[Senate Hearing 119-187]
[From the U.S. Government Publishing Office]
S. Hrg. 119-187
MODERNIZING HEALTH CARE:
HOW SHOPPABLE SERVICES
IMPROVE OUTCOMES AND LOWER COSTS
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HEARING
BEFORE THE
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
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OCTOBER 22, 2025
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Serial No. 119-16
Printed for the use of the Special Committee on Aging
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
61-906 WASHINGTON : 2025
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SPECIAL COMMITTEE ON AGING
RICK SCOTT, Florida, Chairman
DAVE McCORMICK, Pennsylvania KIRSTEN E. GILLIBRAND, New York
JIM JUSTICE, West Virginia ELIZABETH WARREN, Massachusetts
TOMMY TUBERVILLE, Alabama MARK KELLY, Arizona
RON JOHNSON, Wisconsin RAPHAEL WARNOCK, Georgia
ASHLEY MOODY, Florida ANDY KIM, New Jersey
JON HUSTED, Ohio ANGELA ALSOBROOKS, Maryland
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McKinley Lewis, Majority Staff Director
Claire Descamps, Minority Staff Director
C O N T E N T S
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Page
Opening Statement of Senator Rick Scott, Chairman................ 1
Opening Statement of Senator Kirsten E. Gillibrand, Ranking
Member......................................................... 3
PANEL OF WITNESSES
Mark Cuban, Co-Founder, Entrepreneur, Cost Plus Drugs, Dallas,
Texas.......................................................... 5
Dr. G. Keith Smith, MD, Co-Founder, Surgery Center of Oklahoma,
and the Free Market Medical Association, Oklahoma City,
Oklahoma....................................................... 7
Dr. Don Moulds, Ph.D., Chief Health Director, CalPERS,
Sacramento, California......................................... 8
Dr. Jeanne Lambrew, Ph.D., Director of Health Care Reform, and
Senior Fellow, The Century Foundation, New York, New York...... 10
APPENDIX
Prepared Witness Statements
Mark Cuban, Co-Founder, Entrepreneur, Cost Plus Drugs, Dallas,
Texas.......................................................... 46
Dr. G. Keith Smith, MD, Co-Founder, Surgery Center of Oklahoma,
and the Free Market Medical Association, Oklahoma City,
Oklahoma....................................................... 48
Dr. Don Moulds, Ph.D., Chief Health Director, CalPERS,
Sacramento, California......................................... 50
Dr. Jeanne Lambrew, Ph.D., Director of Health Care Reform, and
Senior Fellow, The Century Foundation, New York, New York...... 55
Questions for the Record
Mark Cuban, Co-Founder, Entrepreneur, Cost Plus Drugs, Dallas,
Texas.......................................................... 67
Dr. G. Keith Smith, MD, Co-Founder, Surgery Center of Oklahoma,
and the Free Market Medical Association, Oklahoma City,
Oklahoma....................................................... 68
Dr. Don Moulds, Ph.D., Chief Health Director, CalPERS,
Sacramento, California......................................... 69
Dr. Jeanne Lambrew, Ph.D., Director of Health Care Reform, and
Senior Fellow, The Century Foundation, New York, New York...... 72
Statements for the Record
Alex Oshmyansky, MD, Ph.D. and Mark Cuban Statement.............. 77
American Hospital Association Statement.......................... 308
Families USA Statement........................................... 311
Federation of American Hospitals Statement....................... 314
New York State of Health......................................... 316
Purchaser Business Group of Health Statement..................... 319
Purchaser Business Group of Health; Leveraging Health Care
Statement...................................................... 321
Small Business Majority Statement................................ 506
MODERNIZING HEALTH CARE:
HOW SHOPPABLE SERVICES
IMPROVE OUTCOMES AND LOWER COSTS
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Wednesday, October 22, 2025
U.S. Senate
Special Committee on Aging
Washington, DC.
The Committee met, pursuant to notice, at 3:27 p.m., Room
216, Hart Senate Office Building, Hon. Rick Scott, Chairman of
the Committee, presiding.
Present: Senator Scott, McCormick, Justice, Tuberville,
Johnson, Moody, Husted, Gillibrand, Warren, Kelly, and Warnock.
Also present: Senator Marshall.
OPENING STATEMENT OF SENATOR
RICK SCOTT, CHAIRMAN
The Chairman. The Senate Special Committee on Aging will
now come to order. Free market capitalism has helped make the
United States the envy of the world. It helps spur innovation,
keep costs down, and give consumers options, empowering them to
shop around and find what works best for them. When you shop
around, you think about price, quality, and value, and the free
market allows you to find the option that suits your needs and
your budget.
For too long, Americans have been robbed of the ability to
make informed choices in healthcare because they don't have the
information they need. Our country has allowed the U.S.
healthcare system to operate in the shadows without price,
transparency, or true consumer choice. The result is a
complicated system of inflated "Is this the best doctor for my
needs?" We ask, is this doctor in my network?
Instead of asking if the cost of the surgery or medicine
could be more affordable or better quality elsewhere, we ask
how much is the copay? Trying to navigate the bureaucracy to
get answers to healthcare costs and pricing can be incredibly
intimidating, especially for vulnerable populations like many
in our aging community with healthcare emergencies happen and
we don't always have time to research and shop around for our
best option, but for a huge section of our healthcare needs,
there is clearly a better way to operate for everyone from
patients to doctors.
What I'm talking about is known as shoppable services and
they include elective surgeries, lab tests, prescription drugs,
and more. These kinds of healthcare services make up roughly 40
percent of all healthcare costs and there is significant
potential to introduce consumer-driven, free market reforms
like price and transparency into this space to help drive down
healthcare costs for all Americans, including our aging
population.
We know some sites and pharmacies charge more than others
for these exact same shoppable services. For example, hospitals
charge more than ambulatory surgical centers. In Medicare, we
try to address this problem through site neutral payment
reform, but in the commercial insurance space, things get more
complex. That's because in the current commercial marketplace,
it's up to every insurer to reach a cost arrangement.
With healthcare providers, those agreements have different
reimbursement rates and those differences get passed on to
consumers at different rates. Because of these agreements, the
cost differences are not always tied to quality, meaning two
patients could be receiving the same treatment, but one could
be paying significantly more because of the cost agreement made
behind closed brewers and they can actually get a completely
different quality and different service not tied to price at
all.
For example, MRIs or essentially fancy command cameras that
take lifesaving pictures. You have a digital camera, you have a
phone, how much your neck picture costs, yet there's a wide
disparity in pricing and cost passed on to the patient
depending on their insurance provider. Lab tests, they're the
same. The cost of the test can vary widely by providers, but
you're receiving the same quality lab result no matter what you
or your insurance provider is paying generic drugs, which is up
to 90 percent of the drugs dispensed.
At Affirmity Pharmacy, there typically isn't upfront price
transparency for conservative price shop. That makes no sense,
and I typically quote more specific price examples, but
providers don't like to publicly list their prices and rely on
hiding the actual cost of services they're providing. Not only
does this secrecy make it difficult for consumers to make smart
market driven choices, it allows prices to inflate and drives
up cost for everyone.
Price transparent transparency is not a partisan concept.
It's common sense. When patients can see prices, they can make
informed choices. When providers compete on price, quality and
costs go down price, when they compete on price and quality
costs go down because we don't operate this way right now,
there's too much inflated pricing in the healthcare system, and
that's true whether you're in New York or whether you're in
Florida.
The current system simply does not incentivize people to
seek lower cost options. Healthcare doesn't have to be any more
complicated than a lot of other things. I spent most of my life
in business and I've run one of the largest healthcare
companies in the world. I learned pretty quickly that when you
make things simple, give people price, transparency and focus
on outcomes and quality, the result is lower costs, healthier
patients, and a better system for everybody.
Today, we have the opportunity to hear from witnesses who
have put what I've said into action and look forward to hearing
how they are working to provide service for our aging
population and all Americans. I'm also eager to hear their
thoughts on how we can work to empower patients to make
decisions and reduce some of the inflated costs in our
healthcare system.
Hope today's hearing will be the start of the discussion on
how price transparency and competition can drive down costs,
improve quality for all Americans, but especially our agent
population. Now, I welcome my ranking member, Senator from New
York, Senator Gillibrand, for her opening statement.
OPENING STATEMENT OF SENATOR
KIRSTEN E. GILLIBRAND, RANKING MEMBER
Senator Gillibrand. Thank you, Chairman Scott, and thank
you for calling today's hearing. Thank you to all our
witnesses. This is going to be an excellent hearing. Everyone
in this room today is here because we all agree that the cost
of healthcare is too high in the richest country in the world.
It is unacceptable that one in three adults skip or
postpone getting healthcare that they need because of the cost.
It's unconscionable that one in three adults do not take their
medication as prescribed because of costs. This afternoon, we
will hear from a wide range of witnesses who will share their
expertise on how Americans' ability to shop for health plans,
medical services, and drugs can help them access the care they
need at a cost they can afford.
Every year during open enrollment, tens of millions of
Americans visit the Health Insurance Marketplace to shop for a
plan that works for their family. They're able to see if plans
include the doctors that they need or the medications that they
need and weigh the differences between them based on premium
costs, deductible amounts, and other factors that matter their
households. It's the ultimate shoppable service.
Unfortunately, at the end of this year, crucial tax credits
that help hardworking families afford the Marketplace health
plans are going to expire. On average, these families will have
to pay more than twice as much for their premiums in 2026, and
many enrollees will have to pay more. It's a cost they
definitely can't afford.
Nearly five million Americans will likely lose their
healthcare coverage and become uninsured. These enhanced tax
credits particularly help many of the five million adults
between the ages of 50 and 64 who buy their insurance through
the Marketplace. These enrollees are people who've had to scale
back hours at their job to care for aging parents, people
forced to work part-time until they retire because of a
physically demanding career, or people who retire early and
can't get private insurance because of preexisting conditions.
Over half of the people said to lose tax credit eligibility
altogether are within this age range, many within an income
level just above the eligibility cutoff for the standard tax
credit. By January, they could pay tens of thousands more in
premium costs. That's a lot of money out of your pocket when
you're trying to save for your retirement.
In nearly every state, because of age rating, older adults
can already pay nearly three times as much as younger adults do
for the same plan. Losing tax credit eligibility will compound
those higher costs. These older enrollees also have greater
healthcare needs. Even if their premium costs increase
dramatically, they're more likely to keep their bank-breaking
coverage and be forced to make difficult choices between basic
necessities, whether it's food or rent. Older adults who
ultimately lose their coverage may avoid seeking care until
their needs become an emergency and will then enter the
Medicare program at 65 in poor health and ultimately require
more cost-intensive care.
I've heard from a lot of constituents across the state
about the positive impacts these enhanced premium tax credits
have had on their ability to live with dignity, and potentially
have to make those devastating choices that will make it very
difficult to survive. One constituent asked, "Do I pay for my
healthcare coverage and be healthy, or pay for the food that I
feed for my family? This is what it comes down to. I'm always
going to choose my family."
"So now, if I go to a doctor for my debilitating migraines,
or my diabetes, or emergency care, I'll have to pay more out of
pocket because I can't afford the premiums," another
constituent shared. "I depend on my health insurance for daily
medication, frequent appointments, and procedures. I'm a New
Yorker who has worked full-time since I was 19 and still can't
get ahead in life. I can't afford to see doctors without
insurance, and my employer plan is unaffordable. What am I
supposed to do?"
These enhanced premium tax credits have been a key driver
of the record 24.3 million Americans being signed up for
coverage in the Marketplace. They play a vital role in bringing
down the cost of accessing high-quality care. For many
enrollees, the cost of care is still incredibly high, and this
is not the entire solution, but it will address an urgent
affordability crisis that's happening right here, right now.
For example, people in Idaho have already started signing
up for coverage, and in less than 10 days, people across all
the other states will too. If Congress doesn't act to extend
these credits before enrollment begins, Americans will
experience sticker shock at the rate hikes and may decide to
drop coverage with only a very slim possibility of them ever
being able to come back.
I stand ready to work with my colleagues on this to reach a
bipartisan deal and extend the critical tax credits that will
allow consumers to shop for healthcare plans that cover the
cost of medical services, and drugs and what they need to get
for their healthcare.
I look forward to the discussion about how to lower costs.
I know you all have some really great ideas that I want to hear
about, and I'm excited that this committee is working on how
can we best lower costs. Thank you.
The Chairman. Thank you. Now, I'd like to welcome our
witnesses, all of whom are at the forefront of challenging the
status quo in today's healthcare system.
First, I'd like to recognize Mark Cuban our second Shark.
This year Mr. Cuban is the co-founder of Cost Plus Drugs
company, an innovative online pharmacy that's changing how
Americans purchase their medications.
At his company, he lists the medications actual costs as a
15 percent transparency markup and sells directly to consumers.
For millions of Americans struggling with high prescription
costs, especially seniors on fixed incomes, this model has
shown that transparency and competition can deliver real
savings.
Thank you for being here. You may begin your testimony.
STATEMENT OF MR. MARK CUBAN, CO-FOUNDER,
ENTREPRENEUR, COST PLUS DRUGS, DALLAS, TEXAS
Mr. Cuban. My Shark Tank companies hate selling on Amazon,
but most don't have a choice. About 162 million Americans shop
there, and if you want to reach them, you have to play by
Amazon's rules. Amazon knows this and takes full advantage
adding, and raising fees, and even launching competitive
knockoffs. They get away with it because they control the
marketplace, and because 162 million people shop there, which
makes Amazon incredibly sticky.
What does that have to do with healthcare? Insurance
companies work the same way. Over 300 million Americans have
some kind of coverage, commercial, ACA, Medicare, or Medicaid.
Every one of those plans hires a pharmacy benefit manager, or
PBM, to run their drug benefits. The biggest PBMs all owned by
the largest insurance companies, control pharmacy benefits for
about 270 million Americans. That's a lot of power, and that's
also 70 percent more people than Amazon reaches.
Like Amazon, PBMs control the store shelves, but their
shelves are called formularies; the list of drugs your
insurance will cover. If a drug isn't on the formulary, it's
invisible to doctors and patients.
Here's the kicker. Unlike Amazon, which wants lower prices,
PBMs actually prefer higher prices. They say they negotiate
lower drug costs, but they don't. They auction off access to
their formularies to the highest bidders. Drug companies pay
their rebates and fees. PBMs demand so their drugs can be
covered and prescribed. If they don't pay, they lose access to
millions of patients and plenty of doctors costing them
billions.
These rebates and fees are based on a percentage of a
drug's list price called WAC, the wholesale acquisition cost.
The higher the list price, the more money PBMs make. Because
PBMs are so powerful, that inflated list price becomes the
reference point for the entire drug supply chain.
Take a hypothetical $600 brand name drug. The PBM strongly
suggests the manufacturer set the price at $600 with a 50
percent rebate, and another 10 percent in fees, leaving the
manufacturer with $240 net. Meanwhile, wholesalers buy the drug
at that same $600 list price. How many industries do you know
where the wholesalers pay the full list price?
The three major wholesalers all use the same list price and
get paid almost identical fees. There's zero competition, and
their fees are also because they're tied to list price. They
make more money when prices rise. Pharmacies buy from
wholesalers at about a five percent discount. You think PBMs
would reimburse them more than their costs so they can make a
profit? They don't.
When a pharmacy fills a brand prescription for an insured
patient, it's often reimbursed less than what it paid for it.
If it doesn't fill enough of those money-losing prescriptions,
PBMs or wholesalers can penalize them. It's no wonder
independent pharmacies are disappearing.
Now, what does the patient pay? If they're uninsured, they
pay that $600 list price. If they're insured but haven't met
their deductible, they still pay the full $600. That's crazy.
We were told that PBMs negotiate lower prices for patients, but
they're so bad at their jobs, they can't even get patients a
deal that's better than the retail price. The rebates and fees
that they collect on that $600, flows straight from the
patient's pocket to theirs.
Patients are getting ripped off because PBMs and
wholesalers insist on using inflated list prices instead of
transparent net prices. Because the whole system is built
around list prices, everyone, PBMs, wholesalers and insurers
have an incentive to keep prices rising and they almost always
do. It's costing patients' tens of billions of dollars and
forcing many to go without the medications they need.
Here's the saddest part. Self-insured employers, states,
the Federal Government, they all keep on signing contracts that
lock in this broken system. We blame PBMs, but the real problem
is the CEOs, administrators, and state officials who keep
renewing these contracts. Every one of them complains about
rising healthcare costs while signing deals that make prices go
up.
Big-brand Pharma is part of the problem, too. They hate
PBMs, but still play along. If manufacturers, wholesalers, and
payers, moved to net pricing, meaning the price after all
rebate and fees, patients' out-of-pocket costs could drop by
half overnight, saving patients billions every year.
There's a reason the U.S. has the highest drug prices in
the world. We're the only country that uses PBMs. There's a
reason we have some of the lowest price generics; PBMs can't
control generic pricing from companies like Cost Plus Drugs.
What do we do? One, count all cash payments toward deductibles.
Two, based patient out-of-pocket costs on net price, not list
price. Three, separate formularies from PBMs to end their
power, and four, specialty tier, it's just an excuse to charge
more.
Fix that, and we finally put patients, not PBMs, back at
the center of American healthcare. Thank you.
The Chairman. Thank you. Next, I'd like to introduce Dr.
Keith Smith, co-founder of the Surgery Center of Oklahoma, and
the Free Market Medical Association. Dr. Smith is a nationally
recognized leader in healthcare transparency and free market
reform.
More than 25 years ago, he helped establish the Surgery
Center of Oklahoma, one of the first facilities in the Nation
to post all-inclusive upfront prices for every single surgical
procedure covering the surgeon, facility, and anesthesia, all
in one transparent bundle. His center consistently delivers
care at a fraction of the cost of traditional hospital
settings, while maintaining exceptional outcomes and patient
satisfaction.
In addition to his clinical work, Dr. Smith co-founded the
Free Market Medical Association, which brings together
physicians, employers, and patients to promote transparent,
market-driven solutions in healthcare. His leadership has
inspired similar models across the country, proving that when
providers compete on price and quality, patients win.
Dr. Smith, thank you for being here today. Please begin
your testimony.
STATEMENT OF DR. G. KEITH SMITH, MD, CO-FOUNDER,
SURGERY CENTER OF OKLAHOMA, AND THE FREE MARKET
MEDICAL ASSOCIATION, OKLAHOMA CITY, OKLAHOMA
Dr. Smith. The Surgery Center of Oklahoma was founded in
May 1997. The goal was to gain control of the medical and
financial treatment of our patients. The problem was that even
a minor surgical procedure performed at a large hospital meant
bankruptcy for many patients, including insured patients.
Consistent with their attempts to maximize revenue, big
hospitals denied physicians many times the tools and supplies
they thought appropriate to treat patients, and yet, hospitals
continue to book ever-increasing profits even today.
I've changed this model. Our model is grounded on mutually
beneficial exchange. While we save patients tens of thousands
of dollars currently the only ones walking through our door,
patients paying for their own care are about half the
population. Because if someone else is paying, they don't shop
or care how expensive something is.
We were excluded from insurance from the very start, which
meant that we had to be creative. We started quoting patients'
all-inclusive prices. It was simple math. What fee did the
surgeon think was fair? What was fair for anesthesia, and what
was the time and materials-based charge for the facility? It
turns out that our prices were usually less than the patients
in-network deductible and copay.
Today, our total charges are still only one-sixth to one-
tenth of what large hospital systems near us charge for the
same procedure, and even more extreme price discrepancies are
routine. In fact, we recently performed a tonsillectomy on a
child for $3,875 after the family had been quoted $72,000 by a
Dallas area hospital. Our prices remain half what Medicare pays
big hospitals and less than what Medicaid payments are to the
hospitals for the very same procedure.
The Surgery Center of Oklahoma quoted prices over the phone
to patients until 2009, which is when I launched the first
website displaying all-inclusive surgical prices. I had three
goals in mind, all of which I would argue have been achieved.
First, I wanted sticker-shocked patients to easily find us.
Second, I wanted to start a price war so patients far from
Oklahoma could use our pricing as leverage in their local
market. Third, I wanted to better understand why the same
market discipline other industries must endure was seemingly
not a thing in healthcare.
The first patients to arrive after posting our prices were
Canadians. These patients are forced to wait in lines longer
than the misery they can endure without care. Then, it was the
uninsured beneficiaries of self-funded health plans, and
members of cost sharing ministries. Approximately, half our
patients travel from out of state or out of the country to
Oklahoma City for their surgical care.
As news of the success of our model has grown, so has the
number of facilities, and I'm happy to report large hospitals
who have now copied us price matching in the industry has had a
deflationary effect even on the price gouging facilities as
they stand to lose business and patients if they don't compete.
Our model also increases the quality of care because
physicians with unpredictable outcomes shy away from this
tightly disciplined space. The good surgeons would rather
perform a surgery at my facility due to better conditions and
the higher pay they actually receive while building the surgery
center and changing the market.
My mission is now grown. I now also run Atlas Billing
Company, which facilitates payment bundles for the Surgery
Center of Oklahoma, and is now curating and implementing
surgical bundles for many other facilities now attempting to
accommodate price-sensitive buyers and patients.
I'm also co-founder of the Free Market Medical Association,
a mission-driven organization that works to bring buyers and
sellers together in the United States, promotes market
discipline in the industry, and now has 37 state chapters.
To the industry big shots, or as I call them, the cartel,
the healthcare system in this country isn't broken. It's
working exactly as it was designed, meant to enrich the
corporate elite and intermediaries at the expense of patients
and the American people at large.
Fortunately, the alternative approach I've described is
becoming more widespread as insurance deductibles balloon, and
delays and denials become more commonplace. Affordable, high-
quality care is fortunately available for victims of the
system. I predict that shoppable medical services will become
particularly critical for older Americans as an increasing
number of physicians opt out of or severely curtail their
exposure to Medicare. Thank you.
The Chairman. Thank you, Dr. Smith. Now, I'd like to
introduce Dr. Don Moulds, the Chief Health Director for the
California Public Employees Retirement System, CalPERS. Dr.
Moulds oversees one of the largest public health purchasers in
the United States, governing more than 1.5 million public
employees, retirees, and their families.
Under his leadership, CalPERS pioneered the use of
reference-based pricing, where they set clear benchmarks for
elective procedures like joint replacements that allowed
patients to shop for care that meets both cost and quality
standards. Dr. Moulds brings valuable insight into how large
purchasers can use data and competition to make healthcare
markets work the way every other market due to the benefit of
the consumer.
Thank you for being here. Please begin your testimony.
STATEMENT OF DR. DON MOULDS, PH.D., CHIEF
HEALTH DIRECTOR, CALPERS, SACRAMENTO, CALIFORNIA
Dr. Moulds. Chairman Scott, Ranking Member Gillibrand,
members of the committee, thank you for inviting me to testify
on behalf of the California Public Employees Retirement System.
My name is Don Maltz and I serve as Chief Health Director for
CalPERS with more than 1.5 million members.
