said earlier about transparency,
particularly as it relates to PBMs, and making sure that the
employer, the plan sponsor sees the discounts that are being
given and sees where they are going and that the patient gets
that discount. The patient receives it. Is that something you
think would help?
Ms. Tripoli. Absolutely.
Mr. Carter. Good.
One last thing, Dr. Ippolito, can you expand on the impact
of consolidation on drug prices within the 340B hospital system
and any negative impacts on the availability of provider
services?
Right now there is a study being done by the FTC that
finally, I had requested it the first time I got up here,
finally they undertook a study about two years ago, a 6B study,
to see the impact that PBMs are having on independent retail
pharmacy, which is impacting affordability and accessibility.
Do you see this with the 340B program?
Dr. Ippolito. At a minimum I think it is fair to say the
340B program is perhaps not as targeted towards the types of
care that it is supposed to be targeted towards. Hospitals
certainly made quite a bit of money on it. It doesn't seem like
there is a lot of evidence that that is translating to the kind
of care that you are referring to.
Mr. Carter. Well, I don't want to abuse my time in the
Chair and go past my allotted time, but I want to thank you all
for being here, and I want to thank the Chair especially for
this hearing. I have not been as excited about a hearing since
I have been a Member of Congress in ten years.
Folks, this is serious. This is a problem, and again, the
bipartisanship you see here, everyone wants the same thing. We
want affordable, accessible, quality health care. That is all
we want.
I will yield back.
And at this time the Chair recognizes Representative Balint
from Vermont for five minutes of questioning.
Ms. Balint. Thank you, Mr. Chair, and thank you to all the
witnesses for coming today. As others have said, this is a
really important topic to all of us.
I thought I would just start by naming the elephant in the
room. The United States is the only industrialized nation in
the world that doesn't guarantee access to health care.
And we have heard for years now many Americans have to
decide between refilling their prescriptions, putting food on
the table, and making other cuts in their budgets. They delay
annual checkups and preventative health care visits and
ultimately this costs the system more money in the long term
and we get worse health outcomes.
So I think any discussion about our health care system,
which is, in fact, not a system, it is something that has been
cobbled together horribly with duct tape and twine over
decades, is not a system, and it is not serving Americans well.
That is one of the reasons why I can't have a conversation
about this without naming that we should have Medicare for all.
Full stop. Everyone in this country, regardless of ZIP Code,
should be able to get the health care that they need and we
should finally put patients, finally, at the center of the
equation.
You know, we talk a lot about trying to find solutions and,
in fact, we have had some wins and they have not fixed the
system but they certainly have made things better.
I just want to remind folks, and I don't want to go down a
horribly partisan path here, but I just want to remind folks
that many of my colleagues have tried to repeal Obamacare
between 60 and 70 times. Between 60 and 70 times. The amount of
time that was wasted trying to repeal something that was
actually working to get more Americans health insurance, and I
think we need to remember that because we all have a part in
solving the problem. So let's not pretend that that didn't
happen.
Now, we also recently passed the Inflation Reduction Act,
which from my count, not a single Republican voted for that,
and again, it was to lower health care costs. It was to lower
drug costs.
So again, let's not forget that we have had opportunities
before us to come together and, in fact, in those situations
politics took the front seat over actually coming together to
do some work on behalf of Americans.
So that being said, Ms. Tripoli, I am so glad that you are
here. I want to focus on an issue that is really concerning me
in Vermont, and it is how private interests are playing into
our system to treat opioids.
Like many of my colleagues here on both sides of the aisle,
we are dealing with a terrible fentanyl crisis, and according
to a report from STAT News, ``Private equity firms have
acquired stakes in nearly one-third of all methadone clinics in
recent years,'' and in Vermont we only have six opioid
treatment centers and the majority are backed by private equity
companies.
Ms. Tripoli, could you speak about the negative
consequences of private equity stakes in health care providers?
And specifically in the realm of behavioral health care, that
sector, because we have an incredible need. We are not meeting
the needs of patients in Vermont.
Ms. Tripoli. Absolutely. Thank you for the question. I
think we have to be extremely skeptical of the role of private
equity in health care. Fundamentally, there is an
incompatibility with a private equity business model and
securing the health and financial security and well-being of
the American people. By design the business model is you come
in, you buy up a practice, you buy up a community-based
provider, and you are trying to cut costs. You want to look
more profitable in it, right?
And so we see service lines being cut. So we see people
losing access to care. We see an incredible increase in poor
outcomes related to more increased falls, higher hospital-
acquired infections, et cetera.
So we see access reduced. We see quality going down, and
sometimes the land that the private equity firms are actually
buying up is more profitable than the practice itself and so
they close it down altogether. So it has----
Ms. Balint. Can you say that again?
Ms. Tripoli. Sometimes----
Ms. Balint. Say that again.
Ms. Tripoli. Sometimes the land, oftentimes the land that
the provider is sitting on that the private equity firm has
bought is more profitable than providing the care in that
community and so they close the facility down completely so
that they can sell the land.
And so, of course, that has catastrophic impacts for access
to affordable, quality health care for all health care services
in the community and, in particular, for people who need
behavioral health services when we are in the midst of a
behavioral health crisis in our country.
Ms. Balint. I really appreciate that. I thank you so much
for being here, and all the witnesses.
And the last thing I want to say is health care should
include mental health care. It should include behavioral health
care. The body does not stop at the neck. Thank you.
Mr. Carter. The gentlelady yields.
The Chair now recognizes the gentleman from California,
Representative McClintock, for five minutes of questioning.
Mr. McClintock. Thank you, Mr. Chair.
First, one of my colleagues advocates Medicare for all. I
would remind her that people spend a lifetime paying into that
system before they qualify, and even so they will end up
drawing about three times more out of the system than they pay
in, which is why the actuaries are warning us that that system
is in imminent danger of collapse, and I can't think of
anything that would collapse that system faster with all of the
elderly people who depend upon it than what the gentlelady has
just advocated here. The State of California, which is the most
radical-left state in the country, has several times considered
providing a Medicare for all at the state level and blanched at
that at the price.
