Runaway Drug Prices

On May 5, The New York Times Editorial Board published this commentary, Runaway Drug Prices, examining the industry's arbitrary price increases and a lack of pricing transparency.

New Report Card on State Price Transparency Laws, Regulations, and Websites Released

Forty-five states received a failing grade, only two received a B (Maine and Massachusetts), and no states earned an A, according to the second annual Report Card on State Price Transparency Laws developed by Catalyst for Payment Reform (CPR) and Health Care Incentives Improvement Institute (HCI3). The Report Card offers policymakers, consumer advocates, and other health care stakeholders a comprehensive state-by-state resource on consumer access to price information for health services. The grades are lower than in 2013 as this year’s Report Card no longer graded states only on the laws they have adopted to promote price transparency, but also on states’ price transparency regulations, price transparency websites (to the extent they exist), and all payer claims databases – the ideal source of data for these websites because they contain more accurate, complete price information. States that relied on all-payer claims databases as the source of price information for consumers received higher grades, as did states with adequate, fully operational, consumer friendly websites (mandated by law).

Some states have robust price transparency laws and regulations on the books, requiring them to create a publicly available website – but often the public can’t readily access price information because the website is poorly designed, or inadequately functioning. As an example, New Hampshire – a state that received an A in last year’s Report Card – received an F this year, because its website is inoperative and may remain so for an extended period.

To get a high score, a state needed to have both the “spirit of the law” – public access to a fully functioning website, and the “letter of the law” – robust legislation and regulations on the books ensuring the price information would remain accessible.

You can view the full report card here.

AMA RUC to Increase its Transparency

The American Medical Association panel that recommends values for physician services to CMS for Medicare Part B payment purposes, which has been widely criticized for its closed-door process, has initiated some changes in an effort to make them more transparent. The AMA Specialty Society Relative Value Scale Update Committee, commonly known as the RUC, will now publish meeting minutes and how the panel as a whole voted for individual current procedural terminology codes; how individual members voted will not be released. The information will be posted on the AMA website after CMS releases its annual Medicare physician fee schedule. The new Medicare fee schedule typically is released around Nov. 1, but this year, because of the government shutdown, CMS announced it may not be released until Nov. 27.

Increased transparency in how physician services are valued in Medicare could have significant implications for physician payment in Medicaid and the private sector. Most commercial insurance plans set physician payment as a percentage of the Medicare physician fee schedule. Employers should take note of the increased transparency at the federal level, and advocate for similar transparency within commercial insurance plans. This increased transparency, combined with the real possibility of SGR reform in the near future, could have significant downstream impacts on the entire health care delivery system.

New White Paper on VBID and Transparency

The Catalyst for Payment Reform (CPR) and the V-BID Center at the University of Michigan released a joint white paper examining obstacles to quality and price transparency. The paper highlights ways to motivate consumers to shop for care based on value and focusing on initiatives that meld consumer incentives with greater price transparency. The paper examines several successful models, including some used by CPR members, CalPERS, Group Insurance Commission of Massachusetts, Pitney Bowes, and Safeway, Inc. These initiatives include reference and value pricing, tiered and narrow networks, centers of excellence contracting, and value-based insurance design. Blending quality and price transparency with evidence-based consumer incentives can lead to an increase in the use of higher-value care and clinically appropriate services delivered in the most appropriate venue. In turn, this should also lead to a decrease in inappropriate and potentially harmful medical expenditures.

New Study Shows Wide Price Variation For Privately Insured Patients

Across 13 selected U.S. metropolitan areas, hospital prices for privately insured patients—especially for outpatient care—are much higher than Medicare and vary widely within and across communities, according to a new study by the Center for Studying Health System Change (HSC) for the nonpartisan, nonprofit National Institute for Health Care Reform (NIHCR).

Based on claims data for 590,225 active and retired non-elderly auto workers and their dependents, the study found that average hospital prices for privately insured patients in the 13 communities with large concentrations of auto workers are about one-and-a-half times Medicare rates for inpatient care and two times what Medicare pays for outpatient services.

Within individual communities, prices vary widely, even after accounting for differences in the complexity of services provided. The highest-priced hospital typically is paid 60 percent more for the same inpatient services than the lowest-priced hospital. The price gap within markets is even greater for hospital outpatient services, with the highest-priced hospital typically paid nearly double the lowest-priced hospital.

The dramatic variation in prices from one hospital to another points to the significant market power of certain hospitals to command high prices, even in markets with a dominant insurer. The study highlights the importance of working urgently toward greater price transparency at the state and local level.

North Carolina Governor Signs Hospital Price Transparency Law

The North Carolina Department of Health and Human Services’ (DHHS) website will soon be publishing the prices of the 140 most common in-patient, surgical and imaging services performed by every hospital in the state. Governor Pat McCrory, a Republican who’s focused on regulatory streamlining and healthcare cost reduction, signed into law House Bill 834 in late August, requiring hospitals to submit pricing information on the services, among other changes. Hospitals and ambulatory surgical centers in North Carolina will submit to DHHS pricing on 100 common in-patient services, 20 common surgical procedures and 20 common imaging procedures. The new law also requires hospitals to submit their charity policy to DHHS and it will publish those policies on its website.