CalPERS is the largest commercial health benefits purchaser
in California, and the second largest commercial purchaser in
the Nation. We contract with numerous large health insurance
companies to provide our members with a variety of health plan
offerings. In 2024, we spent about $12.5 billion dollars to
purchase health benefits for active and retired members and
their families.
CalPERS employs a range of innovative cost containment
strategies to address rising medical costs. Among these is
reference-based pricing, which is proven to be an effective
tool for addressing shoppable services that tend to vary
greatly in price.
In 2011, CalPERS implemented a reference pricing program
for hip and knee replacements, which are good examples of
services with significant cost variation across facilities.
Through this program, 46 California hospitals that met quality
standards agreed to a fixed price of $30,000 for these
surgeries. Members who chose reference price facilities paid
standard co-insurance, while those who opted for non-
participating facilities were responsible for any costs above
the reference price. In addition to their standard co-
insurance, within two years, the program increased the portion
of members that used the preferred facilities from about 50
percent to 64 percent.
What was particularly noteworthy was that the non-
referenced price facilities reduced their charges to meet the
CalPERS reference price. As a result, price variation decreased
dramatically. The average price dropped from $35,000 to
$25,000, while the non-referenced price facilities dropped
their prices from $43,000 to about $27,000.
While we anticipated savings from the consumer choice
effect, the most significant impact was the downward pressure
on the market. Overall, the program remains in place today, and
our analysis reveals sustained savings of approximately four
million annually through 2020.
In 2012, CalPERS introduced a second reference pricing
program for colonoscopy, cataract, and arthroscopy services,
establishing a set reference price for procedures performed in
hospital outpatient settings to incent members to choose
ambulatory surgery centers, which are comparatively less
expensive and higher quality.
As with hip and knee replacements, we saw members choose
the more cost-effective sites of care, resulting in five
million in savings per year. An average reduction of 21 percent
for these procedures. CalPERS extended its ambulatory surgery
center-referenced pricing program to 12 additional procedures
in 2018.
Last year, CalPERS implemented a member incentive program
to encourage members to use independent labs instead of much
more costly hospital-owned labs. Early data suggests that
preferred lab use increased by modest four percent in that
first year and saved our members $2.4 million in the first
year.
This program is different from earlier reference pricing
programs in that it eliminates cost sharing for members using
the low-cost labs, but does not increase their cost sharing for
using higher price labs.
Reference-based pricing has shown promise, but it does have
its limits for smaller purchasers. Without the data resources
of CalPERS, access to transparent pricing information is
critical. Moreover, research suggests that if implemented as
broadly as possible, reference pricing only saves about five
percent of total cost of care.
Overall savings are limited by the small number of
procedures where reference pricing makes sense. While reference
pricing is well-suited for non-emergent elective procedures
with significant price differences, many healthcare services
are far less shoppable. This is one of the reasons why CalPERS
adopts a broad-based approach for reducing costs. For example,
we have included cost trend guarantees in our newest contracts
with our third-party administrators and our pharmacy benefits
manager in order to achieve critical financial alignment.
Addressing high-cost markets is also a priority. CalPERS
pace prices that are about one-third higher in Northern
California than it does in Southern California, largely because
of a comparative lack of provider competition in the north.
Thank you again for inviting me to participate in today's
hearing. CalPERS is proud of the savings we've achieved through
our reference pricing programs, which is one part of the kind
of broad-based approach that is necessary to reign in
healthcare costs.
I welcome your questions.
The Chairman. Thanks for being here. Now, I'd like to turn
it over to Ranking Member Gillibrand to introduce your witness.
Senator Gillibrand. Thank you, Chairman Scott. I want to
move to introduce our final witness, Dr. Jeanne Lambrew. Dr.
Lambrew is the Director of Healthcare Reform and senior fellow
at The Century Foundation, previously having served in
President Obama's Administration, first as director of the
Office of Health Reform at the U.S. Department of Health and
Human Services, where she worked to ensure passage of the
Affordable Care Act.
Dr. Lambrew served as President Obama's Deputy Assistant
for Health Policy, where she helped to guide the implementation
of the Affordable Care Act. Most recently, Dr. Lambrew served
as the Commissioner of Maine's Department of Health and Human
Services following her appointment by Governor Janet Mills.
Thank you for being here, and you may begin your testimony.
STATEMENT OF DR. JEANNE LAMBREW, PH.D., DIRECTOR
OF HEALTH CARE REFORM, AND SENIOR FELLOW, THE
CENTURY FOUNDATION, NEW YORK, NEW YORK
Dr. Lambrew. Chairman Scott, Ranking Member Gillibrand, and
members of the committee, thank you for the opportunity to
testify today.
As you've heard from other witnesses, competition,
streamlining, and shopping can optimize value. However, the
nature of illness, and injury, and their costs, means that most
people can't finance healthcare on their own. This is why every
industrialized nation has some sort of health insurance system.
As such, I'll discuss shopping and transparency for health
plans rather than health services, with a focus on older
Americans purchasing coverage on their own.
The Affordable Care Act created a shopping platform called
Health Insurance Marketplaces. Marketplaces offer health plans
that have different levels of coverage. Shoppers can see if
their doctors or drugs are covered, and some marketplaces are
active purchasers requiring insurers to use some of the
strategies discussed here today.
This shopping experience is enhanced by premium tax
credits. These credits are competitively set based on a
benchmark plan. Currently, eligible employees pay no more than
8.5 percent of income for that benchmark plan, with lower
income people paying lower percentages. These tax credits are
like vouchers. With your tax credit, you can shop for any plan
in the Marketplaces.
While improvements can and should be made, the Marketplaces
work. Premium growth has averaged just two percent in the past
five years, choices have expanded, and enrollment doubled since
2020 to 24 million people. About half of these people are self-
employed, or small business workers, and many are rural
residents or veterans.
Marketplace coverage is especially important for older
Americans. Nearly one in four Marketplace enrollees is aged 55
to 64. Nearly one in ten older Americans relies on coverage
purchased on their own, and the uninsured rate among people
ages 50 to 64 has dropped by 50 percent due to Marketplace
changes and the other ACA reforms.
This is about to change. The budget reconciliation law and
recent rules will reduce Marketplace coverage. Moreover, the
enhanced premium tax credits currently in place will end in
December. As a result, the average Marketplace enrollee will
pay more than twice as much out of pocket for premiums starting
in January.
There's no historical precedent for such a large 1-year
increase for so many Americans. The cost increase will be even
higher for people with incomes above 400 percent of the federal
poverty level if the cutoff of premium tax credits is
reinstated. Over half of people losing tax credit eligibility
will be people ages 50 to 64.
For example, a 60-year-old couple with income of $85,000,
will face an average increase of $22,000. This represents 27
percent of their household income. The impact varies by
location. The same couple will pay $28,000 more in Savannah,
Georgia, and about $31,000 more in Caribou, Maine.
To put this into context, if this couple paid that extra
amount until they become Medicare eligible, it will consume
over 60 percent of the typical retirement savings. Others will
simply be unable to afford these premiums. They'll become
uninsured. Older people losing coverage are at greater risk of
unmet needs, worse health, and premature death.
The impact will extend to other Americans as well. Medicare
costs are likely to rise to pay for the unmet needs of
previously uninsured enrollees. The individual market stability
and affordability will be reduced according to all insurance
commissioners across the country, and in the words of the
American Hospital Association, there will be an impact on the
entire community, even those with coverage, because of an
influx of uninsured patients into emergency departments causing
longer waits, stressing the whole healthcare system, and the
inability to get the care that they need.
In conclusion, Americans want clear choices and affordable
options for health coverage as well as healthcare. Extending
tax breaks for private health insurance can help achieve that
goal.
Thank you for the opportunity to present this testimony.
The Chairman. Thank you. Now, we'll go to questions. We'll
start with Senator Tuberville.
Senator Tuberville. Thank you, Chairman. Thanks all of you
for being here today and talking about a subject that's very
important to all Americans across the country, and as Dr. Smith
said, an out-of-control healthcare system, which it is.
Mr. Cuban, innovative companies like Cost Plus Drugs have
already proven that bypassing traditional PBMs can deliver real
savings at pharmacy counters. President Trump has announced
Trump RX, a new website to connect patients directly with the
best prices. How might Trump, and RX, and direct patient
programs improve affordability for patients, your basic, while
you're doing this?
Mr. Cuban. Yes. I mean, we'll work with Trump RX. I mean,
it's incredible. It's stupendous. It's like the most incredible
program ever, and so, we're excited to offer them our API so
that they'll be able to download our daily prices so when they
go down, everybody benefits.
Plus, I like what they're doing with the MFNs because as I
mentioned in my comments, our brand drugs are more expensive
because PBMs are involved, and with Trump RX and the MFN
program, that allows manufacturers to work around the PBMs and
work directly to patients. I think it'll save seniors. It'll
save everybody a lot of money.
Senator Tuberville. You think this is the future?
Mr. Cuban. I don't think it solves the ultimate problem of
how the system is designed, but I think it's something that we
obviously agree on because that's what Cost Plus Drugs is; we
publish our entire price list every day.
Senator Tuberville. Your company posts drug prices with
full cost breakdowns. How does this transparency help save
patients money?
Mr. Cuban. I mean, you know, with costplusdrugs.com, any
patient can just go look at their price for their medication,
and so there's no uncertainty, but more importantly, by seeing
our markup of only 15 percent and seeing our costs, that builds
trust. I always tell everybody in our company that what we
really sell in this industry is trust. I think that's what's
really allowed us to grow so quickly.
Senator Tuberville. If you sold Ozempic and somebody else
went through PBMs how much cost would they save?
Mr. Cuban. Well, if you look at what's happening now where
the PBMs work with sponsors, they're typically being charged
$1,300. If you look at the direct-to-consumer programs that are
being put out there by Novo and Lilly, it's $499 or less and
probably falling. There's already a significant difference, and
the crazy part is that difference of $800 typically goes right
into the pocket of the PBM, who then decides how much they're
going to give to the employer. It's a huge amount as of right
now.
Senator Tuberville. Thank you. Dr. Smith, the Surgery
Center of Oklahoma has proven that real price transparency can
lower cost and improve patient access, which is something we
often hear discussed in the context of PBMs and prescription
drugs.
What inspired you to create this transparent surgical
model, and what parts of the traditional healthcare system,
much like PBMs in the drug space, were you trying to get
around?
Dr. Smith. Well, we started the Surgery Center of Oklahoma
because, frankly, practicing in a big hospital as an
anesthesiologist, I served as an accessory to a financial
crime. Surgeons were also being denied the tools, many of them
required to appropriately treat patients due to the cost-
cutting measures at hospitals trying to maximize the revenue.
I didn't grow up in a home like that. I grew up--it was a
golden rule; mutually beneficial exchange. As a hospital-based
physician, the only way I could escape that was to own and
control my own facility. Where I was responsible to the
patients, not just for the medical treatment, but also the way
financially we dealt with them.
If a patient asks, you know, "What can you do about this
bill?" My answer was everything including not charge them.
We're in a good position to be charitable on an individual
basis. That's really the answer. We started it because we
wanted to be in control of the medical and the financial
journey the patient had in their healthcare experience.
Senator Tuberville. You know, some people argue that
patients won't shop for care, or that is too complicated to
understand. Do you think that is true? What savings have you
seen for patients when prices are available?
Dr. Smith. Well, patients will not only shop for care, but
they'll vote with their feet. Half the patients we see at
Surgery Center of Oklahoma do not live in Oklahoma, and we see
patients from Europe, and Africa, all over the United States.
Self-funded employers see such an insane price difference
between our prices and the local hospital where they're doing
business. They waive all out-of-pocket for those employees and
a companion to fly to surgery at General Oklahoma and have
their procedure, and not just us, but those who've copied us.
People will shop, and they'll travel, and furthermore,
they'll hold our price up in front of their local hospital and
tell them, match this, or I'm going to Oklahoma City. We had a
patient from Georgia that was going to be charged 40,000 for a
urologic procedure, and our online price was 4,000, and the
hospital matched our price. Because that would've been the
second patient that month that came to Oklahoma City, and they
didn't want to see that. The patient reached out to me later
and said, "You saved me $36,000, and you didn't even perform
the surgery."
There is a market that is developing. It's a competitive
market. It's driving prices down. It's driven prices down
Oklahoma City, I know, and quality goes up at the same time.
Senator Tuberville. Thank you for what you're doing. Thank
you, Mr. Chairman.
The Chairman. Thank you, Senator Tuberville. Ranking Member
Gillibrand.
Senator Gillibrand. Thank you very much. Ms. Lanmbrew, why
do so many adults between the ages of 50 and 64 rely on the
enhanced premium tax credits, and how do you anticipate adults
between the age of 50 and 64 will be impacted if these enhanced
premium tax credits are not renewed? How will they be able to
save for retirement? What will the impact be?
Dr. Lambrew. Yes. Just to start with--we know that as
people approach age 65, they often go to part-time work, some
retire early, some are forced to retire early. Those working in
a hard construction job or some other physical job just can't
make it till age 65 when they can enroll in Medicare, which is
why we really see 23 percent of all of our marketplace
enrollees are in that age group versus 15 percent of the rest
of the population, so it definitely is a more important source
of coverage for that group.
It's also important for rural areas where we also know
residents are older. Farmers typically don't get employer-based
insurance. They have to buy coverage on their own. We just know
that these demographics make it more important for them, and
the numbers are pretty stark that the cost of health insurance
across the board is too high.
We should look at all available options to lower employer
coverage, Medicare, Medicaid, and Marketplace coverage, but for
these people right now to be facing these kinds of numbers,
again, an average of over $20,000 for a couple at 60, that is
impossible for a lot of these families to deal with, but your
choices are, if you're chronically ill, do I pay that amount to
maintain my coverage or do I become uninsured? And what does
that mean?
I do wish many of these programs that we're talking about
today would be a solution for those people. They will help. I
have no doubt that these will help, but I think there's more
that will be needed for people who are older, chronically ill,
who are about to face these hard, large coverage or large out-
of-pocket premium increases.
Senator Gillibrand. Thank you, Doctor. Mr. Cuban, can you
speak to this conversation about unaffordable deductibles? Can
you talk a little bit about what this will result in, whether
it's increased hospital visits, emergency room visits. What
does this vicious cycle of unaffordable healthcare cost lead
to, and how does it stress the healthcare system?
Mr. Cuban. Well, no matter what your premiums are and you
pay them, if you can't afford your deductible, you don't really
have insurance, and what ends up happening is either you go to
the emergency room, you do nothing at all, or you are at the
mercy of the provider hoping they can provide some sort of
financing for you. Either way, it creates very difficult
situations for seniors, for entrepreneurs, for anybody in that
situation.
You know, as I alluded to in my comments, we don't do
anything to help people who are unable to afford their
deductibles, and in fact, we make it more difficult. Dr. Smith
alluded to the fact that, you know, the cost of a surgery could
be extremely high, and if you can't afford your deductible, you
can't get it. In the case of pharmacy benefits, if you have a
drug like Eliquis where the list price is $600, and you have a
$4,500 deductible under an ACA silver plan, you're going seven
months having to pay full list price, and if you can't afford
to do that, you're out of luck.
Senator Gillibrand. Right. Dr. Smith, you mentioned how an
increasing number of physicians are either opting out or
severely limiting their exposure to Medicare patients. Why are
physicians increasingly dropping Medicare, and how are these
patients going to get the care they need?
What factors are driving up the cost of providing care,
particularly for older adults, and what can be done on the
federal level to provide greater stability for these practices
to enable them to treat older adults?
Dr. Smith. Yes, I think Medicare is a burdensome quagmire.
It's heavily regulated. I probably get 10 emails a day asking
me to pay somebody to attend a course to figure out how to
navigate this new regulation that's come out. It's very
burdensome.
Also, the payments to individual physicians. The
independents have not really kept up, and frankly, they've been
wrong. Top-down pricing seems to always be wrong. It's either
too high or too low, and that's what happened when RBRVS came
into place in 1992. True pricing comes from market activity,
and that's absent in the Medicare program.
Senator Gillibrand. That's right.
Dr. Smith. When an anesthesiologist like me is paid $78 for
the anesthesia required for a surgeon to do a knee replacement,
that's a message, and message sent, message received. The last
open-heart surgery for which I provided anesthetic in 1992,
Medicare paid me $285. I knew it wasn't personal. You know,
prices are just signals, and that wasn't personal.
That was just an idea of what my time was worth, and I
walked away, and I haven't accepted Medicare payments since I
treat patients free of charge instead of file claims, but it's
payments, and its regulatory burden, and frankly, risk.
Senator Gillibrand. Yes. Thank you.
The Chairman. Thank you. Senator Johnson.
Senator Johnson. Mr. Chairman, again, excellent hearing. I
think it's kind of notable when you have a hearing on how to
improve outcomes and lower costs. Most Republicans show up, we
have the ranking member here on the Democrat side. It's pretty
interesting. We're looking ahead on how to do that, but I think
in order to fix a problem, you have to really define what the
problem is. You have to look at the past, and I don't want to
dwell too much on the past, but right now there's been a lot of
talk about extending the enhanced temporary subsidies that were
put in place to help people through the pandemic.
I have talked a little bit about Obamacare, and Ms.
Lambrew, you were part of the Obama administration during the--
after the passage, but leading up the implementation of it.
Dr. Lambrew. Correct.
Senator Johnson. You were there when President Obama was
out there saying that Obamacare would lower the average premium
for a family by $2,500 a family. Correct?
Dr. Lambrew. I was there when we talked about slowing the
growth of healthcare. Yes.
Senator Johnson. President Obama made that claim, right,
$2,500 lower premium per family. Correct?
Dr. Lambrew. Over time with slower growth.
Senator Johnson. Okay. That hasn't panned out, has it?
Dr. Lambrew. It has.
Senator Johnson. It has not.
Dr. Lambrew. We have seen slower growth in the health
insurance profit base.
Senator Johnson. Inflation has gone up 39 percent since
2013. I've seen, again, it's very difficult because you have a
whole range of premiums, but just one benchmark premiums up to
118 percent. That's three times the rate of inflation, so no,
that was, did not occur.
Premiums have skyrocketed because of the faulty design of
Obamacare. President Obama said, you can keep your doctor, you
can keep your healthcare plan. That was PolitiFact 2013 "Lie of
the year." Correct?
Dr. Lambrew. Today, there is no lower percentage of people
with employer-based covers than there was.
Senator Johnson. People lost their doctors. For example,
Obamacare, outlawed high risk pools, which worked beautifully
in states. They worked beautifully in Wisconsin. As an
employer, we used them all the time. It worked great. You
outlawed those. Yyou outlawed short-term plans. Again, that was
PolitiFact 2013 "Lie of the year."
Let's just look at enrollment history. Obamacare impacted
Medicaid expansion, and then, there's problems with that, but
let's focus just on the individual market. That was the other
thing that Obamacare, again, fix all these, you know, this
marketplace for individuals.
There were about 12 million people prior to Obamacare
taking advantage of the individual markets. You completely
disrupted that, got rid of high-risk pools, got rid of short-
term policies. Before the pandemic, there were 14 million
people on the Obamacare exchanges, so two million more people
on these individual policies. Then all of a sudden with the
enhanced premiums, all of a sudden, we're up to 24 million
people.
Now, are you aware of the problem we're having with the no
premium policies and phantom policies where you have
unscrupulous agents and brokers signing people up without their
knowledge? They get a commission. The premium tax credit goes
directly to the insurance companies. We've seen estimates of
$20' to $30 billion per year of premiums going to the insurance
companies on phantom policies. People make no claims on them.
Are you aware of that?
Dr. Lambrew. I am aware that there are agents and brokers
that have been falsely signing people up. Last year, action was
taken, 500 of them were unsubscribed----
Senator Johnson. Again, so we've gone from----
Dr. Lambrew [continuing]. this year, the H.R. 1 did include
many policies to address that, but the reality is that those
people are the victims, and we are trying to make sure that we
keep these people covered.
Senator Johnson. My point being, we went from 12 million to
14 million, now up to 24 million. That's not 24 million real
people. The uninsured in the country, there million
Dr. Lambrew. The uninsured rate in this country has
dropped, sir.
Senator Johnson. Again, you're saying this is going to be a
huge problem. Now, isn't it true that the original design of
Obamacare, there were no subsidies for people making more than
400 percent of the poverty line? Correct?
Dr. Lambrew. Yes, there are currently three to four times
more subsidies for people----
Senator Johnson. Just answer the question. The original
design of Obamacare, nobody above--working, is making more than
400 percent above the poverty line, got a subsidy. Correct?
Dr. Lambrew. People who have employer-based coverage get a
subsidy. People with Medicaid get a subsidy. People before the
Affordable Care Act buying coverage on their own, the retirees,
could not get help from the Federal Government.
Senator Johnson. The enhanced subsidies started providing
subsidies for people above 400 percent poverty. This is talking
about people who have higher, higher out-of-pockets that didn't
qualify for subsidies in the original Obamacare. The subsidies
aren't going away when the enhanced premiums go away, they
still--the original design of Obamacare stays in place.
Correct?
Dr. Lambrew. We know that people have been significantly
helped by the improvements that were made in 2021, and people
will be hurt if they leave, so many pandemic policies;
telehealth----
Senator Johnson. Those were temporary enhanced tax credit.
Those were temporary enhanced subsidies, and the Democrats in
their law, they scheduled them to expire this year. Right?
Republicans had no point in that at all.
Dr. Lambrew. The 2017 bill----
Senator Johnson. That all that was designed by Democrats to
expire----
Dr. Lambrew [continuing]. also extended policies that
ended, that just got extended without being paid for. Tax
extensions happen all the time.
Senator Johnson. You are claiming harm to people that never
qualified for the subsidy under the original Obamacare. Now,
you're also saying, because you're quoting people at the
hospitals, if these enhanced subsidies expire as they were
meant to do by Democrats, it's going to be a calamity for the
hospital industry. How all's happening is we're going back to
the original Obamacare, so what you're saying is going back to
the original design of Obamacare is going to be a calamity for
hospitals.
Dr. Lambrew. Going back to 1965 practices for medicine are
also a calamity. I mean, we figured out something that worked.
It should be extended. People have been helped by it. Costs
have been growing slower than private employer-based coverage,
choices have gone up. Could it be improved? Without a doubt.
I think it is a fact that the uninsured went down. Cost
growth has not been excessive. We have more choices.
Deductibles have actually gone down. We really have seen in the
last few years people able to choose deductibles that are now
on average $400, not the higher amount.
Senator Johnson. Ms. Lambrew, my point is a number of
goals. My point is, if these enhanced subsidies expire, all
that happens is we go back to the original design of Obamacare,
which didn't work, didn't lower premiums, people couldn't keep
their doctor, couldn't keep their healthcare plan. It's been a
disaster.
The reason Democrats want to extend these subsidies, the
reason we have subsidies is to mask the fact that Obamacare
drove premiums sky high, and what this hearing's about is how
can we bring those actual premiums down, deliver better
outcomes.