Dr. Ippolito, the two sectors of the economy where prices
have increased much faster than inflation are tuition and
health care. Why is that?
Dr. Ippolito. Well, you know, I am not an education
economist, but there are certainly some similarities. Among
other things they are fairly heavily federally subsidized,
which lowers the costs.
Mr. McClintock. We pour tons of money into it and they are
happy to accept it. Is that essentially what is going on?
Dr. Ippolito. I think one could characterize that as a
factor, yeah.
Mr. McClintock. Let me read you something that Milton
Friedman wrote 23 years ago. He said, ``Since the end of World
War II, the provision of medical care in the United States and
other advanced countries has displayed three major features.
First, rapid advances in the science of medicine; second, large
increases in spending, both in terms of inflation-adjusted
dollars per person and the fraction of national income spent on
medical care; and third, rising dissatisfaction with the
delivery of medical care on the part of both consumers of
medical care and physicians and other suppliers of medical
care.''
Have things gotten better or worse since he wrote that in
2001?
Dr. Ippolito. It would be a tough case to say it has gotten
much better. We have had many advances, many technological
advances, but----
Mr. McClintock. In the technology, but as Milton Friedman
also pointed out, ``In every other sector as technology
advances prices go down.'' Has that been the case here?
Dr. Ippolito. No, not in general.
Mr. McClintock. So spending has gotten higher,
dissatisfaction with the system has obviously gotten greater.
If that is the case, despite massive increases in government
spending and regulation, maybe that is what is causing it. All
this government intervention and spending that has made costs
higher and services worse. That shouldn't surprise us. That is
what socialism always produces, higher costs and worse
services.
Let me ask you this. What role does illegal immigration
play in driving up health care costs?
Dr. Ippolito. You know, I am not an expert on this issue
but the key things that you would have to think about are what
kind of resource use do you see among that population and how
much does that cost?
Mr. McClintock. Well, let me tell you what they are because
the Federation for American Immigration Reform just released a
report on that. We had a hearing on it just a week or so ago,
estimating the cost of care for illegals is about $22 billion a
year. Who ends up paying that $22 billion price tag?
Dr. Ippolito. Well, some combination of the people who
receive services, the Medicaid program potentially, and then
providers and the Federal Government in the form of
uncompensated care.
Mr. McClintock. Before we socialized our medical system we
had a free market system which every American could choose from
a wide variety of competing options, the one that best met
their own needs and budget.
They owned these policies. They could change them at will
if they became dissatisfied with their coverage, and they had a
huge incentive to live healthier lives.
For example, an obese smoker paid higher premiums than
someone who kept himself healthy. An elderly couple wasn't
forced to pay for maternity care. A young family could choose
to purchase low-cost catastrophic insurance and then pay for
incidental expenses out-of-pocket.
So explain to me why we shouldn't just start over, scrap
this entire mess of a system, allow people to deduct their
health costs from their taxes, provide the poor with a minimum
subsidy to assure that every family can afford at least a basic
plan, allow consumers to shop across state lines, restore the
freedom of people to choose the level of coverage that best
meets their needs and budget that they can change anytime they
become dissatisfied?
Wouldn't we quickly return to a situation where we had a
wide variety of plans and prices that consumers could choose,
health care providers that are attentive to consumer demands in
a highly competitive environment, and cost just a fraction of
what we are paying today?
Dr. Ippolito. There are certain features of that that I
think would be a real step in the right direction. Focusing
more on ensuring rare, very expensive things, I think, is a
reasonable goal. There are trade-offs associated with that, but
I think there are some reasonable points there.
Mr. McClintock. Thank you. I see my time has expired.
Mr. Carter. The gentleman yields.
The Chair now recognizes the gentlelady from Minnesota,
Representative Fischbach, for five minutes of questioning.
Mrs. Fischbach. Thank you, Mr. Chairman.
Most of the hospitals and nursing homes in my district have
integrated with larger systems in one way or another and they
mainly serve communities of fewer than 5,000 people. This helps
to preserve access to health care in those communities.
In fact, I have one facility in a town of just 700 people
that is part of a large hospital system. It is a vital part of
the community and the surrounding area. The impact of care that
the facility provides extends for miles, and it exists solely
because a larger company has the capability to support them.
These hospitals are an extension of services provided at a
larger hub, spreading their expertise to even the most remote
parts of the state. The work that they do is vital.
Additionally, with the rise in telehealth options, larger
companies are in the best position to finance a cybersecurity
system to protect patient information.
I acknowledge that health care costs are high, but access
to high-quality care, especially in rural communities like the
ones I represent is critical. People living in rural
communities should have access to health care.
Is there a plan to preserve and enhance health care in
rural areas? Rural communities deserve access to health care
and the ability to benefit from the same medical advances that
are developed in this country's top hospitals. We cannot
suffocate innovation and we cannot hinder the care that is
available to rural communities across the country.
Overregulating the care of those with no other option is no
way to cut costs. We need to develop policies that will help
all of our hospitals thrive. We need to support American health
care innovation and expand the reach of expertise to bring
lifesaving care to folks who are far away from their nearest
hospital, and before we go after one aspect of the health care
system, we cannot overlook the issue of access of care
especially to those rural areas.
Would anyone like to address that issue? Have we looked at
that? Have we talked about making sure that people in remote
rural areas have access to care? Anyone who would like to
respond?
Ms. Tripoli. I will say, first of all, absolutely. Making
sure that all people living in this country have access to high
quality affordable care is paramount. I think the challenge
with the rural community sometimes is the economics for those
provider systems are different than those in more urban areas,
and so I think that when we are talking about solving for those
economics we need a very specific set of solutions for rural
providers so that they can keep their doors open, they can be
sustainable financially, and continue to serve the patients and
their communities, continue to be a really important source of
jobs. Having them close their doors is not ideal.
At the same time, we do know that we have to correct some
of these fundamental challenges in these financial incentives
that are encouraging consolidation, and so it is not that it is
all bad, but the vast majority of hospitals are responding to a
financial incentive in the Medicare program that is encouraging
to continue to consolidate.
So we have to address that problem. It is hugely wasteful.
It is shifting patients to higher cost care settings. It is
driving up the cost of care for everybody. So it would be a
both/and for us.
Mrs. Fischbach. All right. Then whatever we do and when we
talk about this we need to address those folks in rural areas
because we are talking about these broad things and saying this
is horrible, this is horrible, this is horrible, but those
people not having health care, not having access to health
care, and they are already driving hours for the most basic
care.
That is horrible. That is horrible and it is not right, and
we need to make sure that we are addressing that, and that is
one thing that I have not heard about today is we are not
talking about access. We can talk about all of the other
things, but when it boils down to it, it is about people having
access to health care.
If you have something to add?
Ms. Tripoli. Yeah, I just want--I completely agree with
you. Could not agree more. One of the things we can do when we
are talking about site-neutral payments, because that is such a
bipartisan solution here today that we have been talking about,
is reinvest.
There is about $150 billion to $160 billion in savings and
some of that savings can be reinvested back into rural
providers to make sure that they stay whole.
Mrs. Fischbach. Well, these larger companies are the ones
that are preserving access to my folks that live in rural areas
and they are making sure that they have health care. So let's
make sure that we recognize that also when we are having these
discussions.
I have seven seconds if you have something, Doctor?
Dr. Bruggeman. I would just add that physician-owned
hospitals are currently banned and there is nothing that says
that physicians could not invest in their own communities and
build those facilities that would provide the critical access,
and we would definitely encourage expanding the rights to own
your own facilities as a physician in those rural areas to
continue to expand the access and care as well.
Mrs. Fischbach. Thank you for that, but I just really--we
need to recognize that it is about access, also, and that we
cannot always just say this is how we cut costs because we have
to recognize that rural people who live in rural areas need
access.
And with that, Mr. Chair, I yield back.
Mr. Carter. The gentlelady yields back.
The Chair now recognizes the gentleman from Wisconsin,
Representative Grothman, for five minutes of questioning.
Mr. Grothman. Thank you. Whenever I think about this topic
I think about a physician friend of mine who told me that he
felt medical care in this country peaked out about seven years
ago. He attributed it in part to all these consolidations which
makes medical care even more impersonal and profit-driven than
it already would have been, plus the seeping of this DEI stuff
both into the colleges and into the medical facilities
themselves.
In any event, whenever we talk about this topic one of the
things that I think of is differences in how we treat people
and how some procedures seem to be done more in one facility
than in the other facility. Years ago they always used to talk
about C-sections, the tremendous variance from doctor to doctor
and hospital to hospital.
Do you want to comment on that a little bit and give me
some other examples where you feel procedures vary from
hospital to hospital, system to system, part of the country to
part of the country?
Dr. Ippolito. I can speak generally to that in the sense
that there is a longstanding empirical literature that looks at
the Medicare program, fee-for-service, and what you see is that
there is enormous variation across the country in both how much
Medicare spends and in particular, utilization across the
country.
And it is clear that there are some areas that on specific
services and more generally deliver much, much more care than
other places. So it is clear that there is a lot of variation
along these lines.
Mr. Grothman. And by more care you mean more procedures?
Dr. Ippolito. Exactly.
Mr. Grothman. And do you think that, and I would assume
that it is driven in part, it is profit-driven? The more you do
the more you make?
Dr. Ippolito. Yeah, particularly in the Medicare fee-for-
service program you can't increase price so what you can do is
deliver more services.
Mr. Grothman. Do more stuff. I think you were going to say
something right there at the end?
Ms. Tripoli. No, just generally agree with that comment.
Mr. Grothman. Okay, next comment. I was looking here at
what administrators make. I mean, it is just obscene, you know,
compared to, I think, what they were making 20 years ago.
Anybody want to comment? I am sure overall that it is a small
cost of medical care, but when you see people making $10
million, $20 million a year, you know, nobody should make that
sort of money unless you, you know, discovered something or
other that is saving lives, but anybody want to comment on the
cost of what administrators make and what it is now compared to
20 or 30 years ago?
Dr. Bruggeman. I mean, I would certainly say that that is
one of our biggest concerns, is that a lot of the dollars are
being diverted that are being paid for in health care to the
salaries of people who do not actually add to the bottom line,
instead shifting the money towards the things that actually
provide the people that provide the care and the things that
provide the care.
Mr. Grothman. Absolutely, baby, and when you get in these
hospitals, do you know how much they spend in a hospital for
people who never deal with a patient? Is there anybody with
those statistics?
I mean, not only do you have the overpriced administrators,
which is criminal enough, but when you go into a hospital you
see all sorts of hardworking people staring into their computer
screens but have nothing whatsoever to do with medical care. Is
that a problem do you think?
Dr. Bruggeman. I would just tell you that right now in my
own personal practice we--because of the regulatory
requirements, over a third of my staff's time and money is
spent purely on non-clinical work trying to respond to various
regulatory burdens.
Mr. Grothman. Okay. Does anybody want to comment on the
effect--we recently had a major consolidation that affects the
hospitals in Milwaukee and they, you know, were connected to
some outfit down in the southeast. Does anyone want to comment
in general on the effect these massive behemoths being formed,
have both on the cost and also on the quality of care?
Because I would think the more impersonal you are the more
you are just worried about dollars and that sort of thing, and
I know doctors hate them. Every doctor I know hates them.
Anyone want to comment on them?
Dr. Ippolito. I guess I could say that there has been
research that looks into, you know, a lot of the focus is on
when two very nearby hospitals merge and obviously that leads
to higher prices and more administrative costs, things like
that.
There is also research that shows that even when these
hospital systems merge and they are not next door to each
other, you tend to see higher prices because still the
employers have to negotiate in Madison and Milwaukee, and so
the fact that the two hospitals in both those cities might be
owned by the same entity ends up mattering quite a bit.
Mr. Grothman. Okay. I want to come back to what you were
referring to as utilization. Are you aware of anywhere where we
can just get those statistics? I mean, the reason I say is I
think they even do more surgeries than some physicians and
others and whatnot and there is always a damage in surgeries.