We've got some great examples here. Doctors from Oklahoma
is doing some marvelous things called bringing consumerism the
free market principles back into healthcare. Republicans are
interested in that. Democrats aren't. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Johnson. Senator Husted.
Senator Husted. Thank you, Mr. Chairman. I appreciate you
hosting this hearing today, and I know that--I want to start
out by healthcare inflation is a problem for everybody in the
American economy. It's the number one driver of inflation in
the 21st century. What we have now doesn't work, and so,
hopefully, we can constructively have conversations about how
we make it work.
One of the ways that we have driven down some costs are
over-the-counter drugs, moving prescription drugs to over-the-
counter drugs. It saves American consumers $170 billion
annually. Working with Senator Hassan we have a streamlining
marketplace, access, and reform for therapeutics called Smart
OTC Act, which will help the FDA identify drugs that could be
candidates for over-the-counter and help companies move those
to over-the-counter more quickly through the FDA. I would
encourage us all to look at that as we move forward.
Now, Mr. Cuban, thank you for the example that you used
with the monopoly and Amazon that's in consumer products, which
we know is troublesome. You know, monopolies create higher
prices, lower quality in general, but that's in a consumer
marketplace. Healthcare, oh my gosh, people don't have choices
at all. They have no choice, for most people, about where they
go to consume that healthcare.
I think that you make a great point, but the healthcare
system seems to be conspiring to create a monopoly, marketplace
monopolies, across all aspects of what it does for a service
that everybody must have, which makes the pressure of cost and
quality even more stark.
I do have--Mr. Moulds, I want to ask you a question about
anti-competitive contracting for healthcare. Because we know it
creates a monopoly environment. It increases costs. I'm going
to give you four examples, and I want you to react to these all
or nothing clauses, anti-steering, most-favored nation clauses,
gag clauses, which create anti-transparency. All of those carve
up marketplaces and don't allow for competition. I want your
thoughts on what eliminated them, and we might do to improve
patient benefits, quality, and lower costs.
Dr. Moulds. We've actually been involved in litigation on
some of these at CalPERS in California. The all-or-nothing
clauses in particular were the subject of a lawsuit there, and
in general, you know, they are some of the challenges, but by
no means the only challenges we are seeing in California,
increasing consolidation, not just in the north. I mentioned
that our costs are about 35 percent higher in the north, but in
the south where we've historically seen pretty good,
comparatively good----
Senator Husted. If consolidation, though, in contracts that
restrict, isn't that----
Dr. Moulds. Some of the contracts----
Senator Husted. The combination, isn't that lethal?
Dr. Moulds. Potentially. Absolutely, yes, but some of these
provisions we don't see as commonly in contracts in California
anymore, but we still have consolidation.
Senator Husted. Mr. Cuban, you understand markets pretty
well. You have a reaction to those?
Mr. Cuban. Yes, I think it's awful. As an example, we
wanted to build on CalPERS, and it was fair, they told us that
we didn't carry certain brands, but we just asked, why not add
Cost Plus Drugs to your network? Because if we're cheaper, buy
from us, and if we're not, don't buy from us.
Cost Plus Drugs doesn't have exclusives with anybody. We
just stand by the fact that we think we'll be better for
patients because we're less expensive, and so, we were told,
and this isn't just CalPERS, any of the big PBMs, when I go and
speak to a CEO, I give them the test, and the test is just ask
your PBM if you can add Cost Plus Drugs to your network and
only use us if we're less expensive. 100 percent of the time,
they've been told no.
Senator Husted. Mr. Moulds, do you have something you want
to add to that?
Dr. Moulds. Well, I want to just start by saying that Mr.
Cuban's work in this space has actually been enormously helpful
to us. Having his prices out there has helped us negotiate
prices in our contract, so we are grateful for that. We did
negotiate in our most recent contract that starts in January,
provision that allows us to carve out so we continue to look at
where we can----
Senator Husted. Is that a yes?
Dr. Moulds. That is a always open to the conversation not a
yes.
Senator Husted. Well, I'll just close with this, is that
you talked about consolidation. You have these tools that are
used inside the marketplaces where people want to consolidate.
They want to limit others competing in their space, which
allows them to basically command whatever price they want.
No market would work well like that, but in a healthcare
marketplace where people don't have choices, I can decide if
I'm buying water, I may not, I may decide to buy something
else, but in healthcare, I don't have a choice, and I know that
that's what Mr. Smith's trying to create; choices, but I'm
hopeful that we can eliminate some of these tools that are
being used to carve up markets and drive up prices. Thank you,
Mr. Chairman.
The Chairman. Thank you, Mr. Warnock.
Senator Warnock. Thank you, Chair Scott, and Ranking Member
Gillibrand for organizing this meeting or this hearing, I
should say.
Nine months ago in this committee, I warned that seniors in
Georgia could see a $20,000 annual increase in healthcare
premiums should congressional Republicans let enhanced
affordable care tax credits expire, and here we are just over a
week before the start of open enrollment and we're in an even
worse place than we were nine months ago.
Mr. Cuban, most Americans probably know you as an investor
in startups and innovative small businesses. I'm a fan of Shark
Tank.
Mr. Cuban. Thanks.
Senator Warnock. In that role and as an entrepreneur
yourself, is it fair to say that you know a little bit about
how small business owners and entrepreneurs think about their
money and startup expenses?
Mr. Cuban. I would say so, yes.
Senator Warnock. Would you say that among those
considerations and expenses, that includes their healthcare
expenses----
Mr. Cuban. Yes.
Senator Warnock [continuing]. and how their healthcare
costs factor into their plans for growth and sustainability?
Mr. Cuban. Yes, sir.
Senator Warnock. Let me show you something. These are the--
this is the cost of the premium for a senior in 2025. This
person is 62 years old. Small business owner in Georgia, taking
home just $65,000 in 2025. The other side show the cheapest
option for that same Georgian, so $228.17 a month. Now, with
the expiration of these tax premiums, $1,142.71 cents. That's
quite a jump.
How would this monthly jump affect that Georgian's ability
to grow her small business or even just make ends meet?
Mr. Cuban. It makes her make a lot of hard choices, either
to try to find the money to pay for the premiums or to go
without insurance, and I think the greatest challenge has been
in all of this is that small business owners, Americans that
are on the ACA, haven't had enough time to plan for it.
It's one thing to know that your premiums are going up,
it's another thing not to know how much and how soon, right?
Now we're just--you know, in Texas, people are just now
starting to see open enrollment and more we'll see in a couple
weeks, and as a small business looking to the ACA for their
employees, it's going to be terrifying for them.
Senator Warnock. If they forego insurance, is it fair to
say that, well, that would drive up premiums for everybody?
Mr. Cuban. Yes, of course. You know, because healthy people
are going to be most likely not to take insurance, right?
Senator Warnock. This gut punch for small businesses
impacts the overall economy because small businesses are such a
big part of our economy.
Mr. Cuban. Well, of course, if you take--you know, there
are 33 million companies in this country. 30 million of them
are solopreneurs, one-person entrepreneurs' companies, and if
you are taking $800, give or take, a month out of their
pocketbooks, they can't invest it in inventory, et cetera, et
cetera. It makes it much more difficult to run your company.
Senator Warnock. Yes, I would imagine that come November
1st, more of my colleagues on the other side of the aisle will
start hearing from folks in their own states who won't be able
to afford their healthcare next year.
In fact, millions of people across the country are starting
to log on today to see their plan premiums for next year
double, and that's not the exception. Like, that's quite
prevalent. People are seeing their premiums double, as you see
here, triple, quadruple, all because my friends on the other
side of the aisle refuse to fund the government and fund
healthcare.
Dr. Lambrew, why are older Americans especially harmed,
older Americans especially harmed, by the expiring premium tax
credits?
Dr. Lambrew. Well, in addition to there being more of them
in the marketplace than would be in the general population, we
also know that older people have greater healthcare needs, so
we look at the average healthcare costs for a 55-to 64-year-
old. It is three times the average healthcare costs of an 18-to
24-year-old, so their needs are greater.
That also means that if, when, these price increases hit
them, it will probably force those harder choices. Again, "Do I
follow the advice of my doctor? Do I take a medication as
needed, or skip pills, or forgo them? Do I choose between my
retirement savings, my groceries?"
There was a story of a woman from Georgia who's 57-year-old
who said, "This amount may not seem much to the government or
to the insurance companies, but for me, it would most likely
mean sacrificing essentials, groceries, gas, basic necessities
that I rely on."
Senator Warnock. Given that reality, do you think it's a
good idea for Congress to wait until December 31st to address
this crisis?
Dr. Lambrew. I do not. People are shopping in Idaho
already. They're looking in 12 or 13 states at the actual
prices they're going to pay. A week from Saturday, they're
going to go in, and we know from last years' experience three
million people came in the first two weeks, and if they come in
and their prices are going to be much higher than they expect,
they may never come back.
Senator Warnock. Thank you so much. This is a crisis. It
needs to be addressed right now, and I would urge my colleagues
to join us in funding the government and extending these
healthcare premiums for the healthcare of millions of
Americans. Thank you very much, Mr. Chairman.
The Chairman. Thank you. Senator Moody.
Senator Moody. Thank you, Senator Scott. I appreciate you
calling this hearing. I'm one of the newest U.S. Senators, and
it pains me to say about every hearing I'm in, we hear more and
more ways government can throw money at a problem to fix it,
and it's so great that we're having a hearing on outside of
government, throwing more money at a problem, ways that we
might actually bring down prices.
I appreciate all of you being here today, taking time to be
here. Many of you have experience in this area and have great
suggestions on this and experience on this topic. I think the
next step is our chairman might hold a Shark Tank for
healthcare ideas on how to bring--just be ready, that's the
next invitation, I'm sure.
You know, in most every other industry, we expect a fair
and free market, and it's always expected that you would know
the prices as consumers when you're shopping. It seems to be
the only area where we don't have transparent pricing,
especially, and we especially need to focus on it, when
shoppable services represent 35 to 40 percent of U.S.
healthcare spending.
If the data's right and we spend $14,570 per person per
year on healthcare, that is more than per capita than any other
country on Earth, and that just is insane to me. Thankfully, we
have leadership that's digging in and trying to figure out how
we can come up with new ideas to tackle prices.
What was shocking to me is that, and when I look back over
the course of my own medical history, it's so clear and it's
been there all along; you never find out how much things cost
until months later when bills start showing up. In fact, only
17 percent of Americans know how much their healthcare products
or services cost before they receive them. That is insane, and
no wonder no one is shopping. It's a captive market of
consumers.
I appreciated hearing your testimony, Mr. Smith, about the
Surgery Center of Oklahoma and how you challenged other
facilities to offer competitive pricing. The one example you
gave was, one family was quoted $72,000 for a procedure at a
major hospital, and then when they found their way to you, they
only paid $3,875. Since you opened your facility, how many
other facilities started like yours, either in your state or
nationally, that you know of
Dr. Smith. If you include all of those on the continuum who
are either posting prices or agreeing to enter into single-case
agreements for a single case, for a price, to those who will
quote a price over the phone but won't write it down, it's in
the hundreds. It's not in the thousands, but it's such a
dynamic situation because every time a big hospital or a
surgery center that's not inclined to reveal prices is faced
with losing a patient.
To me, well, Bridge Surgery Center in Indianapolis, to
Texas Free Market in Austin, and anyone that's a member of the
Free Market Medical Association, they have to step up now and
match those prices or they lose those patients, and it's about
half the people in the country that have sticker shock, either
directly or indirectly, through their proxy buyer, their self-
funded employer.
Senator Moody. When you started, were there any federal
regulatory or statutory hurdles to you starting this clinic up,
or have you been faced with those since you started? Is there
anything that we can do to make it easier for places like yours
to start?
Dr. Smith. The two hurdles that I think this movement faces
are; one, is the overpayment that is sent to hospital-owned
doctors and facilities by Medicare. Because they use that extra
money to consolidate the industry and to run independent
physicians and facilities out of business. That site neutrality
is what I think people are talking, and I don't advocate paying
the independents more. I advocate paying the hospitals less.
Senator Moody. How quickly, after you started, did you
start seeing the market adjust around you?
Dr. Smith. I'm sorry?
Senator Moody. After you started your first surgery center,
how quickly did you see the market adjust to start trying to be
competitive with you, or did you not see that?
Dr. Smith. We did not see that really until I posted the
prices online in 2009. When we opened in 1997, the response of
the industry was to try to crush us through the state
legislature. In 2009, when we posted the prices, that's when we
began to see price matching, not just in Oklahoma, but all over
the country because patients will travel to have surgery
performed.
Senator Moody. Thank you, Chairman.
The Chairman. Thank you, Senator Moody. Senator Warren.
Senator Warren. Thank you, Mr. Chairman. Thank you for
holding this hearing, and thank you, Ranking Member. Military
families keep us safe, and DODs TRICARE program, it's supposed
to keep those military families healthy. Since 2009, the
TRICARE pharmacy benefit has been administered by Express
Scripts, the Nation's largest pharmacy benefit manager, or PBM.
Express Scripts decides which pharmacies are in-network or out.
When one of those nine million military families' needs to pick
up a prescription, Express Scripts decides where they can go to
have it filled, and then they pay the pharmacy.
Now, Express Scripts is owned by the multi-billion dollar
health insurance company, Cigna, and Cigna also owns a mail
order pharmacy called Accredo that participates in TRICARE. In
other words, Cigna owns the company that pays the pharmacies
and it also owns the pharmacy chain that is getting paid the
result.
Well, Express Scripts can reimburse the other pharmacies
and give inflated payments to its corporate cousin, Accredo.
Express Scripts has been caught doing exactly that kind of
self-dealing in other government programs, but right now, the
Department of Defense refuses to check how much it is costing
taxpayers and TRICARE.
Mr. Cuban, you understand this business. Let me ask you,
would requiring Express Scripts to disclose the difference
between what it pays its affiliated pharmacies and the
unaffiliated pharmacies help save taxpayers money or cost
taxpayers money?
Mr. Cuban. It would save a lot of money, and it would keep
smaller independent pharmacies in business.
Senator Warren. Okay. You know, that makes sense to me. It
seems pretty common sense here. More transparency would save
taxpayer money, but the Congressional Budget Office disagrees
with you and me on this. According to the CBO, price
transparency would cost taxpayers money because other
pharmacies would allegedly join together to demand higher
reimbursements. That's their argument here.
Mr. Cuban, you talk with pharmacists a lot. Do you think
that independent pharmacists don't know that Accredo right now
is getting a sweetheart deal, and that the independents are
just waiting for information to be told so that they could
demand more money?
Mr. Cuban. I can't speak for all the independent, but I can
speak for costplusdrugs.com, and so, I went to TRICARE, and I
have done this in the past many times and looked up the price
of some common low-cost drugs, so you know, just recently, I
looked up and our price is lower, whether it's 30 or 90 pills
than the TRICARE price, is for anybody who is in-network, but
off base.
If they're out-of-network, we're dramatically lower, so we
don't need to band together to know that we can be cheaper. All
we have to do is look at some of their prices, and it's obvious
that we're cheaper.
Senator Warren. Okay. This information is actually already
out there?
Mr. Cuban. Yes. I mean, it's just by looking at--and I'm
just talking about the copays. We're not even talking about
what Express Scripts, what the taxpayers still have to pay to
Express Scripts, Accredo. Which is more, they're not doing this
for nothing, and so, I mean, taxpayers are getting ripped off.
Period. End of story.
Senator Warren. Okay.This is where I want to see more
transparency.
Mr. Cuban. Correct.
Senator Warren. You think that's a good thing?
Mr. Cuban. That's a great thing.
Senator Warren. Oh, okay. That's a great thing. Good. I'll
settle for that answer. All right, so DOD claims that this
hasn't affected military families, but that is based on data
from--they said this has not affected military families based
on data from, you guessed it, Express Scripts.
When the Government Accountability Office reviewed just a
little slice of this data, they discovered, "persistent
inaccuracies," including misreporting the number of people who
lost access to their local pharmacies because the pharmacies
were pushed out of the TRICARE network. They left for the very
reasons you described, but that was just a one-time review. I'm
pushing DOD to audit this information every single year.
Dr. Lambrew, you served as commissioner of the Maine
Department of Health and Human Services, so you understand the
importance of program integrity. Do you think that auditing
this program would help save taxpayers money, or cost taxpayers
money?
Dr. Lambrew. Senator, it would save money.
Senator Warren. It would save money. You know, I just want
to point out here, Mr. Chairman, self-dealing by the pharmacy
benefit managers keeps the cost of prescription drugs high,
both for the taxpayers and for consumers.
I'm going to keep pressing CBO to update their analysis of
the PBMs. I hope to work with all of my colleagues to pass
proposals to reign in self-dealing by the PBMs in TRICARE and
beyond, including my bill with Senator Hawley that would make
the same company cannot own a PBM, and an insurance company,
and pharmacy at the same time. Look, we need to stop these
giant corporations from ripping off American taxpayers and get
a little more competition in the drug market. Thank you, Mr.
Chairman.
The Chairman. Thanks, Senator Warren. Senator Justice.
Senator Justice. Mr. Chairman, thank you. Thank you to all
the witnesses. Better turn the thing on. First and foremost, I
mean this from the bottom of my heart, this discussion needs to
happen on, and on, and on. We know we're dealing with a train
wreck here, a runaway train wreck, and absolutely something's
got to be done. Now, I don't have a clue in the world why on
Earth transparency is bad.
Let me just say this before I go any further. I've got to
just tell you this story real quick. We're in a government
shutdown right now, and really included from my standpoint, I'm
not very happy with the Democrats, but at the same time, I was
just going down the hall just a little while ago, and there was
a lady standing there that's a custodian, and she was talking
to a friend of hers, and the friend doesn't know what to do,
and because the friend is so upset, the friend's crying and
she's crying.
I would tell us all just one simple thing, because I'm not
here for anything really, and truly when it really boils down
to it, at the end of everything we do, there's a name and
there's a family, and we should all take that to heart.
Now, with all that being said, on top of all that, I would
say to you just this, I'd go back to when I was a Governor, and
I've got to read to you one thing. I'd even halfway forgotten
about this, but I signed a bill when I was a Governor not long
ago, House Bill 2263, into law. The first of its kind is
legislation that crack down on the PBMs. It requires insurers
and PBMs to pass along negotiated drug savings directly to the
patients, helping lower cost, helping lower cost of West
Virginia with commercial insurance.
Let me tell you, I speak in really common terms. I've just
got a very quick couple of questions, but in a state like ours,
Mr. Cuban, you know, many people rely on independent
pharmacies. What kind of pressures are the PBMs putting on
these pharmacies?
Mr. Cuban. It's horrific. I mentioned in my testimony that,
first of all, the wholesalers buy drugs at the list price, and
then they sell to the pharmacies at just under the list price,
which means those independent pharmacies, small businesses, are
out a lot of money. For instance, on an Eliquis $600 point
price, they're out $570 and they need to collect that money
back as soon as possible. What PBMs do is not only wait to get
the value of the float, but they also under reimburse them.
Instead of paying them at least the $570 so they can break
even, they pay them less knowing that there's only so much they
can take where they'll either, A, go out of business, or, B,
send the prescription to one of their captive pharmacies, and
that in turn means they're not supporting their patients.
Let me tell you something that a lot of people don't
appreciate; that last five feet between the patient and the
pharmacist is some of the most important, important time any
patient will ever spend. Because if they're getting medications
that conflict with each other, then some really bad things can
happen. We underappreciate pharmacies, and the big PBMs are
literally, purposely, as far as I can tell, putting them out of
business.
Senator Justice. Well, I couldn't agree more. Let me just
end by saying just simply just this; all of us, all of us
realize the problem. All of us have got to have enough guts to
do something about the problem, don't we? I mean, that's what
it really boils down to.
You know, like I said, I didn't come here for anything.
I've got white hair, and ride around on a scooter and I've got
Baby Dog. I mean, for crying out loud, when it really boils
right down to it, I speak the truth, and I ask people to help.
With all that being said, the last thing I'd say is just this
on a lighter note mark, when is Kyrie going to be able to play?
Mr. Cuban. Hopefully, November.
Senator Justice. It's going to match. I would absolutely
love it. The last of my last I would say is just simply this;
this is my prediction from a basketball coach that's coached
1,350 games, a semi-pro team, Mavericks will win it all this
year.
Mr. Cuban. Out of your mouth to God's ears.
Senator Justice. Thank you so much.
The Chairman. Thanks, Senator Justice. Senator Kelly.
Senator Kelly. Thank you, Mr. Chairman, and thank you to
all of our witnesses for being here today.
I'm going to start with Dr. Lambrew. Thank you for your
work on implementing the Affordable Care Act, which made
coverage more affordable for millions of folks across the
country, including in Arizona State that I represent. Now, with
the expiration of the enhanced ACA premium tax credits and some
new federal enrollment restrictions taking effect, I think it's
fair to say that the progress we've made is at risk.
In Arizona, many older adults and working families rely on
Marketplace coverage for insurance before they are eligible for
Medicare. I've spoken to many of them, and when Senator Justice
talks about names and families, these are real people. I've
talked to many of them over the last couple weeks, but looking
beyond next year's enrollment, the combination of the tax
credit expirations and the administration's new rules and
Medicaid funding cuts that are coming, this could leave
Americans with higher premiums without a lot of options.
In Arizona, these aren't abstract numbers. They are real
families, real people. A guy I spoke to just a couple days ago
named Dennis is 66 years old. He's on Medicare, his wife is
not. Lives in Lake Havasu City. He worked in ship repair for
over 33 years, never went to college, just went to high school,
but became a project manager. His wife is 62, she depends on
ACA coverage until she's 65.
They've got three years of trying to deal with this. They
pay $440 a month for her insurance through the ACA, but they
get a $720 tax credit. When these tax credit lapse, her premium
will go from $440 to $1,100 a month, and this threatens their
retirement plans.
This guy worked really hard. They've got six kids that are
nieces and nephews that they raised. They're not going to be
able to live out their retirement dreams now because their
excess income that they had is going to go for insurance.
That's it.
It gets worse for other people. Robin, 60-year-old woman
from Sedona. She says the expiration of ACA subsidies could
lead to significant increases in her healthcare costs because
she also gets a premium tax credit? She said it's going to make
her have to decide between rent and healthcare. It's that
simple for millions of people across the country; having a
place to live or having healthcare insurance, and she told me
that she is not looking for a handout, she's looking for a hand
up.
Can you speak to the broader economic and health system
effects that we could see if these policies lead to large
coverage losses. How is it going to affect states like Arizona,
and West Virginia, and Florida, and New York, and Kansas, you
know, places that have rural areas? What should we expect to
see?
Dr. Lambrew. Thank you for that question. To talk first
about the uninsured and then about reduced enrollment. We had
hit a record low percentage of Americans who are uninsured in
2022, and 2023, and 2024. We actually have never done better.