There is always a danger of getting infected or die or
something or other.
And I think the public would love to know if, you know, if
I am going to a conglomeration or I am in a part of the world
where they do way more whatevers than they do in Pennsylvania
or something. Actually, I think it is the other way around.
Probably do way more in Pennsylvania, but do you think it would
help if that were more publicized and maybe some patients
themselves that say, hey, I don't want to go into one of these
killing factories, that is an author I like, killing factories,
if I don't have to and how come we are doing so many of these
things here but aren't doing them in----
Dr. Ippolito. It potentially could, and I would be happy to
send some of the evidence on that.
Mr. Grothman. Wouldn't that be helpful? Because I think a
lot of people don't like to go under the knife and they don't
realize that their doc is just way out of whack with the rest
of the country.
You wanted to say something at the end there?
Ms. Tripoli. Sure. I was just going to say that I think one
of the things you are talking about is the predominant way that
we reimburse for health care physician services in this country
is fee-for-service, and those economics, fee-for-service
economics, by design incentivize higher volume of higher cost
service.
Mr. Grothman. Exactly.
Ms. Tripoli. So I think if we want to shift away from that
we have to think about other----
Mr. Grothman. Exactly.
Ms. Tripoli [continuing]. Types of reimbursement structures
that we can use that drive more towards affordable population
health improvements.
Mr. Grothman. Yeah, that is exactly right. The more you do
the more you make, right? Isn't that kind of the problem?
Absolutely.
Thank you.
Mr. Moore [presiding]. I appreciate the animation of the
gentleman from Wisconsin. Got a new Chair up here. We are going
to get this a little more lively. The gentleman from
Wisconsin's time has expired.
The Chair now recognizes the gentleman from Texas, Mr. Roy,
for five minutes.
Mr. Roy. I thank the gentleman from Utah.
I appreciate all the witnesses. Dr. Bruggeman, it is great
to have you here from San Antonio. I will be in San Antonio
tomorrow to celebrate, hopefully, a new direct flight from DCA
to San Antonio which makes it easier for people to get up here,
which is great.
But appreciate all your time. I have a couple things we
haven't talked about in this hearing so far. One of them is the
proposals for transparency, lower costs as a result of greater
transparency.
I think most people, I think on both sides of the aisle,
would say transparency is probably good to improve. I think my
question here, I guess, and I will start with you, Dr.
Ippolito, is how much do we think that whether it is the Lower
Costs, More Transparency bill or some product similar to it,
will be able to make a sort of meaningful difference in
lowering premiums, lowering deductibles, lowering the general
cost of health care services absent more structural and
fundamental reform?
In other words, how much is that just, you know, I think I
have said before, you know, patching the drywall with some mud
and some tape, but not actually changing the foundational
problems? Again, not to criticize any efforts there, but rather
to say absent structural reform on who is buying and selling
goods and services and consolidation, are we going to get a
meaningful, significant drop in prices or modest drops in
prices under some proposal like that?
Dr. Ippolito. Yes. So one way to think about is two things
can be true. It can be true that greater transparency, for
example, into PBMs, might help employers pick plans better and
save some money.
It can also be true that what you are saying is, you know,
if there is only one hospital in town the fact that you know
their price now doesn't really change anything, and so, yes, we
are more in the modest zone.
Mr. Roy. And even talking about PBMs, for example, right,
79 percent of prescription drug claims are processed by only
three PBMs. Does that sound right to you?
Dr. Ippolito. Yes it does.
Mr. Roy. Is that good?
Dr. Ippolito. It is probably not great.
Mr. Roy. Yeah, I mean, I think this is what I am trying to
get at is, like, we have largely, and I will opine here and you
can agree or disagree, destroyed the market and competition.
So when my colleagues on the other side of the aisle talk
about, oh, the Wild, Wild West--I actually had a debate one
time with a left-leaning progressive activist in Austin, Texas,
and she described the Wild, Wild West of health care and talked
about the Wild, Wild West prior to Obamacare and all that, and
I am, like, if the alphabet soup of regulation is the Wild,
Wild West, then I could see why you think that is a problem,
but it is not free market. It is not free enterprise. It is not
competition.
Would you agree that there is a fundamental lack of
competition to drive prices down? I mean, the gentlelady from
Minnesota was talking about access and talking about, you know,
well, we don't want to get too caught up on cutting costs or
prices or whatever. If you don't get prices down can you have
legitimate access to health care?
Dr. Ippolito. First off, I agree with your conjecture that
we really do not have a private--and we never really did--have
a private system. We had a heavily regulated market.
But it is one way to put it, it is extremely expensive to
insure and expand access if you cannot do anything about prices
that are currently paid.
Mr. Roy. Dr. Bruggeman, how can we make it easier, and
short answer because it is open-ended, but, like, just being
very specific, how can we make it easier for you to cut
insurance, other third parties, government out entirely so that
you can run your business and practice?
And one quick follow-up, you said something about no, there
not being a ban on physician practices. There is a restriction
post-Obamacare on future physician practices, right, as opposed
to, you know, grandfathering out past physician practices. Is
that correct?
Dr. Bruggeman. There is both. The current ones cannot
expand and new ones cannot be built for physician-owned
hospitals.
Mr. Roy. Right. Right.
Dr. Bruggeman. I mean, the answer is, number one, give us a
financial future. Show us a glimmer of hope for the future.
Show us that we can get our pay tied to inflation.
Number two, reduce our regulatory burdens and you have
heard that across the table. There is too much regulatory
burden currently so how do we get rid of that so that we can
just focus our efforts and all of our money on providing care
as opposed to all of this money that is currently being spent
behind closed doors working on various regulatory efforts.
Mr. Roy. Dr. Ippolito, just a couple of questions kind of
on a rapid fire since I only have about a minute. Do these
sound right to you roughly, that premiums have increased by 54
percent since the passage of the Affordable Care Act,
Obamacare?
Dr. Ippolito. I wouldn't be surprised if that is correct.
Mr. Roy. Do United, Anthem, and Humana receive a majority
of their revenue from the Federal Government?
Dr. Ippolito. That sounds plausible.
Mr. Roy. To the best of your knowledge, is it correct that
there were about a thousand hospital mergers between 2002 and
2020?
Dr. Ippolito. That sounds right.
Mr. Roy. To the best of your knowledge, is it correct that
10 percent of all physicians in America now work for an
insurance company?
Dr. Ippolito. Yep, that does.
Mr. Roy. And growing?
Dr. Ippolito. Yes.
Mr. Roy. Do hospital prices after mergers generally go up
one percent to two percent at least $500 rather than going down
based on, you know, some cost savings from the merger?
Dr. Ippolito. Yes. There is extensive evidence on that one.
Mr. Roy. Is national health spending at an all-time high of
about $4.5 trillion in 2022 and growing?
Dr. Ippolito. Yep. That is correct.
Mr. Roy. Are you aware that almost a billion dollars, does
this sound right, that between $750 million and $1 billion have
been spent by health care in lobbying the Federal Government in
the health care industry across sectors?
Dr. Ippolito. While I don't know the exact number I know it
is a very large number.
Mr. Roy. Okay.
I am over my time. I know the Chair has been generous in
allowing some folks to go over their time. I want to be mindful
of the witnesses' time so I will leave it there. I want to
thank each and every one of you. I started to ask questions of
all four of you. I wish we had a little bit more time.
I think this has been an important hearing. We need
competition if you are going to get prices down. I don't care
whether you are right, left, Democrat, or Republican, we are
not going to be able to have health care if you can't get
prices down through competition and empower doctors, patients,
not big corporations, in the form of insurance companies,
hospital companies, and Pharma.
We have got to restore power to patients and doctors, and I
think consolidation is a problem and also freeing up people
through health savings accounts is a problem.
I appreciate it. I yield back.
Mr. Moore. Thank you to the gentleman from Texas, we need
to treat consumers like we treat consumers in every other
industry almost in this Nation and trust the fact that they can
make some of their own decisions based on information that they
have to make a thoughtful decision. Thanks to the gentleman
from Texas for highlighting some really key points.
I now yield five minutes to the gentleman from Kansas, Mr.
Estes.
Mr. Estes. Thank you, Mr. Chairman, for calling this
hearing, and then thank you to all of our witnesses for being
here.
You know, today I just left the Ways and Means Health
Subcommittee who is holding a hearing on a very similar topic,
and a physician from Wichita was one of the witnesses, so I am
keenly aware of the bureaucratic red tape, the lower
reimbursement rates, the rising prices, and the impact that
they have on independent physician practices, and that we are
seeing private practices close or consolidate as a result.
As I have spoken with patients and providers and physicians
and support staff throughout Kansas, consolidating or closing
practices is not helping Kansans receive quality health care.
With fewer and fewer doctors and nurses in private practice,
patients are seeing increased costs and worse outcomes.
The Kellogg School of Management notes that prices increase
about 14 percent when a private practice is acquired by a
hospital, and a National Opinion Research Center survey found
that 45 percent of physicians report deteriorating patient-
provider relationships after consolidation. Increased costs and
diminished outcomes are not the recipe for a healthy society.
Dr. Bruggeman, in recent years we have seen a significant
decline in the number of independent physician practices and an
increase in the number of practices owned by hospitals and
health systems. Based on your experience as a practicing
orthopaedic surgeon, what incentives do you see in the
marketplace for physicians to sell their practices to hospitals
and health systems?
Dr. Bruggeman. Yeah, I think it is two things. It is
economics and getting back to taking care of patients. The
economics are not in our favor in private practice and they are
in our favor and a guaranteed salary that someone else is
responsible for.
And then we are trying to spend more time taking care of
patients and by selling your practice you offload that
regulatory burden to another entity who now takes it on for
you, and so physicians are theoretically able to spend more
time taking care of patients and that is why they are giving up
control of their practice.
Mr. Estes. Yeah. You noted in your testimony that the cost
for procedures commonly conducted in your practice would
increase approximately 30 percent in concentrated markets
compared to more competitive ones. What causes prices for the
health care services in consolidated markets to be higher?
Dr. Bruggeman. It is the bargaining power that those
consolidated groups have. They are able to ensure higher
payments because they are in a larger group.
Mr. Estes. And those are some of the issues I think that
several of my colleagues have talked about today in terms of
the impact and as my friend from Texas just went through a
whole litany of some of the concerns over the last few years.
Again, based on your experience as an independent
physician, what consequences are there for patients, the local
community, Federal and state budgets when independent practices
are acquired and the cost of health care goes up?
Dr. Bruggeman. In my community we had a group that decided
to sell to a local health care system. One of our largest
employers is the grocery store so what that is going to mean
for every single person in my community is higher grocery
prices because those costs are ultimately going to have to be
passed along to our community.
And so it is an access issue where people have a harder
time getting their doctors. They are not able to get primary
care physicians, and then it becomes a cost issue where we have
to pay more for goods, not just for health care but for goods
in general as these consolidations occur.
Mr. Estes. Yeah. Well, I just want to thank all of you
panelists for being here. Obviously, this is an issue that is
of paramount importance for our country.
I mean, because it doesn't just affect individuals, but it
affects, as we talk about from the Budget Committee side, the
concern about our debt and deficit for the country.
Obviously, we want a vital, vibrant health care system to
support all Americans in their health care needs, but we also
need to make sure that it is affordable and that the processes
work.
Mr. Chairman, I really appreciate this process so thank
you. I appreciate having the witnesses together, and I want to
make sure that--you know, so many of my fellow Kansans are
being crushed with inflation the way it is going now,
particularly with the economy and some of the regulatory
burdens that have been imposed in the last few years, and we
just can't afford to have this continued increase in prices.
I yield back, Mr. Chairman.
Mr. Moore. Thank you to the gentleman from Kansas.
I will now yield myself five minutes to jump in here as
well.