The Congressional Budget Office projects that a few years
out, the number of uninsured in this country will increase by
50 percent as a result of these changes, plus the Medicaid
changes that are on the horizon. We know from our hospitals and
health systems and other providers who try to provide care to
people who may not be able to pay, may not be able to afford
it.
It will strain the healthcare system, which could mean more
rural hospitals close, mean more clinics really struggle to
keep their hours, to keep their nurses to really survive in a
climate with less reimbursement. There will be health system
effects, not just for those directly affected, but anybody in
that rural community who may not be able to get the services
that can no longer be sustained.
There's also a broader economic effect. Mr. Cuban talked
about small businesses needing this kind of support for their
workers to stay healthy. We have an estimate that 339,000 jobs
could be lost just because of the expiration of these premium
tax credits. Because it affects hospitals, it affects
communities that are around those hospitals, and that
translates into $2.5 billion loss revenue every year for
certain local governments.
Those are just two examples of the health system and the
economic effects of not continuing these tax credits.
Senator Kelly. I've got some other questions. I know I'm
out of time. This is obviously a complicated issue. You know,
healthcare in the United States is incredibly complicated. I've
got some questions I want to submit for the record to Mr. Cuban
and to Mr. Smith, but thank you again to all of you for being
here.
The Chairman. Thank you, Senator Kelly. Senator Marshall,
thank you. Welcome to our committee hearing. You're up.
Senator Marshall. Thank you so much, Chairman. I appreciate
the invite to come. Welcome to our guest as well. Could you
imagine going into a restaurant and you look at the menu, you
have your choice between a good Kansas City strip, or some day-
old chicken with gravy and cream on it to make it taste good
and not knowing what the price tags are?
Could you imagine you need a new pickup truck to pull the
fishing boat with? And you go online, you look at a Ford, and a
Chevy, and a Dodge. Of course, the Dodge is the best, but you
want to look at the price to help figure out which is the best
deal, but for some reason, in healthcare, it's the only
industry in the world, in America, that doesn't have a price
tag with it, so consumers have no idea.
When a patient would come to me and I would say, "Look, you
need an infertility surgery." They would say, not, "What does
it cost?" They would ask, "Does my insurance cover it?" For
seven, eight years, we've been working on legislation, a price
tags bill. I want to just briefly describe it to you all, if
you don't mind what it does. I want to make sure I get this
right.
It requires public reporting of negotiated rates, cost, and
cash prices for services at hospitals, surgery centers, imaging
centers, and clinical labs, so price tags for the hospital,
much like Surgery Center of Oklahoma is doing.
Number two, it ensures group of health plans have access to
claims data and prevents third-party administrators from
restricting data access. Anyone who's ran a business, isn't it
frustrating? We're trying to convert from a traditional
insurance to a self-funded model, and the insurance companies
won't give us our own data, whose data is that? We fix that.
Number three, it requires patients to be provided an itemized
bill for each succinct service as well.
I'll start with Dr. Smith. What impact would that have on
healthcare costs, specifically across the country, in your
guesstimation?
Dr. Smith. I think it would have a real positive effect on
costs because more companies would self-fund, and self-funded
companies are essentially our proxy buyers for individuals.
They have the same sticker shock that an individual does, and
if a company has their own data and they can actually look at
claims, they can compare what they paid.
Senator Marshall. I think you got a great point. The only
one whose health insurance costs are not going up are self-
funded plans that have a direct primary care doctor running
that, the folks in there as well. Do you think it would bring
down the prices of the hospitals you're competing with? Would
they bring their prices down?
Dr. Smith. Oh, absolutely, and because the self-funded
companies with sticker shock would patronize price-transparent
facilities like mine, and the hospitals would have to match
that or they'd lose all that business.
Senator Marshall. Mr. Cuban, you could talk about the
pharmacy industry, how PBMs hide it, or you could just talk
generally about healthcare, what the impact of a price care,
price tax bill would do. What do you think?
Mr. Cuban. It would be great. I mean, like for my
companies, we're already starting the process of direct
contracting, and the only way you can direct contract is if you
know the prices, and by knowing the prices, we can make our own
determinations about what our cost of care would be. Because
once we have our claims, we can look at our historical claims
and kind of extrapolate to see where they're going.
Point number two to that, is it would crush the big
insurance companies because it allows us, and this is what
we're doing, to direct contract with providers and b, just work
with a third-party administrator to handle all the services and
just figure out the care navigation with a third-party as well.
You know, it's rare that insurance companies take all the
insurance risks these days, and so, this is just one more way
to accelerate the move from them toward people, companies, in
particular, taking responsibility for all of their own care.
Senator Marshall. Dr. Moulds, do you have anything to add
to what the impact of the price tags bill?
Dr. Moulds. No. Anything that can be done to increase price
transparency from our perspective is going to be a good thing.
You know, we have a much better sight line into prices because
of our size. We require a lot of information through our
contracts. There's still opacity out there, but for folks who
are smaller employers, for example, they often don't, and they
don't have the same kind of sight line, and it's incredibly
important for them as well.
Senator Marshall. My belief is whatever we can do to turn
patients into consumers, again, is going to help bring the cost
of healthcare down, and if you want to be a consumer, you have
to know the prices as well.
Mr. Cuban, you want to talk a little bit just about the
opaqueness of PBMs, the traditional PBMs, and how they truly
are hiding the cost from my mom and dad when they go to their
local pharmacist.
Mr. Cuban. You know, Cost Plus has been in business for
three and a half years, and we're still the only pharmacy that
publishes their entire price list. As Mr. Moulds mentioned, he
used us as a reference price when the FTC investigated the
PBMs. They use Cost Plus Drugs as a reference price, and so,
they're doing all they can to prevent transparency.
They also do the same thing with contracts. Anytime you
have a contract with an employer in particular, or State, or
Federal Government, they always put in there maybe other fees
that we charge you. Right? Then, they'll play games like with
rebate GPOs. What a Rebate GPO is, you would think a PBM is big
enough to just negotiate with the brand manufacturers and get
the best rebates they can, but that's not what they do. They
create these intermediary subsidiaries called Rebate GPOs that
in turn go and negotiate with the brand manufacturers.
Take let's, in any given example, 60 percent in rebates
given back 40 percent to the actual PBM, who in turn goes to
the plan sponsor and says here's the whole 40 percent, not
disclosing that they kept 20 percent through their Rebate GPO.
Those are the types of things, and there's a long list
more, but I will say the one thing for every employer or
anybody listening is if you're paying any fees as a percentage
of a price of a drug, you're getting ripped off.
Senator Marshall. That's why we call it DE or Delinking.
The bill takes care of that as well, and the bad news is
they're moving these GPOs offshore so they don't have to obey
any of our laws. Thank you so much, chairman. Thank you for
holding this hearing.
The Chairman. Thank you, Senator Marshall. Senator
Gillibrand.
Senator Gillibrand. For Dr. Moulds, CalPERS has implemented
reference-based pricing for certain procedures like knee and
hip replacement surgery or colonoscopies. CalPERS has also
incentivized its members to use independent laboratories for
shoppable lab services. You emphasize in your testimony that
there is no one-size-fits-all solution for rising healthcare
cost.
What factors does CalPERS consider when deciding to adopt
reference-based pricing for certain procedures or services?
What are the limitations in using reference-based pricing, more
broadly? Are there certain procedures or services for which
this doesn't work or creates a problem?
Dr. Moulds. Thank you for the question. Yes, there are some
things that are better fitted for shoppable responses. For
example, the most recent reference pricing program we have is
with labs. We are essentially eliminating cost sharing for our
members who forego the hospital owned lab and instead go to
independent labs where we've pre-negotiated a much lower price.
You know, the reason that we're structuring it that way is
so that it's entirely a carrot-based intervention rather than a
stick, and with a stick-and-carrot intervention, like some of
our other programs, the one thing that we don't want to happen
is for our members to go down to get their lab work, only to
find out what their cholesterol numbers look like, et cetera,
that it's prohibitively expensive, and then never seek the care
they need.
We have to be thoughtful about when we do it, about the
implications of foregone care. You know, CalPERS members either
work for the State of California or a public sector entity like
a city, county, school district, or a fire district. They stay
with their employers for a very long time. Their long-term
health is incredibly important to us.
It's what we're in the business of doing, make sure that
they stay as healthy as possible, but also if they are
foregoing care, particularly preventative services, we're going
to see those costs later on down the line in the form of worse
conditions that are far more expensive to treat.
Senator Gillibrand. Dr. Smith, can you talk a little bit
about improving Medicare physician fee schedule? Because we
talked a lot about the problems. Can you talk about how to fix
those problems, and what your best recommendations would be for
this committee?
Dr. Smith. Yes, I'm no good at policy. I'll take a swipe at
it. I think one of the first things that maybe should be
considered is eliminating provisions on balance billing. If a
physician thinks their service is worth $500 and Medicare
beneficiary agrees, but the fee schedule only pay them $100.
There should be no prohibition on an arrangement between that
physician and that Medicare beneficiary for what they consider
without any interference. A mutually beneficial exchange.
Right now, there is a hard limit on the fee schedule and no
one can charge beyond that. I would probably start there, and
that will make the Medicare beneficiary a pretty intense
shopper, and that tends to drive prices down as well.
Senator Gillibrand. I feel like this hearing has been very
useful. We've gotten a lot of good ideas about how we reduce
costs from each of you. Some studies show that healthcare
consolidation also leads to increased healthcare costs.
To any of you who want to talk about this, to what extent
do you agree with these findings? And could you please describe
your experiences with healthcare consolidation as increase in
healthcare costs, starting with Mr. Cuban?
Mr. Cuban. I mean, I don't have anything specific to add to
that other than our own experiences that when a PBM owns a
pharmacy. When an insurance company has an investment in 10
percent of the doctors out there, they are going to optimize
for their top line.
I can tell you that when you look at the biggest insurance
companies, they have 2,500-plus subsidiaries. You know, the
intercompany transfers for just one of them alone is equal to
0.3 percent of the U.S. GDP, so you know that they're gaming
the system in every way they can, and if you just intermediate
them or disaggregate, separate them, you'll see prices fall
because they won't be able to arbitrage the financial system.
Senator Gillibrand. Yes. I've seen it where even different
funds acquire whole sets of healthcare practices, and they do
it because they know they can make money. What I've noticed is
a patient, and what my constituents have noticed as patients,
is that the services decline, that you're not actually getting
the quality of care that you had before.
Can you talk a little bit about that as well, any of you?
Also, what does this do to rural areas? I think one of the
biggest hard-hit areas it's going to be in rural areas. Because
when you're a provider in rural areas, you don't have the
economies of scale, you don't have the ability to do cost-
cutting, but honestly, people need healthcare to survive.
Part of my conclusions about this is that if we look at
healthcare as much more of a human right, as opposed to a
business model, you have a different approach. Some of the
things that you've offered are consistent with that. Like, let
the customer know how much things cost, publish it in advance,
let the market work better. Giving that information to
consumers, to the patient, is vital to get costs down.
Also, in your last recommendation, Dr. Smith, you were just
saying give patients more control. Because they may be willing
to pay a little more than Medicare will cover to get the
benefit of that doctor, and that's also interesting, so anyone
can answer the question. Go ahead.
Dr. Moulds. I mean, you know, just elaborating on some of
the earlier figures that I was citing about the differences
between the North and the South and California. We see a more
than two to one difference in prices. When we compare our least
competitive counties to our most competitive counties on
hospital prices, the most efficient 10 percent are at about 62
percent of Medicare. The least efficient 10 percent are above
350 percent of Medicare, so tremendous price variation.
Mostly, you can tie it back to a lack of competition. Just
generally speaking, anything that can be done to oversee
consolidation is going to be of critical importance. For us,
absent that, having other tools to get at those kinds of
differences in areas that really, you know, when we talk about
shoppable services, we provide a travel benefit for our members
who are getting hips and knees if they need to go out of
county.
Without that, we wouldn't be able to do reference pricing
in counties that uniformly are above 300 percent of poverty--I
mean, sorry, above 350 percent of Medicare. It's a tremendous
problem in California.
Senator Gillibrand. Dr. Lambrew?
Dr. Lambrew. I will just quickly add that I think this
issue of consolidation within states, especially areas that are
rural, is a great concern to state policymakers as was well as
federal policymakers because they're on the front line right
now of some of these negotiations between large health systems
and insurance companies. How do they manage kind of this cost
growth that they can't actually totally control? Because self-
funded plans are outside of states purview.
I think we'll see a lot of bills next year, I think, at the
state level, on this topic. I will just go back to rural
because I think many states are thinking hard about whether
some of the funds from the Rural Health Transformation Program
that's rolling out this fall can be used for different types of
payment models for those rural hospitals that may be critical
access hospitals.
Some of these hospitals just don't have enough volume to--
even if you paid them 300 percent of Medicare to support the
day in and day out services, so thinking creatively and
differently about how we support access to rural services, not
just hospitals, I think, will be on the horizon as well.
Dr. Moulds. If I could add just one point on the rural
issue. Rural areas are not driving healthcare costs in
California. We understand that in some rural areas it is more
challenging to provide healthcare services. Some of them are
still more expensive than they should be, but that's not what's
going on. It is the populated areas where you still have very
high prices that are driving healthcare costs in California.
Senator Gillibrand. Got it. Thank you, Mr. Chairman.
The Chairman. Thank you. Mr. Cuban, how does the level of
transparency that--your Cost Plus, right, you know your prices
and then your cost, you add 15 percent, right? You just tell
everybody, so everybody knows, so how's that changed behavior?
How's that changed? What have you watched?
Mr. Cuban. I mean, I look to see who's--people start
shopping more, to answer your question directly, because now
they know when they go to the pharmacy counter and they're
shocked by a price, and we get emails, and calls, and letters
all the time; "I thought this medication was going to cost me
$900. I went to cost plus and it was $21." Then, they tell
people Cost Plus is growing and we don't spend a penny on
advertising, and the reason is, when you save somebody money on
their healthcare and their medications, they're going to tell
everybody.
The Chairman. How many employees do you have at Cost Plus?
Mr. Cuban. Seventy, maybe. That includes manufacturing.
The Chairman. All right. How do you structure your health
plan?
Mr. Cuban. Our own health plan?
The Chairman. Yes.
Mr. Cuban. We created something called Cost Plus Wellness,
where we're going and we're doing direct contracting with
providers around Texas and where we have employees. I met with
a lot of CEOs and CFOs of hospitals and found out where the
insurance companies were taking advantage of them. They
underpay their contracted rate with high deductibles. You
turned the hospital into a subprime lender with the delays from
the preauthorizations, so we said we'll do none of those
things. If you give us a better reference price, we'll pay you
cash up-front, no deductibles and no preauthorization. We're
able to get a much better price.
What we're going to do that's different at, by the end of
the year, we'll have costpluswellness.com where we're going to
publish all our actual contracts. Because when we talk about
transparency, it's one thing to talk about prices, but most
companies don't have the sophistication to understand the
contractual details. We'll publish them for anybody to copy.
Then for our employees, they have no out-of-pocket when we
work within the system. For our employees, for any drugs from
Cost Plus Drugs, they have no out-of-pocket as well.
The Chairman. If they go outside the system, what happens?
Mr. Cuban. If it's for healthcare, someone's in a car
accident somewhere, then we have kind of a healthcare
navigator, we call our healthcare CEO, that will call the
hospital and say, "Hey, we'd like the cash price." Because the
craziness, part of the craziness of this healthcare industry is
the biggest insurance companies will negotiate a $25,000 rate
for a hip replacement, and any Tom, Dick, or Harry walking in
off the street can probably get it for $15,000, and so, we'll
negotiate directly to get the better price.
The Chairman. Do your employees have any costs at all in
healthcare?
Mr. Cuban. Yes, in some of them. Depending on which one of
the companies they're in, they do, but for the Mark Cuban
companies directly, they do not.
The Chairman. Okay. When you do--why do you have them have
any skin in the game?
Mr. Cuban. Why don't we?
The Chairman. Why do you have--why do they have, you know,
do they have any charge at all? Why do the employees have any
charge at all? What's the rationale for that?
Mr. Cuban. I mean, it's really just because as a startup,
we're progressing through all this. The goal is to get them so
they don't have any responsibility because we want to use it to
retain them. Now, I get where you're going with your question.
You want smart shoppers going out there to be able to make the
best decisions, but we'll have a healthcare CEO, CFO who goes
out there and does the negotiating for them.
The Chairman. They won't have a choice.
Mr. Cuban. Well, they'll have a choice. I mean, they'll
have the opportunity, but if it's not going to cost them
anything, nobody complains. Because what we're saying is, like,
if you have a favorite doctor that you've always used and we're
switching for whatever reason, we'll go to that doctor and say,
"Hey, we'd like to do a direct contract with you. What will you
charge us?"
The Chairman. What if they say no, and I'm not going to do
that?
Mr. Cuban. Then we'll pay their going rate because we want
our employees to be happy.
The Chairman. Okay. Dr. Smith, are government policies and
regulations helping you or hurting you?
Dr. Smith. Well, indirectly hurting us, I think, because we
pay tax, unlike the not-for-profit hospitals. As you pointed
out earlier today, we also are alarmed at how aggressively
hospital systems are acquiring physician practices and hiring
physicians. That has decreased the number of independently----
The Chairman. Why would they do that?
Dr. Smith. Well, yes, it's vertical integration and it's
consolidation. It's all the above. The number of independent
practicing physicians is dwindling in the country, and so, this
movement is curtailed to the extent that they have no sort of
entrepreneurial instinct or vision at all. I operate, for the
most part, out of the government regulatory sphere. We accept
no government payments. We just accept payments directly from
that.
The Chairman. Could you open up another surgery center
right now?
Dr. Smith. Could I?
The Chairman. Yes. Is there any government limitations?
Dr. Smith. The only government limitations on opening up a
surgery center or a hospital is if you wish to accept federal
payments that's illegal for a hospital.
The Chairman. Why would that be illegal?
Dr. Smith. That was a provision in the Affordable Care Act.
The Chairman. What's the rationale for that? I mean, what
you've said is your way cheaper than Medicaid and your way
cheaper than Medicare. Shouldn't they want a lot of competition
like you?
Dr. Smith. Yes, I can only speculate the prohibition on
opening new physician hospitals. It's actually worse than that.
The prohibition expanded to, or it included, expanding,
existing physician-owned hospitals. I was told that that was
part of getting the American Hospital Association to the table
to endorse the bill, but I'm speculating. That's just what I
was told
The Chairman. Mr. Cuban, so who's on your health plan,
right? It does take Cost Plus--you know who's on your health
plan, right?
Mr. Cuban. I have a bunch of different companies, but
that's generally,
The Chairman. You, I mean, the CEO of the company would
know who's on the plan, right?
Mr. Cuban. Not necessarily, no.
The Chairman. They would know who's----
Mr. Cuban. I mean, generally, yes, but I've got a lot of
different companies, so I couldn't----
The Chairman. Okay. Would you be okay if there was just an
agent that could just sign up somebody and you paid 100 percent
of it?
Mr. Cuban. No, of course not.
The Chairman. Okay. Would it surprise you that in the
COVID--you know, what Senator Warnock was talking about, that
the way it works is an agent can sign anybody up they want as
long as they know their name, address, and birthdate, and then
the money goes directly to the insurance company, so does that
sort of make sense to you?
Mr. Cuban. Of course not.
The Chairman. Okay. Do you think there might be fraud? That
people would take advantage of it?
Mr. Cuban. I mean, I think salespeople are going to find
ways to make money, aren't they, no matter what.
The Chairman. Yes. Dr. Moulds, so what did you--so how many
different reference things are you doing? How many different
procedures?
Dr. Moulds. Eighteen at the moment----
The Chairman. Okay. How much--sorry.
Dr. Moulds. Eighteen different procedures and they're
structured differently, but in three buckets, essentially.
The Chairman. Okay. You've said that the prices in certain
places of the hospitals are higher than others. Why would that
be?
Dr. Moulds. As I've said, I think a lot of it has to do
with competition. Some of it is independent of that. I mean,
certainly, there are places where it is harder to run a
hospital than in other places.
The Chairman. Let's say Sacramento. How many delivery
system, hospital delivery systems are there?
Dr. Moulds. There are one, two, three, four--four.
The Chairman. How many do you contract with
Dr. Moulds. All of them
The Chairman. Is there different pricing?
Dr. Moulds. Yes. Negotiated through, generally speaking,
either through the insurance companies that we contract with or
through our third-party administrator.
The Chairman. How big of a customer are you?
Dr. Moulds. Well, we're the largest purchaser in
California.
The Chairman. If somebody said they're not going to talk to
you, would it impact their business much?
Dr. Moulds. Yes.
The Chairman. Okay. You were talking about rural hospitals,
and I think all of us want to make sure rural hospitals stay in
business. Would you do a hip surgery at a rural hospital?
Dr. Moulds. Any hospital----
The Chairman. They do hip surgeries, and you do it?
Dr. Moulds. For any hospital that is of sufficiently high
quality.
The Chairman. How many surgeries would you want them to
have?
Dr. Moulds. Hips, as I understand it, I'm not that kind of
doctor. As I understand it, generally, there are multiple
knees--as in a single knee more than once or multiple single
hips, pretty rare.
The Chairman. Dr. Smith, how many, if you--before you went
to do a rural hospital, how many--would you want to go to a
physician that did one a year?
Dr. Smith. Yes, I would pick the physician, and they--you
know, I'd say they'd need to do 100 a year. If the surgeon had
confidence in a facility and the crew there, that would be the
biggest indicator that they know what they're doing.
The Chairman. In a typical rural hospital, how many, if
they were going to do, they do get 100?
Dr. Smith. They would not do 100, no.
The Chairman. You probably wouldn't want to go there for
your care?
Dr. Smith. No.
The Chairman. Right. Mr. Cuban, do you think you could
apply the same principle to some or other areas of healthcare?
Could we do it with MRIs and CT scans?
Mr. Cuban. Yes, particularly with those. Because it's just
equipment, and some technicians, and some qualified doctors.
The Chairman. Have you worked with the department of War?
Are they contracting with you?
Mr. Cuban. No.
The Chairman. Why not?
Mr. Cuban. I have no idea.
The Chairman. Have you talked to them?
Mr. Cuban. I have not talked directly. When the DOD went
out for one of their bids, their requirement was that thick,
you know, and it just wasn't worth the time.
The Chairman. Okay. The same for the VA and same for
TRICARE?
Mr. Cuban. Yes, same.
The Chairman. Senator Warner was saying that you were
checking the price, I think you said something. How did you
find that you were able to look at the TRICARE book? You could
see what their price was?
Mr. Cuban. Actually, just the copays. We were cheaper than
their copays.
The Chairman. Why would you be cheaper than our copays?
Mr. Cuban. Because they're stealing.
The Chairman. Have they--I mean, is there----
Mr. Cuban. Makes no sense. Does it?