We will talk a little bit about competition and how we can
address that to some degree, but, I mean, it is crucial to
driving costs down and we know that.
I am into this my second term. It was a debate question
that I had in my very first debate that I ever had as a
potential Member of Congress back in 2020, and it is
frustrating to be here almost four years later still talking
about the same thing, and I haven't solved it yet in my first
two terms, but I have seen progress. I have seen a recognition
that it needs to happen. Look, there are going to be times
where you are in an ambulance and you are incapacitated and you
are not going to choose which X-ray you are going to go to.
Yeah, we know that. That is the point, that we can do better
than what we are doing.
But we recognize there is a difference in health care than
there is in other industries, whether you are choosing which
grocery store to shop at versus which emergency room to visit.
Yes, we recognize that, but we can't give up on that the fact
that it is a different industry, we just can't give up the fact
that, you know, that there are better opportunities out there
and we can't continue to do things the way that we have been
doing them.
The Federal Government spent roughly $1.5 trillion on our
major health programs. That is more than defense and our
entire, basically our entire discretionary budget, just on one
specific issue.
We know health care costs for the Federal Government and
patients alike are on an unsustainable path in this country and
they are a major driver of Federal spending comprising 17
percent of GDP in 2022.
Solutions that can enhance transparency and promote
competition will be critical to tackling this problem. Last
year, House Republicans advanced bipartisan legislation, the
Lower Costs, More Transparency Act, to combat consolidation and
enhance free market competition. We have more work to do to
improve the health system.
Dr. White, I wanted a chance to hear from you. How does CBO
approach estimating the budgetary effects of policies that aim
to directly combat consolidation or inject competition into
health care providers or payers? And does CBO credit any
savings from this downward pressure on costs from increased
competition?
I know your job at CBO is very difficult and you have to
take in more almost abstract consequent ideas. We talked
earlier about medical innovation and there is so much benefit
to that potential of incorporating.
It is tough to incorporate into scoring. I get it. I would
love to hear your thoughts on that, though.
Dr. White. Sure. So let me give one example which is site-
neutrality in Medicare. We have talked a lot about how that
would tend to promote competition and take a thumb off the
scale that is increasing consolidation, but there, the scoring
would first start out with just figuring out how is that going
to change Medicare prices and Medicare outlays?
And then we would look at, is this a big enough deal to
deflect the trajectory of consolidation? And is that going to
affect the prices that private insurers pay?
On other types of policies like funding for FTC or other
pro-competitive measures, we would just look closely at, is
this meaningful enough, big enough in the context of all the
forces driving consolidation to deflect the trend to
consolidation?
And then if so, we would think about how that is going to
affect the prices that private insurers pay.
Mr. Moore. Excellent. That actually hits on the other
question that I had so I will leave it be. It is just so much
of what we do gets pinned down to the way the scoring plays
out, and I know I share the actual Chairman of this Committee,
it's not mine, I share his thoughts on needing to make any
reforms we can to being big picture, thoughtful, futuristic on
how we approach this issue.
Because if we keep doing the same thing we have been doing
we are just going to keep financing it in a different way, and
we are not going to drive costs down. That is what we have to
do, and we see it in other industries.
Lastly, Dr. Ippolito, thank you for the last several weeks
of your engagement with us and what AEI does to help provide a
real thoughtful approach to issues all across the board, but
particularly health care.
We have heard a lot about in this Congress about vertical
consolidation among payers, such as when a health plan acquires
a pharmacy benefit manager or a pharmacy even. What impact do
these mergers and acquisitions and this consolidation have on
Federal spending and patient access to quality and affordable
care, particularly in rural areas?
Dr. Ippolito. You know, there are potential benefits from
these kind of arrangements, but in terms of things you would be
concerned about, the big question is do these entities start
behaving in their own self-interest to the point that it is a
negative for quality or access?
Do they start preferencing their own providers they are
integrated with? Do they preference drugs that they ship to
your house through their specialty pharmacy?
And while I don't know that we have great evidence on that,
those are the areas that I would focus on.
Mr. Moore. Excellent. Thank you very much, and I will cut
myself off but I am going to hold on to the gavel so just
remember that, Mr. Ferguson, when we get to you.
Next up we will go--I will yield five minutes to the
gentleman from Oklahoma, Mr. Brecheen.
Mr. Brecheen. Thank you, Mr. Chairman.
Health care spending keeps going up in tandem with
government involvement. We know that. So how do we have great
care but at the same time allow people to keep the fruits of
their labor?
The framers of our Constitution understood that we have to
have a free market. You have to have consumer choice. The best
allocation of hard-earned dollars is a free market.
Thomas Jefferson advised in 1787 that the Bill of Rights
should include restrictions on private monopolies,
interestingly enough. In 1788, James Madison called monopolies,
``The greatest nuisance in government.''
He went on further to say that, ``Monopolies are
sacrificing the many to the few. Monopolies are an antithesis
to the free market. The free market will always work absent
monopolies,'' and this is destroying consumer choice.
By the way, I would note that governments can become
monopolies, too, when you take that all health care spending
right now, the Federal Government is 35 percent of it, state
and local is 15 percent of it. That is almost half of all
spending is the government. It is a monopoly.
And so, again, in tandem, what we see is the more
government increases, so does the price. When the government
tries to make things affordable it makes it expensive for
everybody.
Between 2002 to 2020 there were 1,000 mergers in hospitals
in the United States, and on the concept of monopolies, each
time these mergers occurred they led to an average increase in
consumer cost of $521.
In 2023, three pharmacy benefit managers, PBMs, processed
79 percent of all prescription drug claims. Each of these PBMs
being owned by a health insurance agency. The average family
health insurance premium of 2010--think government monopoly--
the year Obamacare became law was $13,000 according to the
Kaiser Family Foundation. In 2024, the average family health
insurance premium is now $23,000, almost a doubling of the cost
according to CNN.
In 2010, the average salary of a hospital CEO was $182,000.
Now in 2024, that average CEO is getting $700,000, according to
the Lown Institute.
$35 trillion in debt, health care spending is the biggest
contributor to our debt behind Social Security. What we spend
on health care is 20 percent of our GDP. 20 percent of our
entire gross domestic product is going to health care spending.
What we spend on the government viewpoint is three times what
we spend on defense.
I want to add one more thing that is interesting because
people think that in America our health care outcome is
comparative to other nations. It is important to note, on the
average outcomes comparable to the other advanced nations we
are getting the same results, but we are spending $12,000 per
person, and these other countries, these advanced countries,
are spending $6,000. Something is happening.
Again, I go back to the concept: the more government
involvement we see, whether it is over time, the less
competition, less choice of allocation of scarce resources.
So let's discuss direct primary care because I think that
is one of the most unique elements that is out there.
It is where a physician can say for $50 to $100 a month, I
will take care of your basic needs. It gets government, it gets
insurance out of the mix, and so I would love to hear from you
all quickly about direct primary care and your thoughts on
that? Dr. White?
Dr. White. First, this may come across as a little bit of a
dodge, but--and I know HSA policy is related to direct primary
care and can you pay for direct primary care out of HSA policy
is also baked into the Internal Revenue Code, and so our
colleagues at the Joint Committee on Taxation would lead
analysis of that.
That is just something I want to flag. We would work very
closely with them in thinking about HSA policy if it were
expanded to allow purchase of direct primary care. We would
help them think about competitive effects, price effects,
broader market effects, but they would take the lead.
Mr. Brecheen. For the American Enterprise Institute, direct
primary care? Your thoughts on how it is showcasing allocation
of scarce resources in a competitive manner?
Dr. Ippolito. Yeah. I mean, just speaking for myself
personally, you know, there is a conceptual appeal to this
which is that if we can move in the direction of having health
insurance focus on the expensive, unexpected stuff and less on
the relatively predictable, low-cost things, then we get a more
efficient health insurance system.
So generally speaking, to the extent that direct primary
care is trying to work in that direction, I think it has some
appeal.
Mr. Brecheen. So, well, at least for time considerations,
so also what we see is post-Affordable Care Act, again,
whatever you try to make affordable you make more expensive. We
know that, 46 percent increase in cost just since Obamacare.
More government, more cost.
What we are losing is catastrophic loss coverage and me
caring about the price of things. When I go through a health
care expenditure, what I am worried about, when I am going to
pay for something, I care about quality plus price.
But when insurance paid for it I just care about quality.
So I am only concerned about my copay or my deductible. How do
we get catastrophic loss-type policies back into the markets in
tandem with deductibles that would be, you know, a part of that
and me self-insuring in part, so that everybody has skin in the
game over price. I will go back to you, the American Enterprise
Institute. I am over time.
Dr. Ippolito. Yeah. I am over time so I will be very brief,
but just say that I think there is a lot of conceptual appeal
to this idea of getting a more efficient health insurance plan
that focuses specifically on the expensive stuff that is hard
for you personally to insure against and focusing less on using
all this bureaucratic cost to pay relatively routine low-cost
bills.
Mr. Brecheen. And with that, Mr. Chairman, thank you for
your indulgence. I yield.
Mr. Moore. The gentleman yields.
I now recognize for five minutes the gentleman from
Georgia, Mr. Ferguson.
Mr. Ferguson. Thank you, Mr. Chairman. Before I get into my
questions I would ask unanimous consent to submit to the record
letters and statements from the following organizations,
including Better Solutions for Health Care, American
Pharmacists Association, Coalition Against Socialized Medicine,
Dr. Rick Snyder, President of Heart Place, and Patients Rising.
Mr. Moore. Without objection.
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Mr. Ferguson. Thank you, sir. All right. So I look at where
we are with health care right now and I ask myself three
questions, okay? And I am doing this as a consumer. I am doing
it as a former provider.
Here are the questions. Number one, is health care more
expensive today than it was 15 years ago? Number two, are
Americans healthier today than they were 15 years ago? And
number three, is there better utilization of the system than
there was 15 years ago?
So real quickly, going down the line here, relative to
inflation or any metrics that you want to use, does health care
cost significantly more than it did 15 years ago?
Dr. White. More expensive, yes.
Mr. Ferguson. Yes? Okay.
Dr. Ippolito. It is more expensive.
Mr. Ferguson. All right.
Dr. Bruggeman. Yes.
Mr. Ferguson. Are Americans healthier today than they were
15 years ago?
Dr. White. No.
Ms. Tripoli. It depends on the metric you are looking at.
Mr. Ferguson. Okay.
Dr. White. Life expectancy has flattened out. It stopped
improving.
Mr. Ferguson. All right. My dear friend and Ranking Member
from Pennsylvania made the comment in his opening remarks that
more people have insurance than have ever had. Access is one
thing. Utilization is another.
Is the utilization of the population from the middle class
downward, is that utilization, has it increased significantly
in the system over the last, over the last decade and a half?
We don't have an answer to that. It's fine. We don't know.
I am going to go back and I am going to put my provider hat on,
okay? I was blessed enough in my dental practice to be able to
take care of folks across the economic spectrum, folks that
were, you know, looking for meals the next day that may have
been on Medicaid up to folks that had unlimited means.
And those two groups of people got the exact same level of
care in my practice. We did not distinguish based off of
income. They got the same level of care.
The biggest challenge that we had, quite candidly back
then, was the utilization of that system and understanding that
folks that were in poverty had a crisis every day and sometimes
preventive care was not at the forefront of their minds,
understandably so, a lot of challenges in life there.
But when I look at the system that is in place now, we
cannot answer three basic questions. Does it cost less, are we
healthier, and is the utilization of the system by those that
primarily need it, is it better? And the answer to all of those
is no.
So we have heard a lot of conversation about PBMs, about
insurance companies, about site-neutral payments; there is a
whole litany of things that this Committee has talked about.
All of those players in there, we have a tendency in one
way or the other, to vilify. Aren't they just operating under
the rules that this place created?