The Chairman. Can they----
Mr. Cuban. There's a reason why they don't publish their
price list. To Dr. Moulds' point, prices vary by customer, to
customer, to customer. That's how they maximize their margins,
and that's how they're able to control. You know, Dr. Moulds
was smart enough to get a carve out from his PBM. Most
companies are not big enough, are able to do that.
The PBMs will require that you buy from their pharmacy,
that you buy from, you know, specialty. The fact that there's a
specialty tier for generic drugs or any drug. Every drug is
special in its own way. You know, if you are being offered a
specialty tier, you're being ripped off.
The Chairman. Yes. Dr. Moulds, so do you know anybody else
that's gotten a carve out, and why, you're just so big you can
get whatever you want?
Dr. Moulds. We can't get everything we want. We certainly
try to get the things that we think we need. We do not get
everything that we would like to have in our contracts. I am
not aware of other entities offhand that have carve outs. It
would not surprise me if larger purchasers sometimes.
The Chairman. Have you been able to get into any employers
that way?
Mr. Cuban. There's more and more carve outs now for GLP-1s
because one PBM sold their access to the formulary and excluded
another GLP-1. Some of those large customers are able to get
carve outs for GLP-1, specifically, but typically, we'll push,
we will get those big companies to start working with
transparent PBMs that include us in their network.
The Chairman. Dr. Moulds, what will it take for Mr. Cuban
to get your business? I mean, how can he get in? Because you
did it because of somebody like him. Right?
Dr. Moulds. As I said, it was very helpful to have his
prices published and to be able to use them in our
negotiations. We looked very expansively in our most--we just
renegotiated our PBM contract for a January 1st, 2026, start.
We look comprehensively at a number of different solutions,
including multifaceted ones of the kind that Mr. Cuban has
mentioned. There are a lot of things that PBMs do in addition
to buying drugs. They distribute drugs. They help manage
formularies, et cetera. You know, breaking that up is something
that we always have as a vision for our future.
It is enormously complicated thing to take on. We have
taken pieces of that and incorporated it in a broader approach
right now, but we're not precluding a future where we do
something that breaks apart what they provide and contracting
independently for those solutions.
The Chairman. Is there something that the PBMs are doing
that you can't do?
Mr. Cuban. No--I mean, let me qualify that. We don't have
access to all brand drugs. What we're told from the brand
manufacturers is the reason we they don't sell to us is because
it's been intimated to them from the big PBMs that if they do
work with us, they will see their portfolios diminished on
their formularies.
Formularies give the big PBMs 100 percent of their power.
If they didn't have control of formularies--and look, there's
no specific skillset that they have that the State of
California couldn't recreate for creating their own
formularies, right? They just go out and negotiate that
formula, and effectively, auction off access to that formula.
If you disaggregated by law formularies from PBMs
companies, patients would have better experiences because they
would be more dependent on their doctors, and the entire rebate
system would collapse like that. When the entire rebate and
fees system collapsed, the price of medications would fall
depending on the medication, 30 to 80 percent.
Their control of formularies gives them every bit of
leverage.
The Chairman. Why do you think PBMs are started?
Mr. Cuban. Why were they started? Yes, back in the day, it
was about negotiating pricing, and that's what they did, but
they don't negotiate prices today. If they negotiated prices,
they would just publish a price list. Hey, and I wouldn't be in
business, right? Because they're big, they should be able to
buy for a lot less than we can, but they don't negotiate
prices. What they negotiate is what they auction off as access
to their formulary.
You see that a big part of the problem as a result is going
back to when we talked about deductibles, right? All the stuff
about the ACA, well, you would think of PBM, if they truly were
about negotiating prices to the benefit of patients, they
wouldn't make patients pay full list price for a medication
until they hit their deductible.
What happens when that insured patient has that $2,500
deductible and it's a $400 medication, you know, out of the
$400, let's just say $200 of it goes right to the PBMs pocket.
The Chairman. Yes. Dr. Smith, have you calculated for just
the surgeries that you do, that you have prices of how much
Medicare would save or just even Medicaid in your state? Take
Oklahoma. Do you have any feel for what--take Medicaid. Have
you ever looked at what you could save if you--if everybody
just got your prices?
Dr. Smith. I think I could answer that in a roundabout way.
Oklahoma County, it's the largest county in Oklahoma, and they
have 1,100 employees. The first year we were directly
contracted with them, those 1,100 employees saved $750,000 out-
of-pocket. The Oklahoma County Health Plan saved $3.25 million.
Those prices we were offering were less than what Medicaid pays
the hospital, but that's 1,100 lives.
I think if you extrapolate that out to the number of
Medicare, Medicaid beneficiaries, it could be tens of millions,
dozens of millions of dollars, easily.
The Chairman. If Medicare, Medicaid had a complete choice
that people go wherever they want, and we gave the money to the
enrollee, you think they could buy better prices?
Dr. Smith. Oh, yes. You would essentially turn Medicare
into the same sort of cooperative arrangement that cost sharing
ministries have embraced where the member pays and then they're
reimbursed, so, that caused extreme shopping. Yes.
The Chairman. They would bring them in and make them
shoppers.
Dr. Smith. Yes.
The Chairman. Mr. Cuban, you're starting to produce sterile
injectables. Was that an easy process? Was the government
really a good partner in helping you do get that done?
Mr. Cuban. No, it wasn't an easy process, and if I can add
one more thing on the cost for Medicare and Medicaid. There
have been multiple studies that showed if Medicare bought, I
think it was oncology drugs, through Cost Plus Drugs, it would
save $6 billion a year, $1 billion a year for urology drugs.
To go back to your question on our manufacturing facility,
we had to work with the FDA and it was slow, but it was
efficient and we were able to get it done. Honestly now, since
the change in administration, we're extending that and they've
been very good to work with and much quicker.
The Chairman. Are you like three times, four times, five
times the international--same thing. Your prices, are your
costs way higher than if you did this in Vietnam, or India, or
China?
Mr. Cuban. No. Because we're mostly robotic, we're all
robotic. I'd say we're really close to being as cheap, if not
cheaper, than overseas.
The Chairman. All right. By the way, do you tell people
where drugs are made?
Mr. Cuban. I'm sorry?
The Chairman. Do you tell----
Mr. Cuban. Oh, where the source country is? Yes, we don't.
At this point in time, it's something we're discussing. We have
one drug that's made in China, that might move to two. We have
a bunch that are made in India, but we check and we do batch
checking and all that, and we're increasing the number that we
get done here.
Part of the challenge we have is the big wholesalers have
these contracts with American manufacturers, and I forget the
term, but it's like either deliver or your SOL. That really
makes things a lot difficult for us when it comes to when--for
them to be able to compete with pricing.
The Chairman. What do you think your prices, and especially
as you buildup more volume, what do you think your prices are
going to be on injectables versus something?
Mr. Cuban. Well, they're already cheaper than anywhere
else, right? And in terms of competitive with international, we
should be less expensive.
We're changing how we do it. We've created these mobile
pods so that we'll be able to not only make sterile
injectables, but we'll be able to make N-of-1 selling gene
therapy so we can park one of these mobile pods outside of
hospital.
When they're doing all kinds of genetic, I'm not--my
partner Alex over here knows this stuff better than I do, but
when they're doing N-of-1 analysis, we'll be able to convert it
to a biologic that they can use with a child, and it'll cost a
10th of what it currently costs.
The Chairman. Do you think you could open up generic drug
manufacturing the same price as India and China?
Mr. Cuban. Yes. Now we might not have the scale initially--
--
The Chairman. Yes, but once you get to scale.
Mr. Cuban. Yes. I mean, it's robotics. It's all robotics.
The Chairman. If you're doing one billion pills a year, you
think you can get there?
Mr. Cuban. Yes.
Senator Gillibrand. I have to go.
The Chairman. Okay.
Senator Gillibrand. Should I just go?
The Chairman. Yes.
Senator Gillibrand. I just want to thank you guys so much
for your testimony. I have to leave, he's insatiable. He's got
more questions. I want to just tell you, I appreciate your
testimony, and this committee is doing some really important
work on how we can help older Americans, and this affordability
hearing has been magnificent. Thank you so much.
The Chairman. Dr. Smith, why do you think hospitals aren't
doing this?
Dr. Smith. Well, they are. Now, many of the hospitals in
the Oklahoma City area that tried to put me out of business
early on are now the recipients of referrals that I send them.
We fortunately had enough national exposure that patients from
all over the country now ask for pricing for procedures that
can only be performed in their hospital.
When a CEO or a CFO gets a call from me, it's about a
patient from Florida, or Arizona, or Nevada who needs a colon
resection or a brain tumor removed. I cobble those prices
together and quote them to the buyer, either the individual or
the self-funded employer cost-sharing ministry. Invariably,
those prices are extremely reasonable. I then pay that
hospital.
These hospitals are coming into this movement. They've kind
of put their toe in the water, but it is spreading because
they're not afraid of the carriers. They're not afraid of the
carriers with a single-case agreement.
The Chairman. Yes, but if the Affordable Care Act didn't
outlaw what you're doing, you probably feel like there'd be a
lot more of these around the country?
Dr. Smith. Oh, yes.
The Chairman. Yes. Dr. Lambrew, what do you think of high-
risk pools?
Dr. Lambrew. You know, there's a fair amount of research on
how they operated back then. I looked at Texas's when I was
living in Texas, and there was a concern that for people with
preexisting conditions, they would often have to wait months to
get into it. They were often getting capped payments so that
they would run out of insurance, which is why I think most
people who have cancer or work with people who have some sort
of disease, much prefer integrating those people into
mainstream health insurance.
You know, now, we really have a situation where anybody can
get health insurance with a preexisting condition and not worry
about whether their coverage will be there for them. The
Affordable Care Act has maximum out-of-pocket limits. It makes
sure the essential health benefits are covered, and it really
makes sure that, hopefully, we all don't need that kind of
health insurance. When we need it, it's there.
The Chairman. Here's actually what's happened since the
Affordable Care Act came in to being. The premiums have
skyrocketed. Back then a catastrophic plan had a $5,000
deductible. Most of these ACA plans now have unbelievable
deductibles. It's what people didn't want to get, and
supposedly the ACA was going to say everybody's going to get
all this stuff covered.
Well, now what's happened is premiums are up over 100
percent, copayments are up, deductibles are up. I mean, the
deductibles are ridiculously high. Well, here's what's happened
with these extended credits. What we're talking--what some
people are talking about is these extended credits, the ACA,
nothing goes away. Nothing than nobody's losing. You're up to
400 percent--so let me give you an example. If you make--let's
see, you can make up to--400 percent would be $128,000 for a
family of four, a couple of 30. Basic, there's almost no
change, but you can be worth two million and make $225,000, and
the Federal Government is still subsidizing your healthcare.
The only way we're ever going to get this fixed is we're
going to have to start doing what you guys are doing. Number
one, we've got to let people buy the insurance they want to
buy. Do you want to be told what--how to cover your employees?
No. You'd like to say, "For my employees, I'm going to do it
this way, and if I don't like it, I'll change it." You can't do
that. Right?
Number two, is you ought to--if we are going to help
people, like if you want to help your employees, you probably
should let them shop. We don't do that. Then, we wonder why
healthcare costs have just--they're out of control.
What I like about what you guys are talking about is if
we've got to shop for this stuff we do, we're going to get
better. We're going to get better price, and Dr. Smith, you
said at lunch today, is there a correlation between--and in
most businesses, there's a correlation between price and
quality? How about healthcare? What do you think?
Dr. Smith. Well, it's inverse because----
The Chairman. The opposite what you would think.
Dr. Smith. It's completely upside down. Yes, if you have so
much uncertainty that you can't quote a price, you're probably
not very good at what you do, and that's the logic behind it.
The Chairman. Yes. Well, first of, I want to thank you
for--thanks for being here. Thanks for taking all the
questions. One thing we're trying to do up here is get
everybody more informed about healthcare so we can make better
decisions. The healthcare system that we have created, you
would never create. It doesn't work. It costs way too much
money. We don't have the outcomes we need. We're spending more
than other developed countries with worse outcomes. I mean, in
business you would go bankrupt.
If any Senators have additional questions for the witnesses
or statements to be added, the hearing record will be open
until next Wednesday at 5:00 p.m.
I want to really thank each of you for being here.
[Whereupon, at 5:36 p.m., the hearing was adjourned.]
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APPENDIX
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Prepared Witness Statements
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U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Prepared Witness Statements
Mark Cuban
My Shark Tank companies hate selling on Amazon - but most
don't have a choice. About 162 million Americans shop there,
and if you want to reach them, you have to play by Amazon's
rules.
Amazon knows this and takes full advantage - adding new
fees, raising old ones, forcing sellers to buy ads, and even
launching copycat products that compete directly with them.
They get away with it because they control the marketplace -
and because 167 million people pay $139 a year for Prime, which
makes Amazon incredibly "sticky."
So what does that have to do with healthcare?
Insurance companies work the same way. Over 300 million
Americans have some kind of coverage - commercial, ACA,
Medicare, or Medicaid. Every one of those plans hires a
Pharmacy Benefit Manager, or PBM, to run their drug benefits.
Three giant PBMs - all owned by the biggest insurance
companies - control pharmacy benefits for about 270 million
Americans. That's 70% more people than Amazon reaches.
Like Amazon, PBMs control the "store shelves." Their
shelves are called formularies - the lists of drugs your
insurance will cover. If a drug isn't on the formulary, it's
invisible to doctors and patients.
Here's the kicker: unlike Amazon, which wants lower prices,
PBMs actually prefer higher ones.
They say they negotiate lower drug costs - but they don't.
They auction off access to their formularies to the highest
bidder. Drug companies pay the rebates and fees PBMs demand, so
their drugs can be covered and prescribed. If they don't pay,
they lose access to millions of patients - costing them
billions.
Those rebates and fees are based on a percentage of the
drug's list price - called WAC, the Wholesale Acquisition Cost.
The higher the list price, the more money PBMs make.
Because PBMs are so powerful, that inflated list price
becomes the reference point for the entire drug supply chain.
Take a hypothetical drug - Brand A. The PBM tells the
manufacturer to set the list price at $600, with a 50% rebate
and another 10% in fees, leaving the manufacturer with $240
net.
Now, what does the patient pay?
If they're uninsured: $600.
If they're insured but haven't met their deductible:
still $600.
And yes, the PBM still gets its rebate on that sale. PBMs
and the insurance companies that own them love high deductibles
because they keep collecting rebates while patients pay full
price. Insurance carriers love it even more when patients can't
afford their deductibles - because then they never have to pay
out from premiums.
So patients end up paying the highest prices of anyone -
all because PBMs insist on using inflated list prices instead
of transparent net prices.
Meanwhile, wholesalers buy the drug from the manufacturer
for $600. The three major wholesalers all use the same list
price, so there's zero price competition, and because their
fees are also based on WAC, they profit more when prices rise.
Pharmacies buy from wholesalers at around a 5% discount -
about $570 in this case, but when they fill a brand
prescription for an insured patient, they're often reimbursed
less than what they paid. They literally lose money on most
brand-name drugs, and if they don't fill enough of those money-
losing prescriptions, PBMs and wholesalers hit them with even
more penalties. No wonder independent pharmacies are being
crushed.
Make it make sense. It doesn't.
Because the whole system is built around list prices,
everyone - PBMs, wholesalers, and insurers - has an incentive
to keep WAC going up, and it almost always does. Patients are
the ones who pay the price.And here's the saddest part: self-
insured employers, states, and anyone contracting with the big
PBMs are signing off on this system. They approve plans that
force patients to pay list price without realizing how badly
their members are getting ripped off. We blame PBMs - but the
real problem is the people and governments who keep signing
these contracts without a clue
And big brand pharma is part of the problem too. They hate
the big PBMs , but they let themselves get trapped in this mess
with formularies and WAC based pricing.
If they moved to all net pricing , out of pocket prices to
patients would drop immediately.There is a reason the USA has
the highest brand pricing in the world and it's because we are
the only country that uses PBMs.
Coincidence. I think not /)
What to do?
Require that all cash pays are counted against
deductibles
Require that patient out of pocket costs are based
exclusively on net pricing not WAC
Separate formularies from PBMs
Use administration leverage to require manufacturers to
use net prices and marginsrather than list prices and rebate/
fees
Get rid of GCRs and DIRs
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Prepared Witness Statements
Dr. G. Keith Smith, MD
The Surgery Center of Oklahoma was founded in May of 1997.
Our goal was to gain control of the medical and financial
treatment of our patients. The problem was that even a minor
surgical procedure performed at a large hospital meant
bankruptcy for many patients, including insured patients.
Consistent with their attempts to maximize revenue, hospitals
denied physicians the tools and supplies they thought
appropriate to treat their own patients-and yet hospitals
continue to book ever increasing profits even today. I have
changed this model. Our model is grounded on mutually
beneficial exchange. While we save patients tens of thousands
of dollars, currently the only ones that walk through our door
are patients paying for their own care (about half the
population) because if someone else is paying, they don't shop
or care how expensive something is.
We were excluded from insurance at the start which meant
that we had to be creative. We started quoting patients all-
inclusive prices. It was simple math: what fee did the surgeon
think was fair, what was the fair anesthesia charge and what
was the time and materials based charge for the facility. It
turns out that our prices were usually less than the patient's
in network deductible and co-pay. Today our total charges are
still only 1/6th to 1/10th of what large hospital systems near
us charge and even more extreme price discrepancies are
routine. In fact, we recently performed a tonsillectomy on a
child for $3875 after the family had been quoted $72,000 by a
Dallas area hospital. Our prices remain half of what Medicare
pays hospitals and less than Medicaid payments to hospitals for
the same procedure.
The Surgery Center of Oklahoma (www.surgerycenterok.com)
quoted prices over the phone to patients until 2009 which is
when I launched the first website displaying all-inclusive
surgical prices. I had three goals in mind, all of which I
would argue have been achieved. First, I wanted sticker-shocked
patients to easily find us. Second, I wanted to start a price
war, so patients far from Oklahoma could use our pricing as
leverage in their local market. Third, I wanted to better
understand why the same market discipline other industries must
endure was seemingly not a thing in healthcare.
The first patients to arrive after posting our prices were
Canadians. These patients are forced to wait in lines longer
than the misery they can endure without care. Then it was the
uninsured, beneficiaries of self-funded health plans and
members of cost-sharing ministries. Approximately half our
patients travel from out of state or out of the country to
Oklahoma City for their surgical care. As news of the success
of our model has grown, so has the number of facilities-and I'm
happy to report-large hospitals-who now have copied us.
Price-matching in the industry has had a deflationary
effect, even on the price-gouging facilities, as they stand to
lose business and patients if they don't compete. Our model
also increases the quality of care because physicians with
unpredictable outcomes shy away from this tightly disciplined
space. The good surgeons would rather perform a surgery at my
facility due to better conditions and the higher pay they
receive.
While building the surgery center and changing the market,
my mission has now grown. I now also run Atlas Billing Company
(www.atlasbillingcompany.com) which facilitates payment bundles
for the Surgery Center of Oklahoma and is now curating and
implementing surgical bundles for many other facilities now
attempting to service price-sensitive buyers and patients. I am
also a co-founder of the Free Market Medical Association
(www.fmma.org), a mission-driven organization that works to
bring buyers and sellers together in the United States,
promotes market discipline in the industry and now has 37 state
chapters.
To the industry big shots, or as I call them the cartel,
the healthcare system in this country isn't broken-it is
working precisely as designed, meant to enrich the corporate
elite and intermediaries at the expense of patients and the
American people at large. Fortunately, the alternative approach
I've described is becoming more widespread. As insurance
deductibles balloon and delays and denials become more
commonplace, affordable, high quality care is available for
victims of the system. I predict that "shoppable" medical
services will become particularly critical for older Americans
as an increasing number of physicians opt out of or severely
curtail their exposure to Medicare.
Thank you.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Prepared Witness Statements
Donald B. Moulds, Ph.D.
Introduction
Chairman Scott, Ranking Member Gillibrand, and Members of
the Committee, thank you for inviting me to testify on behalf
of the California Public Employees' Retirement System (CalPERS)
and discuss how shoppable services can help control health care
costs. I will be using our reference pricing program and other
aligned purchasing innovations as case examples.
My name is Don Moulds and I serve as the Chief Health
Director for CalPERS. With more than 1.5 million members,
CalPERS is the largest commercial health benefits purchaser in
California and the second largest commercial purchaser in the
nation after the federal government. We contract with numerous
large health insurance companies to provide our members with a
variety of health plan offerings that include health
maintenance, preferred provider, and exclusive provider
organization (HMO, PPO, and EPO) plans, as well as Medicare
Supplemental and Medicare Advantage (MA) plans. In 2024, we
spent over $12.4 billion purchasing health benefits for active
and retired members and their families on behalf of the State
of California (including the California State University) and
nearly 1,200 public agencies and schools.
In my testimony, I will outline successes and lessons
learned from CalPERS' two reference pricing programs: our hip
and knee replacement reference pricing program and our
Ambulatory Surgery Center Reference Pricing program. I will
also describe a new program we instituted last year to
incentivize our members to use independent laboratories for
shoppable lab services rather than higher cost hospital-based
labs. Finally, I will touch on our experience with a price
transparency tool.
As I share our experiences, I wish to underscore that there
is no "one size fits all" solution for rising health care
costs. The cost-driving challenges are multifaceted. So too
must be the solutions. We've learned that initially encouraging
ideas can have underwhelming results or unintended consequences
and that purchasers must be ever vigilant in monitoring and
evaluating interventions to ensure they produce the outcomes we
are seeking. Having said that, CalPERS considers consumer-
oriented incentives, such as reference pricing, to be an
integral part of our value-based purchasing model. At the end
of my testimony, I will discuss other mechanisms that CalPERS
utilizes to provide superior health care services at the
greatest value for our members.
About CalPERS
For more than nine decades, CalPERS has provided retirement
and health security for state, school, and public agency
members serving more than two million members as the nation's
largest defined-benefit public pension fund.
As part of our role in administering health benefits for
members and their families, CalPERS is committed to ensuring
access to equitable, high-quality, affordable health care.
To promote competition and keep premiums affordable,
CalPERS regularly commissions competition studies. For example,
based on results from the 2021 study, CalPERS implemented
health plan service expansions and introduced lower-cost HMO
plans. These efforts increase competition within the CalPERS
insurance marketplace and put downward price pressure on the
premiums, positively impacting CalPERS members and
employers.\1\,\2\
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\1\ See CalPERS, Pension & Health Benefits Committee Agenda Item
7a, available at https://www.calpers.ca.gov/docs/board-agendas/202103/
pension/item-7a--a.pdf
\2\ See CalPERS, Competition Study & 2022 New Plans, Area
Expansion, and Benefit Changes, available at https://
www.calpers.ca.gov/docs/board-agendas/202103/pension/item-7a-attach-2--
a.pdf
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To control rising health care costs, CalPERS works to align
financial incentives with the health plans and Pharmacy Benefit
Manager (PBM) we contract with, aiming to mitigate cost trend
increases. In June 2024, CalPERS awarded new five-year
contracts for its self-funded PPO plans to Blue Shield of
California (BSC) and to Included Health, which serves as the
population health management vendors. The contracts are
designed to promote savings and improve quality by establishing
financial incentives and clinical performance guarantees. BSC
and Included Health have committed64 million at-risker the term
of the contract if they do not meet the program's goals for
controlling medical cost trends and improving quality. The
contracts set the initial medical trend cost target at 5.5% in
2025, decreasing annually to 3% by 2029. If CalPERS' medical
cost trend is lower than the target, BSC and Included Health
stand to share in the savings.
In July, CalPERS announced a new five-year pharmacy
benefits contract with CVS Caremark (CVS) designed to address
rising costs of prescriptions while ensuring access to safe and
effective medications for members. Under the agreement, CVS has
committed $250 million at-risk over the term of the contract
for controlling drug costs and improving health outcomes.
Similar to our HMO and recent PPO contracts, the new PBM
contract builds on CalPERS' broader efforts to align health
care affordability with quality and equity. By aligning
pharmacy benefits with our overall health care goals, CalPERS
aims to create a model that can serve as a blueprint for
purchasers across the nation.
Reference Based Pricing
CalPERS mitigates medical trend increases through cost and
quality conscious strategies, including leveraging curated
hospital networks for better pricing, implementing value-based
purchasing and integrated health models, fostering competition,
and flex-funding. One contributor to increased health care
costs is significant price variation for the same service. For
example, lab services tend to vary greatly in price, despite no
quality difference. Additionally, the prices for procedures
provided in hospital outpatient departments are typically
higher than those charged in freestanding centers due to the
hospitals' higher costs and stronger bargaining position with
insurers. In fact, Medicare reimburses hospital-based
outpatient procedures at rates substantially higher than those
it pays freestanding ambulatory facilities.\3\ As such,
employers and insurers have started to utilize programs
encouraging employees and enrollees to select the most cost-
effective setting, including reference pricing models, which
CalPERS has had success with. In a reference pricing model, the
payor sets a maximum price for a specific health care service.
Patients still have the option to receive that service at a
facility of their choice, but they are responsible for charges
above the reference price. This process helps contain costs
while maintaining access to quality care by encouraging members
to choose a pre-arranged high-quality, lower-cost provider for
certain medical services. Patients who require hospital
outpatient services due to specific clinical needs or limited
local options are not subject to cost-sharing initiatives.
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\3\ See Robinson, James C., Timothy T. Brown and Christopher
Whaley. "Reference-Based Benefit Design Changes Consumer Choices and
Employers' Payments for Ambulatory Surgery. Health Affairs 2015 34:3,
415-422 https://www.healthaffairs.org/doi/10.1377/hlthaff.2014.1198
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CalPERS Experience #1: Hip and Knee Reference Pricing
In January 2011, CalPERS and Anthem Blue Cross of
California (Anthem), our prior third-party administrator for
our PPO plans, implemented a reference pricing program for
high-cost elective procedures with minimal quality difference
among facilities. CalPERS initially aimed to control inpatient
hospital orthopedic surgery costs for total hip and total knee
replacements. The program involved 46 hospital inpatient
facilities statewide that accepted a reference price of $30,000
and met quality and volume standards. Members who used the
designated reference price facilities were responsible for
their standard coinsurance payments. However, members who chose
a non-designated facility were responsible for any charges
above the $30,000 reference price. Medical exceptions were
granted for non-routine procedures, and travel benefits were
available for members living over 50 miles from a designated
facility. A significant level of effort was devoted to both
implementation and member education.
Results: The reference pricing program successfully
increased the proportion of members who used designated
facilities from about 50% to 64% within two years. Notably,
non-reference pricing facilities lowered their charges to match
the CalPERS $30,000 reference price. In turn, price variation
for hip and knee replacements decreased dramatically. The
average price at preferred facilities dropped from $35,000 to
$25,500, while the non-reference pricing facilities reduced
their prices from $43,000 to $27,000.
A study by University of California Berkeley health
economists found that CalPERS' reference pricing program saved
$5.5 million in its first two years, with the average price per
procedure declining by 26% or about $9,000.\4\ Initially, the
program sought to create savings through consumer decisions,
but market changes and hospital pricing had the biggest impact.
We learned anecdotally that non-reference pricing facilities
were lowering prices to draw CalPERS members. Berkeley
economists concluded that 14% of the savings arose from more
individuals selecting reference-based pricing facilities, while
86% were due to cost reduction. Our analysis showed that the
program continued to generate approximately $4 million in
annual savings through 2020, with participating facilities
expanding from 46 to 72. Additionally, members who utilized
reference pricing facilities had lower rates of complications
and infections with similar follow-up admission rates. Patient
experience was also shown to be better at the reference pricing
facilities.
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\4\ See Robinson, James C., and Timothy T. Brown. "Increases in
consumer cost sharing redirect patient volumes and reduce hospital
prices for orthopedic surgery." at Health Affairs 32.8 (2013): 1392-
1397. https://doi.org/10.1377/hlthaff.2013.0188
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In terms of our overall health care spend, savings from
reference pricing have been relatively modest, but the model
has nonetheless offered valuable insights and lessons that may
inform future strategies and potentially yield further savings.
More member outreach could have been beneficial, such as
phone calls or letters to members who had been referred to a
procedure that could have been done at an ASC or a pop-up in
the price transparency tool when members searched for a
reference pricing procedure.
Our reference price has applied only to the facility
portion of the procedure and excluded professional fees and
other related costs. Adopting a bundled payment approach
alongside reference pricing could be beneficial.
CalPERS has used a single statewide price that is easily
communicated to members, despite significant price variation by
region, with Northern California historically much more
expensive than Southern California. Cost savings could be
improved with regional pricing, but it might be more difficult
to explain to our members.
CalPERS Experience #2: Ambulatory Surgery Center Reference
Pricing
In 2012, CalPERS and Anthem introduced a second reference
pricing program for Colonoscopy, Cataract and Arthroscopy
services. Under this program, procedures not performed at an
Ambulatory Surgery Center (ASC) have a set reference price.
Similar to the hip and knee replacement procedures, we
identified large price variations for colonoscopy, cataract,
and arthroscopy services. The variation mainly depended on the
location of care, specifically whether procedures were provided
by Hospital Outpatient Facilities vs. ASCs. We noticed a
substantial increase in routine non-screening colonoscopies at
ASCs, climbing from 70% to over 90%. In contrast, Anthem's
broader business had around 75% of these procedures at ASCs.
Results: The University of California, Berkeley's
evaluation of this program showed total savings of $5 million
each year and realized average reductions of 21%. Specifically,
cataract surgeries resulted in $1.3 million in savings (20%
reduction), colonoscopies saved $7 million (28% reduction), and
arthroscopies contributed $2.3 million (17% reduction) across a
two-year timeframe.\5\,\6\ As a result, in 2018,
CalPERS extended its ASC reference pricing program to 12
additional procedures, including endoscopic and laparoscopic
procedures.
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\5\ See Robinson, James C., Timothy T. Brown and Christopher
Whaley. "Reference-Based Benefit Design Changes Consumer Choices and
Employers' Payments for Ambulatory Surgery." Health Affairs 2015 34:3,
415-422 https://www.healthaffairs.org/doi/10.1377/hlthaff.2014.1198
\6\ See Robinson, James C, Timothy T. Brown and Christopher Whaley.
"Association of Reference Payment for Colonoscopy With Consumer
Choices, Insurer Spending, and Procedural Complications." JAMA Internal
Medicine 2015;175;(11):1783-1789. https://jamanetwork.com/journals/
jamainternalmedicine/fullarticle/243473
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CalPERS Experience #3: Member Incentive Lab Program
In 2024, CalPERS implemented a member incentive program for
labs due to high price variation with no quality difference.
National research shows that lab services in hospitals (e.g.,
large health systems) cost roughly 3.7 times more than those at
independent labs.\7\ Our data indicates the markup may be even
higher, especially compared with California's two largest
independent lab providers.
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\7\ See Chang, Jessica, Katie Martin, Yuvraj Pathak and Marissa
Myers. "Price Markups for Clinical Labs: Employer based Insurance Pays
Hospital Outpatient Departments 3X Than Physician Offices and
Independent Labs for Identical Tests." Health Care Cost Institute,
https://healthcostinstitute.org/images/pdfs/HCCI%20Lab%20Brief--
103124.pdf
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Our program offers no cost sharing for preferred
independent labs in California, but non-preferred labs require
standard coinsurance. In contrast to the other reference
pricing programs, the lab incentive program provides financial
incentives for our members to choose the lower-cost option
without imposing additional costs for those who opt out.
While we are still evaluating this program, preliminary
results indicate it increased preferred lab use by 4% and saved
members $2.4 million in its first year. As a result, we are
expanding outreach to improve awareness of the program and
encourage more use of the preferred lab sites.
CalPERS Experience #4: Price transparency tool
To aid price shopping, CalPERS provided a price
transparency tool for PPO members in 2014 that allowed members
to use an app to search for location, price, and quality of
services. The tool was created to empower members to shop for
services based on both price and quality, fostering greater
member engagement. When paired with reference pricing, the goal
was to create a more informed and engaged member.
Results: Ultimately, the price transparency tool fell short
of delivering expected overall cost savings. Members saved on
imaging costs, but spending in other 'shoppable' categories and
reference pricing procedures showed no decrease.
We found that few of our members used the tool, especially
for price shopping. Even though 24% of CalPERS households
registered to use the tool, only 12% used it to search prices,
and just 4% maintained usage (3 or more times, at least 90 days
apart). Our experience is consistent with other research in
this area.\8\ A small fraction of people sign up for these
tools, and among those who sign up, few use the tool before
seeking care. Furthermore, when they do use the tool to search
prices, for most services, users do not choose a lower cost
provider.
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\8\ Desai S, Hatfield LA, Hicks AL, Chernew ME, Mehrotra A.
Association Between Availability of a Price Transparency Tool and
Outpatient Spending. JAMA. 2016;315(17):1874-1881. doi:10.1001/
jama.2016.4288
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As such, CalPERS stopped offering the tool after 2.5 years
due to the added cost of the tool. We found that there are a
limited range of services that are truly `shoppable' and that
our benefits with low cost sharing diminished the relevance of
price shopping for most services. While members express an
interest in quality and pricing, their decisions frequently
hinge on the referrals they receive from healthcare
providers.\9\ Additionally, rural communities lacked sufficient
options to facilitate a meaningful comparison.
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\9\ Semigran, H., Gourevitch, R., Sinaiko, A., Cowling, D., &
Mehrotra, A. (2018). Patients' views on price shopping and price
transparency.. The American journal of managed care, 23(6), e186e192-
ee192. Available at: https://pubmed.ncbi.nlm.nih.gov/28817296/
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Limitations on Reference Based Pricing
Reference based pricing has shown promise, but it is not a
panacea. Research suggests that if implemented as broadly as
possible, it saves about five percent of total cost of
care.\10\ Considering that CalPERS spends approximately $2.3
billion each year (or $6.4 million per day) on the affected PPO
population, the savings are quite modest.
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\10\ White, Chapin, and Megan Eguchi. Reference Pricing: A Small
Piece of Health Care Price and Quality Puzzle. National Institute for
Health Care Reform. Available at: https://nihcr.org/wp-content/uploads/
2016/07/Research--Brief--No.--18.pdf
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Overall savings are limited by the small number of
procedures where reference pricing makes sense. While reference
pricing is well suited for non-emergent elective procedures
with significant price differences, many healthcare services
are not "shoppable."
Our experience has shown that while price referencing
programs can work, to truly manage rising health care costs,
other issues need to be addressed, including:
Competition: CalPERS has found that insufficient
competition results in higher prices. Since 2010, competition
among hospitals and providers in California has lessened,
notably in rural regions.\11\,\12\ As of 2018, 52%
of specialists and 42% of primary care physicians were in
health system-owned practices.\13\ In markets with fewer
hospitals, consolidation led to a 12% increase in premiums, a
9% rise in specialist fees, and a 5% rise in primary care costs
from 2013 to 2016.\14\
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\11\ See California Health Care Foundation (CHCF), The Sky's the
Limit: Health Care Prices and Market Consolidation in California,
available at https://www.chcf.org/wp-content/uploads/2019/09/
SkysLimitPricesMarketConsolidation.pdf
\12\ See California Health Care Foundation (CHCF), Markets or
Monopolies? Considerations for Addressing Health Care Consolidation in
California, available at https://www.chcf.org/publication/markets-
monopolies-health-care-consolidation-california/
\13\ Ibid.
\14\ See Health Affairs, Consolidation Trends In California's
Health Care System: Impacts On ACA Premiums And Outpatient Visit
Prices, available at https://www.healthaffairs.org/doi/full/10.1377/
hlthaff.2018.0472
To address abuses in this space, Congress could pass
laws to stop anti-competitive practices in contracts between
providers and health plans. Specifically, we support the
passage of the Healthy Competition for Better Care Act (S.
1451), which encourages a more open market, fosters
competition, drives innovation, improves quality, and reduces
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costs.
Transparency: We see transparency as vital in developing
shoppable services but emphasize that it should be user-
friendly for all stakeholders. CalPERS maintains a
comprehensive claims data warehouse to track health care costs
and outcomes, allowing us to identify cost drivers and innovate
in areas like reference pricing. Other payers may lack this
long-term data, making federal standards for hospital
transparency crucial. We commend the Administration's efforts
to ensure comprehensive and precise reporting of hospital price
data.
Innovation: Beyond reference pricing, CalPERS
continuously explores innovative approaches to reduce costs and
improve quality. For example, CalPERS, in alignment with other
large public purchaser partners in California, adopted a subset
of quality and outcome measures and tied significant financial
accountability to high-performance on these measures for our
health plans. These measures, known as the Quality Alignment
Measure Set (QAMS), and the financial incentives tied to them,
aim to improve care for clinically important conditions for
which there are major opportunities for improvement and
evidence-based measures in current use. The QAMS consists of
five measures, all of which are nationally endorsed, evidence-
based NCQA HEDIS measures: Childhood Immunizations, Controlling
High Blood Pressure, Comprehensive Diabetes Care - Poor Control
(HgbA1c >9 percent), Colorectal Cancer Screening, Maternity
Care (reflecting a combined score for Timeliness of Prenatal
Care and Postpartum Care).
Conclusion
Thank you, again, for inviting me to participate in today's
hearing. CalPERS' application of Reference Pricing models
demonstrates modest but notable savings in shoppable services.
However, truly curbing rising health care costs requires a
thoughtful, multi-faceted approach. CalPERS is uniquely
positioned to assist the Committee as it develops policy and I
welcome your questions on how we manage health care costs.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Prepared Witness Statements
Dr. Jeanne Lambrew, Ph.D.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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Questions for the Record
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U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Questions for the Record
Mark Cuban
Senator Mark Kelly
Question:
You have pushed for greater transparency and fairness in
prescription drug pricing. Many Americans, including seniors on
fixed incomes, continue to struggle with rising drug costs
despite recent reforms.
As new drug pricing models and federal policies take shape,
there is concern about how these changes will affect the
stability of supply and the ability of smaller providers and
rural hospitals to keep essential medicines in stock. We all
agree that prescription drug costs are too high, but in states
like Arizona, many people rely on Medicare and Medicaid. So
even small pricing shifts could have ripple effects on access
and affordability, especially for small hospitals, community
pharmacies, and rural clinics.
How can future pricing models and market changes avoid
unintentionally raising costs or limiting access for patients
who rely on public programs or small community providers?
Response:
The solution is for states to stop working with industry
behemoths and instead join together to create their own group
purchasing organizations (GPOs). These state-run GPOs could
purchase everything from generic and brand medications to
medical equipment. Their aggregate buying power would shift
pricing and availability leverage away from PBMs, wholesalers,
and insurance companies and move it directly to the states."
Question:
How can we encourage transparency and competition in the
drug market while maintaining a reliable supply of medicines
for seniors and people with chronic conditions?
Response:
If states work together to purchase all medications, from
the cheapest generics to the most expensive therapies, they can
use their combined volume to require that all purchases are
made at a net price. This model would also require all
associated costs, markups, and prices to be published, ensuring
full transparency and removing any question about whether the
pricing is fair."
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Questions for the Record
Dr. G. Keith Smith, MD
Senator Mark Kelly
Question:
It's clear that transparent, all-inclusive pricing has
allowed patients to save tens of thousands of dollars.
At the same time, many older Americans, particularly those
in rural or lower-income areas, still struggle to access care
because of high hospital costs and reduced Medicaid
reimbursement rates.
For transparency to work, it also has to be fair and
accessible to patients on Medicare and Medicaid. This is also
important for those in rural areas who may not have multiple
provider options, which makes it hard to make informed
decisions about their care.
How can we expand shoppable health care so that patients in
places like rural Arizona can actually benefit from transparent
pricing and consumer choice, rather than seeing these reforms
limited to larger or urban health systems?
Response:
Thank you for your question. While certain, high-complexity
services can only be delivered in high population areas due to
specialization of personnel and equipment, primary care,
imaging, simple surgical and obstetrical care can be delivered
in rural areas and has been traditionally. My great uncle,
Walter Bayes, owned the only hospital in Chickasha, Oklahoma
(some of the old-timers still talk about Bayes Hospital). His
ownership and control of the facility allowed him to treat
patients as individuals, both medically and financially. Most
of the rural hospitals in Oklahoma (and I'd bet nationally)
were established, owned and controlled by the physicians
working in the small towns. I would suggest that just as my
surgery center is owned and controlled by the physicians
working there, physician ownership of rural hospitals
(currently prohibited by Stark laws) would solve part one of
rural health care's issue: supply. Ownership would not only
powerfully recruit new graduates from residency, it would
almost certainly draw urban physicians, disgruntled with their
job as a hospital employee or otherwise grinding out a living
in a corporate atmosphere. Demand, is part two of rural health
care's issue, fueled by relieving patients of a large part of
their out of pocket expense. Medicare price controls have not
only caused shortages on the supply side, but, relieved of so
much of their out of pocket expense, the demand side by
patients without sticker shock has overwhelmed the restricted
supply of personnel and services. I would suggest that allowing
physicians to own the hospitals and repealing balance billing
provisions which currently restrict physician fees to the
"Medicare allowable" would together bring more market
discipline to rural care. Any physician inclined to abuse
patients with this new freedom would find their waiting room
empty as more arriving competitors would keep this temptation
in check. I hope this answer is helpful to you and in line with
your inquiry.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Questions for the Record
Dr. Don Moulds, Ph.D.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Questions for the Record
Dr. Jeanne Lambrew, Ph.D.
Senator Raphael Warnock
Question:
According to Justice in Aging, 1 in 5 Americans between the
ages of 50 to 64 are enrolled in Medicaid, with 5 million of
those individuals covered through Medicaid expansion. Older
adults also face challenges with employment, something that the
Special Committee on Aging examined just last month.
How will older Americans face barriers to health coverage
under H.R. 1's new Medicaid work requirements?
Response:
According to KFF, older Medicaid enrollees may be most at
risk of losing coverage due to work requirements that begin in
January 2027. The percent of non-disabled, non-parent adults
with Medicaid coverage that are employed or in school is 72
percent of those ages 19 to 27, 66 percent of those ages 27 to
49, but less than half (48%) of enrollees ages 50 to 64.
In addition to its new work requirements, H.R. 1 makes
other changes to Medicaid. An estimated 90 percent of the 22
Americans age 50 years or older will be affected by these
changes. Given the greater use for health care of older than
younger people, the loss of Medicaid coverage could have dire
health consequences.
Question:
Can you describe how loss in health coverage due to work
reporting requirements will increase costs in Medicare as
seniors age into the program?
Due to the expiration of enhanced Premium Tax Credits
(PTCs), older Americans are at risk of losing health care
coverage due to facing one of the highest premium increases.
This might have ripple effects on the rural healthcare system
in states like Georgia, with 71 rural hospitals and 94 rural
health clinics, which disproportionately serve older Americans.
Response:
Research suggests that people who were uninsured in the
year before enrolling in Medicare had higher health needs and
significantly higher costs than those who were previously
uninsured.
Question:
How will the expiration of enhanced PTCs and Medicaid cuts
affect the financial viability of rural hospitals and clinics
in Georgia?
Response:
A recent analysis by the Urban Institute estimates that the
failure to continue current premium tax credits will result in
7.3 million people losing ACA coverage and 4.8 million people
becoming uninsured. This, in turn, would reduce office-based
physician service spending by $5.1 billion. It would also
reduce hospital spending by $14.2 billion and increase
uncompensated care for hospitals by $2.2 billion.
The analysis estimates that Georgia hospitals will be among
the hardest hit, potentially experiencing a 20.8 percent
increase in hospital uncompensated care. The National Rural
Health Association estimates that 50 percent of rural hospitals
nationwide are operating with negative margins: the funding
reduction from the expiration of enhanced premium tax credits
could cause them to reduce services or close altogether.
Question:
How can Congress alleviate the financial burden of rural
health providers and the subsequent rise of healthcare costs
among older Americans?
Response:
Congress could prevent rural health providers from seeing
more uninsured, older Americans by extending the enhanced
premium tax credits. Older Americans pay more than younger
Americans for individual health insurance, so they will face
higher out-of-pocket premiums. Additionally, over half of those
who will lose eligibility for tax credits altogether are ages
50 to 64.
Further, Congress could limit the coverage loss from H.R. 1
in a number of ways, including exempting older Medicaid
enrollees from its policies like work requirements.
In addition to doing no harm, Congress could take numerous
actions to lower health care costs such as accelerating action
on high drug prices, reducing overcharging by insurers and for-
profit health care providers, and supporting safety net
services and providers to maintain the health of rural and
underserved communities.
=======================================================================
Statements for the Record
=======================================================================
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
Alex Oshmyansky, MD, Ph.D. and Mark Cuban Statement
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
American Hospital Association (AHA) Statement
On behalf of our nearly 5,000 member hospitals, health
systems and other health care organizations, as well our
clinician partners - including more than 270,000 affiliated
physicians, two million nurses and other caregivers - the
American Hospital Association (AHA) appreciates the opportunity
to submit this statement to share the hospital field's comments
on how to reduce health care costs for seniors.
OVERVIEW OF NATIONAL HEALTH SPENDING
America's hospitals and health systems understand and share
your concerns regarding the high cost of health care. Hospitals
continue to face a perfect storm of financial pressures driven
by persistent cost growth, inadequate reimbursement and
shifting care patterns driven by both policy changes and an
older, sicker population with more complex, chronic conditions.
Despite escalating expenses, Medicare reimbursement continues
to significantly lag behind inflation. At the same time, the
practices of certain Medicare Advantage (MA) plans to increase
delays, denials and underpayments are exacerbating the
financial burden faced by hospitals. These challenges create
significant barriers to hospitals' ability to continue to
provide access to essential services and care, especially for
our nation's seniors.
Rising prescription drug prices also continue to be a major
cost driver for both patients and hospitals and health systems.