So if we believe that there is too much private equity, if
we believe that there is a lack of transparency, if we believe
that utilization is not where it should be, if we are less
healthy, if we are not, you know, if we are paying entirely too
much for our health care right now, and we look at the players
that are in the system, insurance company, PBM, pharmacy,
hospital provider, and they are vertically integrated and they
are allowed to do that and encouraged to do that because of the
very rules that are in place, maybe shouldn't we be looking at
breaking those rules apart and creating real transparency and
competition within the system?
I will ask that question. Should we be looking at breaking
down the vertical integration to end the incestuous
relationships between these entities so that you create real
competition at the various levels?
Dr. Bruggeman. I mean, I think the answer is absolutely
yes.
Mr. Ferguson. Okay. I look at what we did with the telecom
industry. I say we, I wasn't here that long ago, thank
goodness, but when we took Ma Bell and broke it apart and we
created the seven Baby Bells and we opened up competition, we
had the greatest technological innovation that you have ever
seen. That is why we have broadband. It is why we have call
conferencing and now Zoom.
You are walking around with, you know, something that can
run, you know, a spaceship in your pocket. I mean, these things
are incredibly powerful and yet their cost relative to
everything else has come down, right?
Shouldn't we be looking at health care the same way?
Shouldn't we be looking at how do you take that system, break
it apart into different pieces that literally create real
competition, innovation, shareholder value, and, most
importantly, better quality of care for the patient? And part
of that would be the elimination of the massive administrative
costs that exist in our current health care system. Make sense?
Doctor?
Dr. Bruggeman. I say absolutely.
Mr. Ferguson. Okay. Mr. Chairman, with that I yield back.
Mr. Moore. Thank you. The gentlemen yields, and we now
yield to the gentleman from Virginia, Mr. Good, for the
remaining five minutes.
Mr. Good. Thank you, Mr. Chairman, and thank you to our
witnesses. You can see the sunlight or the daylight at the end
of the tunnel here.
In 2031, or roughly seven years from now, it is predicted
that health care spending will reach $7 trillion on an annual
basis, or about 20 percent of GDP. Our national debt is at $35
trillion, a little over $100,000 per American citizen. We are
on the Budget Committee here.
The President wants to take it to $50 trillion in the next
ten years if his budget were to be enacted, and that is without
any additional emergency supplemental spending.
We know the long-term trajectory for health care spending
is not good and that has a tremendous impact on the budget. We
really ought to be as a Congress doing hearings on how
nutrition spending and subsidies in the ag and farm bill and so
forth is actually funding and subsidizing the wrong kind of
food for Americans.
So many are profiting off sick Americans and how many
compromised individuals are making decisions for how our whole
system works?
And the explosion of obesity, diabetes, chronic diet-caused
illnesses, drug treatment proliferation, and actually, I am
seeing reports that young people are for the first time,
children, especially if you get diabetes at a young age or you
are projected to live--a child who gets diabetes at an early
age is projected to die before their parents.
And just this explosion of this self-caused--we have 50
percent obesity in our country and you have got three percent
in Japan. Why is that? Because of diet.
So anyway, health care is a huge cost here to our budget
problems, of course, health care costs, but we are exacerbating
it with our diet and with our whole system, our whole subsidies
particularly in our nutrition system in that farm and ag bill.
That said, Dr. White, transparency in health care pricing,
consolidation in health care markets has accelerated in recent
years. There is less competition, yet there is increased
Federal spending and yet costs continue. That is the one
constant as Mr. Ferguson said a moment ago, that costs continue
to rise.
CBO states that increased transparency in health care
reduces costs because it gives patients and plan sponsors more
info to make informed decisions. By negotiating with drug
manufacturers and pharmacists to control costs, PBMs have a
significant behind-the-scenes impact in determining total costs
for insurers, shaping patients' access to medication and to
determine how much pharmacies are paid.
Where are you at with believing that, you know, does
increased transparency actually--some have said that increased
transparency will raise costs because the PBMs can collude and
some claim that the transparency inhibits the payers' ability
to negotiate prices. Where are you at with, in terms of
transparency and price? Where are you at and what is the impact
that is going to have?
Dr. White. You know, in general we think about who needs
information to buy the services they are buying? How are they
getting that information? Are they able to act on it?
And in the PBM space employers are choosing health plans,
including PBMs, and if they have better information on PBMs and
what different PBMs charge they are going to be able to shop
better for PBM services. So more transparency for employers,
especially small employers, is going to drive down the fees
that PBMs are able to retain.
Similar with state Medicaid agencies, if they have better
visibility into what different PBMs are charging they can shop
better for PBM services. That lowers Medicaid costs. That
lowers the Federal deficit.
Mr. Good. Switching to 340B for a moment in the limited
time that I have, that is an important program for my district
being a predominantly rural district. How has the 340B program
contributed to consolidation in the hospital markets and the
proliferation of contract pharmacies that are owned by these
large health insurance companies?
Dr. White. That is a great question. We are digging pretty
deeply into the 340B program right now, and at a high level if
you were an oncology practice and you are facing the choice of
joining a large system and becoming a 340B-covered entity or
remaining independent, if you join the 340B system you can buy
your drugs at a heavily discounted 340B price, sell them to
Part D patients, private patients, at a much higher price.
That is a financial windfall that can be shared between the
oncology practice and the larger system. To my read of the
evidence it is clearly a contributor to consolidation.
Mr. Good. So what would you do about that?
Dr. White. We don't recommend policy, but my sense is that
there is a lot of interest just in more visibility into how the
340B program works, what facilities are doing with the revenues
they get. That seems to be where the discussion is mostly at
these days.
Mr. Good. All right. I thank you, sir, and I yield, Mr.
Chairman.
Mr. Moore. Thank you. The gentleman yields.
Thank you all, Dr. White, Dr. Ippolito, and Dr. Bruggeman,
and Ms. Tripoli. Thank you for appearing before us today.
Please be advised that Members may submit written questions
to be answered later in writing. Those questions and your
answers will be made part of the formal hearing record.
Any Members who wish to submit questions for the record may
do so within seven days.
With that, the Committee stands adjourned.
[Whereupon, at 12:17 p.m., the Committee was adjourned.]
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