Average drug expenses per patient increased nearly 20% between
2019 and 2022.\1\ In addition, a government report found that
drug companies increased prices faster than inflation for
approximately 2,000 drugs between January 2022 and January
2023, with an average price increase of 15.2%.\2\ Compounding
this problem are decisions made by drug companies to price new
drugs coming onto the market at record-high levels, with the
median price of a new drug in 2023 costing $300,000 and
increasing to $370,000 in 2024.\3\,\4\
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\1\ https://www.aha.org/system/files/media/file/2025/04/The-Cost-
of-Caring-April-2025.pdf
\2\ https://aspe.hhs.gov/reports/changes-list-prices-prescription-
drugs
\3\ https://www.reuters.com/business/healthcare-pharmaceuticals/
prices-new-us-drugs-rose-35-2023-more-than-previous-year-2024-02-23/
\4\ https://www.reuters.com/business/healthcare-pharmaceuticals/
prices-new-us-drugs-doubled-4-years-focus-rare-disease-grows-2025-05-
22/
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HOSPITAL PRICE TRANSPARENCY REQUIREMENTS
We appreciate Congress' ongoing interest in hospital price
transparency to provide consumers with access to the price
information they need, which is specific to their course of
treatment.
Hospitals and health systems must comply with both state
and federal price transparency policies, which include the
federal Hospital Price Transparency Rule and provisions in the
No Surprises Act. The Centers for Medicare & Medicaid Services
(CMS) monitors hospital price transparency compliance, which
includes requirements for a consumer-friendly display of
shoppable services information, as well as comprehensive,
machine-readable files. Since the Hospital Price Transparency
requirements went into effect in 2021, hospitals have invested
countless staff hours and substantial resources in adhering to
the provisions and remain committed to ensuring they meet the
regulatory requirements, even as the provisions have been
continually modified since implementation.
We are concerned with legislative proposals that would
diverge from current regulatory requirements and impose
additional administrative burdens on hospitals and health
systems. For example, provisions have been drafted that would
no longer recognize price estimator tools as a method to meet
the shoppable services requirement under the Hospital Price
Transparency regulations. This change would both reduce access
to a consumer-friendly research tool and unfairly penalize
hospitals that have spent significant capital to comply with
the regulation.
Price estimator tools offer consumers an estimate of their
out-of-pocket costs based on their insurance benefit design,
such as cost-sharing requirements and prior utilization, as
well as the patient's annual deductible. This is an important
feature of these tools that is not available from a shoppable
services spreadsheet. Eliminating the use of price estimator
tools as a method to meet the shoppable services requirement of
the Hospital Price Transparency Rule would therefore reduce
price transparency for patients. We urge Congress to reject
this potential change.
As Congress seeks to make statutory changes to price
transparency standards, it is important for legislators to
consider the adjustments that CMS regularly makes to the
Hospital Price Transparency Rule. These include changes related
to standardization, new data elements, file accessibility, and
the accuracy and completeness affirmation, as well as changes
to CMS' monitoring and enforcement processes. CMS currently
requires hospitals to use a standard format to comply with the
machine-readable file requirement, which includes data elements
such as negotiated rate contracting type or methodology, an
accuracy and completeness affirmation, and (as of Jan. 1, 2025)
an "estimated allowed amount."
CMS also requires that hospitals' price transparency
information be more easily found on their websites. In the
calendar year 2026 outpatient prospective payment system
proposed rule, CMS considered drastically changing these
requirements once again, both in terms of the required data
elements in the machine-readable files and the attestation
language. Should Congress pass price transparency legislation
that does not align with current requirements or the new
requirements expected to be finalized in the coming months, it
would negate the work that CMS has done to update the rule
based on lessons learned since the regulation took effect.
Regarding compliance and enforcement, hospitals may be
required to have an authorized hospital official certify the
accuracy and completeness of the hospital's machine-readable
file during the monitoring and enforcement process. CMS can
also require hospitals to provide additional documentation at
the agency's request, including contracting documentation
needed to validate the hospital's negotiated rates and
verification of the hospital's licensing status.
CMS publicizes hospital-specific information on all
compliance assessment and enforcement activity, which it now
updates regularly on a public website. This includes details
related to CMS' assessment of hospital compliance, any
compliance actions taken against a specific hospital, the
status of the compliance action(s) and the outcome of the
action(s). Since the hospital price transparency requirements
took effect in 2021, CMS has changed the requirements and
guidance several times. While many of these changes have made
expectations clearer and easier to comply with, their repeated
implementation requires significant time and resources.
Hospitals and health systems are eager to continue working
towards providing the best possible price estimates for their
patients.
The AHA asks Congress to take the following steps to
support these efforts:
Review and streamline the existing transparency policies
with a priority objective of reducing potential patient
confusion and unnecessary regulatory burden on providers.
Focus efforts on ensuring pre-service estimates can be
as accurate as possible, including by simplifying benefit
design.
Continue to convene patients, providers and payers to
seek input on how to make federal price transparency policies
as patient-centered as possible.
Refrain from advancing additional legislation or
regulations that may further confuse or complicate providers'
ability to provide meaningful price estimates while adding
unnecessary costs to the health care system.
REJECT SITE-NEUTRAL PAYMENT CUTS
The AHA strongly opposes efforts to expand site-neutral
payment cuts, which would jeopardize access to care for
seniors. Current Medicare payment rates appropriately recognize
that there are fundamental differences between patient care
delivered at hospital outpatient departments (HOPDs) compared
to other settings. HOPDs treat patients who are more likely to
be sicker and more medically complex while also being held to
stricter patient safety standards and regulatory requirements.
This is especially true in rural communities. Medicare
beneficiaries in rural areas -including those who are dually
eligible for Medicaid - disproportionately rely on HOPDs to
meet their increased health care needs since they have less
access to office-based physicians.\5\ Additional Medicare cuts
to these facilities will have a direct impact on the level of
care and services available to patients in rural communities.
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\5\ https://www.aha.org/system/files/media/file/2024/01/analysis-
hospitals-health-systems-are-critical-to-preserving-access-to-care-for-
rural-communities-report.pdf
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The cost of care delivered in HOPDs accounts for the unique
benefits that hospitals and health systems provide to their
communities - which are not provided by other sites of care.
This includes investments made to maintain standby capacity for
natural and manmade disasters, public health emergencies and
unexpected traumatic events, as well as delivering 24/7
emergency care to all who come to the hospital.
Existing site-neutral payment cuts have already created
significant financial challenges for many hospitals and health
systems. This is largely because Medicare significantly
underpays hospitals for the cost of caring for patients. The
latest analysis, from 2023, shows that on average, Medicare
paid only 83 cents for every dollar spent by hospitals,
resulting in over $100 billion in underpayments.\6\
---------------------------------------------------------------------------
\6\ https://www.aha.org/system/files/media/file/2025/04/The-Cost-
of-Caring-April-2025.pdf
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The AHA urges Congress to reject any additional site-
neutral cuts, which would exacerbate the financial challenges
facing hospitals and health systems and reduce access to
essential care for Medicare beneficiaries, especially those
living in rural and underserved communities.
CONCLUSION
Thank you for your consideration of the AHA's comments on
issues related to reducing health care costs for seniors. We
look forward to working together to ensure patients continue to
have access to quality care in their communities.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
Families USA Statement
Chair Scott and Ranking Member Gillibrand, we want to thank
you for holding this important andtimely hearing on health care
affordability, and to offer our sincere appreciation to all of
thewitnesses and senators who are lifting up the impact that
unaffordable health care costs have onour nation's families,
especially older adults.
Across the country, Americans are sounding the alarm: the
cost of health care is too high, thesystem too complex, and
relief is desperately needed. In 2025, nearly half of all
Americansstruggle to afford the health care that they and their
families need due to the high cost.\1\ More than a quarter of
older Americans, who spend more on health care than any other
age group, reportbeing very concerned they will be unable to
pay for lifesaving health care in the future.\2\ Evenfamilies
with commercial coverage are spending up to 25% of their
monthly budget on health carecosts.\3\ These high costs have
left 100 million families grappling with medical debt they may
neverpay off.\4\
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\1\ KFF, Americans' Challenges with Health Care Costs, July 11,
2025. https://www.kff.org/health-costs/issuebrief/americans-challenges-
with-health-care-costs/
\2\ Nicole Willcoxon, Older Adults Sacrificing Basic Needs Due to
Healthcare Costs, June 15, 2022. Gallup, Inc. https://news.gallup.com/
poll/393494/older-adults-sacrificing-basic-needs-due-healthcare-
costs.aspx;Centers for Medicare and Medicaid Services, National Health
Expenditure Data, U.S. Personal Health Care Spending By Age and Sex
2020 Highlights. https://www.cms.gov/research-statistics-data-
andsystems/statistics-trends-andreports/nationalhealthexpenddata/
downloads/ageandgenderhighlights.pdf
\3\ Sara R. Collins, Shreya Roy, and Relebohile Masitha, "Paying
for It: How Health Care Costs and Medical Debt Are Making Americans
Sicker and Poorer: Findings From the Commonwealth Fund 2023 Health Care
Affordability Survey," The Commonwealth Fund, October 26, 2023, https:/
/doi.org/10.26099/bf08-3735.
\4\ Noam N. Levey, "100 Million People in America Are Saddled With
Health Care Debt," KFF Health News, June 16, 2022, https://
kffhealthnews.org/news/article/diagnosis-debt-investigation-100-
million-americanshidden-medicaldebt/.
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Rising health care costs stem from a fundamental
misalignment between the business interests ofthe health care
sector - including big drug companies, corporate hospital
systems, pharmacybenefit managers (PBMs), and insurers - and
the health and financial security of our nation'sfamilies. The
unchecked growth of big health care corporations and a lack of
oversight over theirbusiness practices have led to monopolistic
health care practices and prices, reduced access tocare, worse
health outcomes, and lower wages for workers. Health care
industry players chargeexcessive health care prices and take
advantage of loopholes that drive inefficient health
carespending that has little to do with the quality of care
patients receive. This was all true beforerecent policy changes
like the passage of H.R. 1, which cuts $1 trillion from our
health care system,compounding this crisis by limiting access
to affordable care while failing to provide families withrelief
from high health care costs.
It's time to put partisanship aside and provide Americans
with desperately needed relief fromcrushing health care costs.
Congress must take immediate steps to support families whose
healthand financial security are in jeopardy, while also
committing to address the root causes of ournation's health
care cost crisis by taking on price gouging by corporate health
systems. The firststep is for Congress to come together to
extend enhanced premium tax credits for the nearly22 million
Americans who rely on them to help them afford comprehensive
health coveragefrom the federal or state health insurance
Marketplaces.\5\ If Congress fails to prevent these keytax
credits from expiring this year, millions of Americans will see
their health insurance premiumsskyrocket next year - more than
double on average,\6\ with many paying not just hundreds
butthousands of dollars more for health coverage - and roughly
four million people will lose coveragealtogether.\7\
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\5\ Centers for Medicare & Medicaid Services. "2025 Marketplace
Open Enrollment Period Public Use Files." May 12, 2025. https://
www.cms.gov/data-research/statistics-trends-reports/
marketplaceproducts/2025marketplace-open-enrollment-period-public-use-
files.
\6\ Andrew Sprung. "Trump administration takes one more whack at
the ACA marketplace." Xpostfactoid. September 4, 2025. https://
xpostfactoid.substack.com/p/trump-administration-takes-one-more
\7\ Congressional Budget Office, The Effects of Not Extending the
Expanded Premium Tax Credits for the Number of Uninsured People and the
Growth in Premiums, December 4, 2024.https://www.cbo.gov/system/files/
202412/59230-ARPA.pdf.
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The Aging Committee has a key role to play in discussing
and advancing bipartisan andcommonsense legislation that would
remedy some of the most obvious health system failings, andthe
American people are eager to see action. A new poll from
Families USA and Hart ResearchAssociates shows that lowering
health care costs is the top priority for Americans
acrossdemographics, even surpassing concerns related to
housing, jobs, crime, and immigration. Over 9in 10 voters think
it is important that Congress and the President act to lower
health carecosts to reduce stress on family budgets, bring down
the cost of living, and to make healthcare more affordable and
accessible to millions of families around the country.\8\
---------------------------------------------------------------------------
\8\ Families USA, "New Poll: Crushing Health Care Costs Top
Priority for Voters" October 22, 2025,https://familiesusa.org/press-
releases/new-poll-crushing-health-care-costs-top-priority-for-voters/
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Congress Must Act Now to Make Health Care Tax Credits Permanent
A top priority for this Committee and your colleagues in
Congress must be to permanently extend the expiring enhanced
premium tax credits to ensure millions of people can continue
to afford their health insurance. Millions of American workers
who don't get coverage on-the-job or through Medicaid or
Medicare qualify for premium tax credits for a plan on
healthcare.gov or a state marketplace if their current
household income is at least $15,060 for an individual or
$31,200 for a family of four, and they do not have other
options for affordable health coverage.\9\ If Congress does not
intervene, these individuals and families will enter the annual
open enrollment period for health coverage on November 1 and be
hit with premiums that may be double or triple what they paid
last year, with no guarantee that any tax credit relief will be
available to them later. The effect on families, communities,
and local economies will be devastating.
---------------------------------------------------------------------------
\9\ "Advance premium tax credit (APTC)," HealthCare.gov, U.S.
Centers for Medicare & Medicaid Services, accessed July 25, 2025.
https://www.healthcare.gov/glossary/advanced-premiumtax-credit/ and
2024 federal poverty guidelines,https://aspe.hhs.gov/sites/default/
files/documents/7240229f28375f54435c5b83a3764cd1/detailedguidelines-
2024.pdf. The minimum income limits are slightly higher in Alaska and
Hawaii due to those states'poverty guidelines. The income limits will
increase slightly for 2026 - people may qualify then if their incomes
their incomes are above 2025 federal poverty guidelines, listed
here:https://aspe.hhs.gov/sites/default/files/documents/
dd73d4f00d8a819d10b2fdb70d254f7b/detailedguidelines-2025.pdf
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These tax credits are a lifeline for workers and their
families, including those with serious andchronic health
conditions like diabetes, heart disease, and cancer who need
access to regular careto stay healthy and keep working when
they don't get insurance through their job. If Congress failsto
act, older adults would be some of the hardest hit. For
example, a couple in their early 60searning a combined income
of $90,000 will see their premiums spike by more than 250% -
awhopping increase of more than $26,000 per year. In some
states, their premiums will increase byover $50,000.\10\
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\10\ Cheryl Fisch-Parcham, "Health Premiums To Spike for American
Workers and Small Business Owners If Enhanced Health Care Tax Credits
Are Not Made Permanent" Families USA https://familiesusa.org/wpcontent/
uploads/2025/10/National-ImportancePremiumTaxCredits-FactSheet--
October-2025-Update.pdf
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The enhanced premium tax credits have been lifechanging for
people like Amy from New Castle,Colorado who runs a small print
publishing business with her husband that garners a
householdannual income of about $40,000. While her husband is
covered by Medicare, Amy relies on themarketplace for the
health insurance she needs to manage her chronic health
condition. Utilizingenhanced premium tax credits, her monthly
premiums dropped from a staggering $923 to just$1.57 each
month. Only with these credits can Amy get the coverage she
needs to stay healthy,keep their small business open, and
contribute to the local economy.\11\
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\11\ Lauren Rubenstein, "Behind the Numbers: The Real Americans who
will be Hardest Hit if Congress Lets Premium Tax Credits Expire"
Families USA, September 25, 2025 https://familiesusa.org/resources/
behindthe-numbers-the-real-americans-who-will-be-hardest-hit-if-
congress-lets-premium-tax-credits-expire/
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Amy needs Congress to take immediate action, and she isn't
alone: Roughly three-quarters ofAmericans polled from across
the country - and across party lines - want Congress to act
toextend the enhanced credits.\12\
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\12\ Families USA, "New Poll: Crushing Health Care Costs Top
Priority for Voters" October 22, 2025, https://familiesusa.org/press-
releases/new-poll-crushing-health-care-costs-top-priority-for-voters/
Committing to an Agenda that Addresses Root Causes of High
---------------------------------------------------------------------------
Health Costs
Beyond providing immediate relief and certainty to families
and older adults who utilize theenhanced premium supports, this
Committee and your colleagues in Congress have an
importantopportunity and responsibility to take on the
corporate interests and underlying drivers of highhealth care
costs and advance pro-consumer reforms to the health care
system that put moneyback in people's pockets. To that end,
almost all of below priorities have bipartisan and
bicameralsupport in Congress and would make important strides
to begin addressing corporate abuses inhealth care, and our new
poll shows that voters across the political spectrum believe
thesebold actions will be most effective at immediately
bringing down costs:\13\
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\13\ Families USA, "New Poll: Crushing Health Care Costs Top
Priority for Voters" October 22, 2025,https://familiesusa.org/press-
releases/new-poll-crushing-health-care-costs-top-priority-for-voters/
Requiring all hospitals to disclose rates they charge in
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dollars and cents (91% support),
Prohibiting health systems from charging Medicare more
for the same procedure ifperformed at a hospital facility
instead of a doctor's office (84% support),
Prohibiting Medicare Advantage companies from
exaggerating health risks to get paid more(79% support),
Eliminating legal loopholes that allow health care
providers to overcharge (75% support),
Restricting aggressive billing practices like surprise
billing (73% support),
Reducing unnecessary middlemen between patients and
providers, who increase costs(72%),
Closing legal loopholes that allow drug companies to
raise prices by blocking generics(87% support),
Allowing Medicare to negotiate lower prices on more
drugs (89% support), and
Reforming the way doctors and providers are paid, so pay
is based on keeping peoplehealthy and quality of care rather
than the number of procedures (80% support).
Thank you again for holding this timely and critical
hearing. Now, more than ever, families acrossthe country are
feeling the negative impacts of our nation's affordability
crisis firsthand and areeager for Congress to pass legislation
that provides meaningful relief and reaffirms that theirelected
representatives are doing all they can to deliver on their
promises to lower costs andimprove health care. The journey to
fully transform our health care system so that it truly works
forAmerican families is long, but Congress holds the power to
take the next critical steps. FamiliesUSA stands ready to
support you in this essential and urgently needed work.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
Federation of American Hospitals Statement
The Federation of American Hospitals (FAH) submits the
following statement for the record in advance of the Senate
Special Committee on Aging hearing on "Modernizing Health Care:
How Shoppable Services Improve Outcomes and Lower Costs." As
the national representative of more than 1,000 leading tax-
paying hospitals and health systems throughout the United
States, we strongly support efforts to improve health care
transparency and empower patients with actionable information.
Hospitals have been committed partners in implementing federal
price transparency requirements, investing significant
resources to comply with evolving regulations issued by the
Centers for Medicare & Medicaid Services (CMS).
The FAH supports the goal of ensuring that patients have
access to clear, accurate and actionable cost-sharing
information. Providing this information empowers patients to
make more informed decisions about their health care. Since the
issuance of the 2019 Executive Order on price transparency,
hospitals have undertaken a vast modernization effort to make
pricing more accessible and understandable for patients. This
effort has evolved from posting gross charges to publishing
complex, standardized data files that detail negotiated rates
with insurers, discounted cash prices, and estimated allowed
amounts in a usable format. Further, our members have developed
price estimator tools to help patients plan for their care and
expanded resources to connect families with financial
assistance programs. These advances have required significant
new investments in staff, technology, and vendor support. While
CMS initially projected hospitals would spend roughly $250
million on compliance from 2020 to 2025, actual investments
have far exceeded that figure-particularly for hospitals that
stepped up early to meet changing federal rules and lead the
way on transparency.
We appreciate the current Administration's results-oriented
approach and active engagement with hospitals when it comes to
compliance with transparency regulations. FAH members report
that CMS is expeditiously closing enforcement actions when an
appropriate corrective action plan has been initiated and
completed. Some of these enforcement matters involve simple
issues like unexpected website glitches, and CMS' approach to
these cases has ensured that access to a compliant machine-
readable file is restored quickly through a cooperative
enforcement process. The current enforcement approach also
maximizes compliance by including critical opportunities for
education. In particular, initial warning letters have opened
up cooperative dialogue between hospitals and CMS that allow
both to develop a more sophisticated understanding of hospital
pricing and price transparency. This process also provides the
most expeditious path to promptly resolve minor and inadvertent
issues with machine-readable files. The FAH recommends
maintaining the current orientation toward education and
impactful results in monitoring and enforcement activities.
Given the significant progress hospitals have already made-
and with new federal transparency requirements taking effect on
January 1, 2025-the FAH urges policymakers to support a period
of regulatory stability. Constantly changing rules create
unnecessary costs and administrative burdens that pull
resources away from patient care, without meaningfully
improving the information patients receive. Stability will
allow hospitals to strengthen existing systems, enhance data
accuracy, and make the most of the substantial investments they
have already made-all while confronting financial pressures,
cybersecurity risks, and the growing costs of caring for the
uninsured.
The FAH also calls on Congress and CMS to bring balance to
transparency efforts by ensuring that health plans meet the
same high standards now expected of hospitals. The Transparency
in Coverage Rule was designed to provide a full picture of
health care pricing, but enforcement and oversight of payer
data have fallen behind. Modernizing these requirements-so that
payer data is complete, accurate, and includes qualifying
payment amounts under the No Surprises Act- is critical to
achieving our shared goal of promoting transparency and
shoppability. A balanced approach that includes both providers
and payers is in the best interest of patients, employers, and
taxpayers.
Hospitals have not just complied with transparency
regulations-our members have built the infrastructure that
makes price transparency real for patients. We look forward to
working with Congress to ensure the successful implementation
of transparency measures across the health care system.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
New York State of Health Statement
The following stories came from consumer emails in reaction
to recent announcements regarding the impact of H.R. 1. on
health coverage:
1) Trump is an absolute terror and my heart breaks for the
people who are going to suffer because of what he is doing.
Republicans have blood on their hands. I am praying that I can
figure out an affordable solution to pay for health insurance-I
have a chronic condition that requires a lot of meds and
testing, so people like me are being disproportionately
affected by this change. Shame on the GOP-I am devastated.
2) New York State has been a leader in expanding healthcare
access. I hope that leadership will continue in the form of
sustained resistance to federal policies that undermine the
health and wellbeing of your residents. Thank you for accepting
and considering these comments.
3) Only since the Affordable Care Act have I been able to
get all the things I need as a type 1 diabetic. Only since the
Affordable Care Act have I even been able to be covered by
health insurance. Because of my "pre-existing condition" that I
was born with; I could never get coverage before. It is
complete and utter bullshit that millions of other Americans
and I have to suffer because of the greed and ruthlessness of
the federal government. Profit over patients; it's sickening. I
want to personally thank Donald Trump and his puppets for the
possible death sentence for myself and millions of others.
4) Please stand up to this authoritarian administration.
Especially those living with HIV in this country. What are we
supposed to do without coverage? Just die? We're forced to pay
high monthly premiums for nothing and now literally nothing.
Where's the empathy? This is NYC! Don't let the people that
actually pay taxes for the city be the ones to suffer. None of
this makes sense.
5) I recently received an email stating that I would be
losing my NYS Essential Plan Health Insurance due to cuts at
the federal level. This is extremely disheartening as I have
spent the last year battling stage three cancer. The Essential
Plan has saved my life as I would not have been able to pay the
over a million dollars in costs for chemotherapy, radiation,
and surgery. I am 47 years old, a single mother of four with
some in college, hold a masters degree, and work full time as
an Executive Director of a Not for Profit. I am very concerned
for my health moving forward and how my family will be affected
by my difficulties in paying for health insurance and doctor's
bills. I hope that there is something that can be done to save
this critical health insurance for New Yorkers.
6) I have been covered under the United Healthcare
Essential Plan which has been a Godsend to me and my family. We
have been able to receive the care we need since the ACA Act
was implemented. We just received the email about the changes
to this plan and it is incomprehensible. The Federal Government
should want to help people, not harm them.
7) It is my understanding that these cuts are being
implemented to fund tax cuts for the top 1% in this country. It
makes no sense. Why do they want to punish people who are
already struggling? Food prices are higher than ever. People
are being laid off left and right. We see the Democrats are
doing their best to bring Republicans to the table for
precisely this issue. We support them and hope this can be
resolved. Cutting healthcare subsidies for working people is
not the answer. We thank you for all you do, and we hope this
horrifying new policy can be reversed.
8) I've been on the Essential plan for years, and I depend
on my health insurance for daily medication, frequent
appointments and procedures. I'm a New Yorker that has worked
full time since I was 19 and still can't get ahead in life. I
have multiple heath concerns, including an auto immune disease.
It makes me sick to think my coverage is ending because the
president wants to play with the money. This is completely
unacceptable and will likely result in people dying. This needs
to be corrected. I can't afford to see my doctors (yes
multiple) without insurance and my employer plan is completely
unaffordable. What am I supposed to do? Come July I'm just out
of coverage with no options? This is absolutely sickening. Do
better NY. Trump is running this country.
9) I've just received an email stating that as of July 1,
2026, I will no longer be covered by the Essential Plan in NY.
I am incredibly upset and frustrated that the political games
being played by US Senate and House Republicans at the behest
of convicted felon and adjudicated rapist Donald Trump, and his
advisors and authors of Project 2025, such as Stephen Miller,
who have no regard for the general public and the citizens of
this country whom they are supposed to protect, will now result
in myself and many, many other New Yorkers losing their health
care. I work two part-time jobs, neither of which offers
benefits or health care, and cannot afford to pay for monthly
health care premiums offered by the New York State of Health
program. You can't pull blood from a stone, and I can't
magically make money appear that doesn't exist in my paychecks.
I need NY State, and our duly elected officials who are meant
to be working FOR US, the citizens who elected them, to find a
way to fix this, whether it be by passing a new healthcare
plan, or repealing Trump's "Big Beautiful Bill" which is
neither big, nor beautiful, and restoring my proper healthcare.
I am on medications for life, which I will not be able to
afford to pay for without insurance, and I am frankly
absolutely disgusted with the state of our elected
representatives and their incredibly obvious lack of care about
who they see as their"enemies." Something needs to be done, and
I can promise you on my part, I will never be voting for
anybody affiliated with the Republican Party ever again, as
they clearly do not consider me and all those like me to be
worth helping. I can also promise you that I will not ever
again be voting for anyone affiliated with the Democratic Party
who does not fight for my rights.
10) I will likely be one of the New Yorkers impacted. For
the purposes of this comment, I strongly prefer to remain
anonymous. The changes due to H.R.1 feel personal. I can't help
but feel that it is as though America is turning its back on
the poor. When I initially qualified for Medicaid, I was very
thankful, but I also didn't want to "abuse"the system, so I've
kept my use to the absolute minimum, preventative appointments
only. I try to keep well so that I don't pull on an already
burdened system. Still, the results of the election sent a
message. The message is that the majority of Americans are not
happy with people like me-- who are not fully qualified for
disability and also do not feel well enough to work. We are
already poor. It doesn't feel right that we are also now kicked
off of our medical insurance. Also, I would like to point out
that many other social support systems are tied to Medicaid
eligibility: rides to medical appointments, eligibility for
food pantries, and discounted shopping services. I'm facing
losing all of this. I realize that NY is doing all it can and I
appreciate that. I'm not against the Basic Health Plan but I
don't think I'll be able to benefit as I'm not part of the
"working" NY. I believe it when I hear that my Governor is
trying to work for New Yorkers. I truly believe she would
listen if I described the difficult situation that I'm facing,
but I find all of this disappointing. Where is the kindness to
the poor that New York is known for? I pray that we will
weather this storm.
11) Well, we all know how shitty Donald Trump is being but
this one takes it. Costing all of the poor-middle class ranged
Americans their health insurance, so he can continue to get
richer since he went bankrupt so many times. Now....we all have
to pay for it. I can't afford the ridiculous costs of health
insurance this is going to cost me.
12) Do I pay to be healthy and have coverage or feed my
family, is what this comes down to. I'm always going to choose
my family. So now, if I go to the doctor for my hemeplegic
migraines or my diabetes or need emergency care, I'll have to
pay even MORE out of pocket because I don't have healthcare
because I can't afford the monthly premiums. MAKE AMERICA GREAT
AGAIN! Let me know when this happens.
13) We need to stand up to Trump and his disgusting
administration by sticking UP for New Yorkers. We are not like
that. We do not abandon our neighbors. We need to find a way.
New Yorkers will not forget. If we're left to suffer we will
remember, but if we are supported, we will remember that too.
Which do you prefer? I'm so proud to live in New York, this is
breaking my heart and spirit. Please reconsider terminating the
1332 waiver. Please.
14) I am submitting this comment in response to New York
State's request for public input on the forced termination of
Essential Plan coverage due to federal policy changes. As
someone whose coverage will end on July 1, 2026, I want New
York State officials to understand the very real impact this
decision will have on working New Yorkers who have relied on
this program.
I am a small business owner who relocated from Florida to
New York City specifically to build my practice and life in a
state that demonstrated a genuine commitment to healthcare
access. The Essential Plan has been essential to my ability to
operate my business while maintaining the health security that
allows me to serve my clients and contribute to New York's
economy. That decision to move here now feels undermined by
federal policymakers who appear indifferent to the needs of
working people.
My academic training, which culminated in a PhD, taught me
to evaluate policy through evidence and impact. The evidence
here is clear: terminating coverage for individuals who qualify
for and depend on this program will result in worse health
outcomes, increased financial stress, and decreased economic
stability for thousands of New York families.
I understand that New York State did not choose this
outcome and is being forced to implement a federal decision
that contradicts our state's values and priorities. I
appreciate that the state is providing advance notice and has
committed to supporting affected individuals through this
transition. However, I want to emphasize how inadequate any
transition will be when the end result is a loss of
comprehensive, affordable coverage.
The federal government's characterization of this decision
as "deeply unfortunate" does not capture what it means for
people like me. It means anxiety about whether I can afford the
healthcare I need. It means uncertainty about whether an
unforeseen health-related issue would bankrupt me. It means
questioning whether I made the right choice in building my life
and business in New York when the federal government can
arbitrarily strip away the healthcare access that made that
choice viable.
I urge New York State officials to:
Advocate forcefully at the federal level for reversal of
this policy decision.
Explore every possible state-level option to maintain
coverage or provide comparable alternatives.
Ensure that any transition process prioritizes
continuity of care for individuals managing serious health
conditions.
Continue to publicly document and communicate the harm
this federal decision causes to New Yorkers.
15) The fight in Congress over the Republicans plan to
discontinue the tax credits for ACA premiums must continue.
Premium tax credits make health insurance accessible for
millions of U.S. citizens. Without the tax credits, cost of
premiums will skyrocket, rendering health insurance
inaccessible for millions. Make no mistake - access to health
insurance directly equates to access to healthcare. Healthcare
costs in the U.S. are astronomical and would very easily
bankrupt millions of average U.S. households.
The ACA allows citizens who have no access to group
insurance plans through their employment, access to insurance.
This includes the self-employed, contract/sole proprietors (a
fast-growing number of workers since online work has become so
popular with companies and workers), freelance workers, and
less than full-time W2 employees.
I am a self-employed, private practice psychotherapist. I
worked long and hard to earn a master's degree at one of the
nation's top universities. I do not have access to group
insurance because I am a solo practice clinician. Although I am
incorporated, group insurance plans for companies require two
or more employees. Even though my spouse does a great deal of
administration for my business, spouses are disqualified from
counting towards that minimum. He is a contract employee/sole
proprietor, so he has no employer-based health insurance.
Therefore, the ONLY access to health insurance we have is the
ACA.
NOTE: When workers have health insurance through their
employers, the employer pays a share. Additionally, premiums
are paid PRE-tax. Self-employed/small business owners do not
get these benefits. Premiums are paid fully out-of-pocket POST-
tax. Furthermore, premiums do not count as out-of-pocket
healthcare costs, so we are unable to claim them as an expense
on our federal taxes. This is truly unfortunate, since average
health insurance premiums can easily be $1000/month or more and
would meet the 7.5% of total income to qualify as an itemized
deduction on our federal taxes.
So, in summary, the thinly veiled excuse used by
Republicans, that those needing ACA premium tax credits are
looking for "a handout" or want to "get something for free" is
not only incredibly insulting, but wholly untrue. Also, the
indisputable lie being propagated by the Trump administration
and right wing/propaganda media outlets that undocumented/
illegal immigrants can get insurance through the ACA (or
Medicaid) needs to be loudly and adamantly disputed and
disproved. This needs to happen every day until their
disinformation and propaganda messaging is shown for what it is
- an outright lie.
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
Purchaser Business Group on Health Statement
The Purchaser Business Group on Health ("PBGH") applauds
the committee for holding this timely hearing on the most
pressing issue in health care: Affordability. Our members (one
of whom is an expert witness during today's hearing) agree.
Cost control and affordability emerged as the top issue for
large employers and public purchasers in PBGH's 2025 Annual
Survey(1) against a backdrop of escalating costs(2) and growing
fiduciary risk.(3)
We agree with the premise of this hearing, which is that
while policy debates typically center around the problems of
our health care system, we ought to focus primarily on the
solutions. PBGH and our members have developed thoughtful
policy solutions(4) - informed by the real-world experience of
purchasers - to improve America's health care system,
including:
Strengthening and codifying the Administration's two
price transparency rules and ensuring purchasers have full
access to their health care claims data under federal law.
Prohibiting anticompetitive contracting practices in the
health care industry, which limit purchasers' ability to direct
contract, develop and use high performance networks, or
implement reference pricing strategies that leverage
independent sources of price data.\1\
---------------------------------------------------------------------------
\1\ Traditionally, the prevailing reference for health care service
pricing information has been Medicare's reimbursement rate, such that
purchasers' reference pricing strategies have benchmarked to a multiple
of Medicare (e.g., 150 or 200%). However, since hospitals and insurers
were required to publish their negotiated rates publicly, it is now
also possible for purchasers to compare the prices they are paying for
health care services to the market rates for those services that have
been negotiated and agreed to between health care providers and payers
/ other purchasers.
Removing barriers to direct contracting for medical
services, so purchasers can exercise their buy-side market
power to help employees shop for high-quality, fairly priced
---------------------------------------------------------------------------
care.
Supporting direct/advanced primary care, to improve
patient access to valuable preventive services and ensure that
patients are appropriately referred to high-quality, fairly
priced specialist care through the unconflicted advice of their
trusted primary care physician.
Scrutinizing the role intermediaries (i.e., PBMs, TPAs)
play in driving health care costs up.
Reforming policies that directly or indirectly
contribute to consolidation in health care markets, which
lessens choice and leads to higher prices without gains in
quality.In addition to these policy solutions, PBGH has been
deeply engaged in supporting employers to use the price
transparency data to lower their health care costs and improve
health outcomes.
In addition to these policy solutions, PBGH has been deeply
engaged in supporting employers to use the price transparency
data to lower their health care costs and improve health
outcomes.
The PBGH Health Care Data Demonstration Project
PBGH and our purchaser members have been at the forefront
of using the data made available under the Hospital Price
Transparency ("HPT") Rule as well as the Transparency in
Coverage ("TiC") Rule with a first-of-its-kind data
demonstration project.(5) In January 2025, PBGH announced the
deployment of this initiative, which aggregates and analyzes
the de-identified claims and demographic data from five large
purchasers across 10 regional markets alongside the price
transparency datasets. Through partnerships with Milliman,
Embold, and Leapfrog, we also integrated individual provider
quality metrics and hospital safety scores, as high quality of
care is a top priority for our purchaser members.
This demonstration project has delivered important insights
to purchasers on how the prices they pay compare to the market
and what network selection and benefit design opportunities
exist. The findings of this project are being used now by the
participating purchasers to:
Determine what fair prices for health care services are
in their regional market and assess one's own costs and quality
against other networks in the market.
Identify high quality clinicians to develop Centers of
Excellence, design high performance networks, and steer
employees to high-quality, fairly priced providers.
Validate existing direct contracting relationships as
well as identify opportunities for new direct contracts.
Hold service provider partners accountable for
competitive prices/rates, contractual performance guarantees,
and full compliance with federal price transparency rules.
The results of this first iteration of PBGH's demonstration
project were recently released to the public on September 24,
2025(6) and were announced via press release on October 16,
2025.(7) As a sign of our commitment to supporting this
Committee in its important work to improve health care
affordability and health outcomes, we are enclosing a copy of
the PBGH whitepaper "Leveraging Health Care Price
Transparency," which details the findings, market implications,
and policy implications of the initial phase of the project.
PBGH sincerely appreciates the Committee's attention and
dedication to advancing policies that improve health care
affordability and outcomes, and which facilitate purchasers'
ability to achieve these objectives on behalf of America's
workforce.
Sincerely,
/s/
Elizabeth Mitchell, President and CEO
Purchaser Business Group on Health
********************************
Endnotes
(1) PBGH (May 13, 2025) "PBGH Announces Jumbo Employers' Top 5
Health Care Priorities" Announcement [Link]
(2) Mitchell (Jul. 2, 2025) "Want to Lower the Price of Eggs?
Start with Health Care Costs" US News & World Report [Link]
(3) PBGH (Mar. 31, 2025) "Purchaser Innovation and Policy
Engagement Against a Backdrop of Unaffordability and Fiduciary
Risk" Issue Brief [Link]
(4) PBGH (Jan. 31, 2025) "Purchaser Policy Priorities in 2025"
Issue Brief [Link]
(5) PBGH (Jan. 29, 2025) "PBGH Launches Groundbreaking Health
Care Data Project, Tackling Data Transparency Challenges and
Strengthening Employer Fiduciary Compliance" Announcements
[Link]
(6) PBGH "Are We There Yet? Making Transparency Work for
Purchasers and Patients" Webinar [Link]
(7) PBGH (Oct. 16, 2025) "PBGH Unveils Breakthrough Data
Demonstration Project, Empowers Employers to Expose Hidden
Costs and Hold Vendors Accountable" Press Release [Link]
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
Purchaser Business Group on Health: Leveraging Health Care Statement
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. Senate Special Committee on Aging
"Modernizing Health Care: How Shoppable Services
Improve Outcomes and Lower Costs"
October 22, 2025
Statements for the Record
Small Business Majority Statement
As a leading representative of America's 36 million small
businesses, Small Business Majority is pleased to submit this
written statement for the record underscoring the urgent need
to extend the Affordable Care Act's (ACA) enhanced premium tax
credits (EPTCs). The extension of these enhanced credits is
essential to ensure that the millions of small business owners,
self-employed entrepreneurs, and small business employees who
rely on the ACA Marketplace can continue to access affordable
healthcare coverage.
Small Business Majority is a national small business
organization that empowers America's entrepreneurs to build a
thriving and equitable economy. From our 12 offices across the
country, we engage our network of more than 85,000 small
businesses and 1,500 business and community organizations to
deliver resources to entrepreneurs and advocate for public
policy solutions that promote inclusive small business growth.
Our work is bolstered by extensive research and deep
connections with the small business community that enables us
to educate stakeholders about keys issues impacting America's
entrepreneurs, with a special focus on the smallest and most
under-resourced businesses.
Access to affordable, quality health insurance is essential
to the growth and success of small businesses nationwide, as it
not only allows entrepreneurs to pursue their ventures with the
security of insurance coverage but also helps small businesses
attract and retain talented employees. Due to the skyrocketing
cost of employer-sponsored coverage options, however, most of
our nation's smallest businesses cannot afford to offer health
insurance to their employees. This is especially challenging
for older individuals who are pursuing small business ownership
as a means to create income streams later in life. These
individuals may be deterred from starting businesses altogether
without the availability of affordable healthcare options
provided by the ACA Marketplace.
Without access to coverage through an employer, millions of
small business owners and employees rely on individual coverage
through the ACA Marketplace. In fact, nearly half of all
Marketplace enrollees under the age of 65 are either small
business owners, self-employed entrepreneurs, or employed by a
small business with less than 25 employees.1 Small business
owners and self-employed entrepreneurs are three-times more
likely to enroll in the Marketplace and a projected 5 million
small business owners and self-employed entrepreneurs will have
enrolled in coverage through the Marketplace this year alone.2
Recent Marketplace enrollment growth over the last several
years has been a direct result of the successful expansion of
premium tax credits approved by Congress in 2021 and then
extended in 2022. An analysis by the U.S. Department of the
Treasury found that 82% of all small business owners and self-
employed entrepreneurs enrolled in the Marketplace in 2022 (2.7
million individuals) claimed the premium tax credit.3 This
includes nearly 300,000 entrepreneurs with incomes above 400%
of the federal poverty level who would not have qualified for
the credit without these enhancements. The EPTCs have
undoubtedly helped lower the cost of coverage for millions of
entrepreneurs who previously struggled to afford healthcare and
oftentimes went without coverage entirely just so they could
keep their business running.
While the EPTCs have lowered costs and expanded access to
affordable coverage for Main Street, millions of small business
owners and employees enrolled in the Marketplace stand to see
their premiums skyrocket by an average of 75% next year if
Congress fails to extend the enhancements by the end of this
year.4 Many small business owners may ultimately face the
difficult choice between closing their business to access
coverage through a larger employer or going without health
insurance altogether to keep their entrepreneurial dream alive.
Small business owners understand what's at risk, and that's why
our polling found that 74% of small business owners support
extending the EPTCs.5
To highlight both the critical importance of the ACA and
the EPTCs for small business owners, as well as the impact
their expiration would have, we have included several quotes
from entrepreneurs in our network who rely on these credits
each month.
"I'm definitely glad to have some support from the federal
government when it comes to payingfor my health insurance, but
even with that support it's still a struggle. The cost keeps
going up,about $100 more every year. Back in 2010, I was paying
$50, maybe $75 or $100 per month formy health insurance. I'm
single, no kids, and I'm in fairly good health. I eat well, I
exercise-soit's frustrating to see the premiums rise while the
coverage and services seem to decline yearafter year. That
said, I'm still grateful the Affordable Care Act Marketplace
exists, but with theenhanced premium tax credits set to expire,
I honestly won't be able to afford my plan if thathappens.
Right now, I pay about $550 a month, and that's with tax
credits covering around50%. Without those credits, it would
cost close to $1,000 a month-which I simply couldn'tafford.
Before the ACA, I only had insurance now and then, when I could
scrape together themoney. As a freelancer, that was just the
reality. The federal subsidy is essential because
smallbusinesses-collectively the largest employer in the
country-are the backbone of our economy.We are the economic
engine that drives growth and opportunity nationwide."
Karin Mckie, Owner of Tree Falls Productions in Chicago, IL
"With the enhanced premium tax credits, my $545 monthly premium
is reduced to $0.00.Without the tax credits, my monthly
premiums could cost me close to $1000/month. That'ssimply
unaffordable. At that point, it would be more cost-effective
for me to drop my insuranceand self-insure, like I did for
years before this year. If I have to choose between health
insuranceand a place to live and work, I'll choose a home."
Nance L. Schick, Owner of Third Ear Conflict Resolution, VA
"I get my health coverage through Connect for Health Colorado
and I receive the enhanced PTCwhich covers 90% of my $400
monthly premium. This is very important as I need
healthcoverage to recover from being hit by a car as a
pedestrian. I'm able to keep running mybusiness while receiving
the healthcare I need."
Sydney Jackson-Clockston, Owner of Citrine Unlimited in Fort
Collins, CO
"As a self-employed individual, my premium is $340 per month.
Without the tax credits, I wouldpay over $1200 per month for my
coverage. This is hugely important to me as someone with
amuscle disease, Spinal Muscular Atrophy, that requires health
insurance to treat. I'm onmedication that prevents its
progression and without it, I may lose the ability to walk."
Courtney Vargas, Owner of Empower Independent Living Services
in Santa Rosa, CA
"My name is Andrea Deutsch, and I am the mayor of Narberth,
Pa., where I am also the ownerof Spot's - The Place for Paws, a
pet store that I have created and worked for the past 22 years.
Iam also a Type 1 diabetic and must have health insurance in
order to get the medical care I needto remain alive and
healthy. Thanks to the Affordable Care Act, I can no longer be
outrightdenied health insurance as a person with a pre-existing
condition. Thanks to the enhanced taxcredits, I still pay over
$700 a month for my health insurance, but it is manageable.
Without theenhanced tax credits, I would be paying
approximately $1,400 per month for my same plan.The cost of the
plan goes up every year, so it may even be more next year. Keep
in mind, thisplan is not for the care of an entire family. It
is simply to cover a single individual - me. Thiswould be
incredibly burdensome for me as a small business owner to
sustain, and would beincreasingly difficult as costs rise. I am
not alone in this struggle. The crushing weight of thecost of
health insurance, without the enhanced tax credits, threaten
the ability of smallbusinesses such as mine to exist. I am,
consequently, asking Congress to affirm theircommitment to
stand with small business and to continue to support the
enhanced tax credits."
Andrea Deutsch, Owner of Spot's - The Place for Paws in
Narberth, PA
As the open enrollment period for the ACA Marketplace is
just days away, small business owners will soon be met with
catastrophic premium increases when they go to re-enroll in
coverage next month if Congress does not take immediate action
to extend the EPTCs. Allowing these enhancements to expire
would be nothing short of a disaster for our nation's small
business economy, which depends on access to affordable,
quality healthcare to keep its doors open. The expiration would
also create more barriers for older adults seeking to start and
grow their own business, many of whom may seek out these
options to sustain their livelihood after retiring from their
prior careers. We call upon Congress to support our nation's
small business community by ensuring that our nation's job
creators have the opportunity to access quality and affordable
healthcare options. Healthy businesses are sustainable
businesses, and without support from Congress, our business
community will pay unimaginable debts to an already broken
healthcare system.
For any questions or additional information, please contact
our Government Affairs Director, Alexis D'Amato.
Sincerely,
/s/
John Arensmeyer, Founder & CEO, Small Business Majority
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