Wallet, cash and stethoscope Howcan the same people argue that we cannot impose fair, objectivecaps or rules on amounts charged by hospitals, but can impose fair,objective caps or rules on amounts charged by drug companies?(Photo: Shutterstock)

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As 2019 came to an end, and we entered the politically charged year of 2020, one topicdominated the debate stages and legislator's minds: health care. Specifically, two issues relatingto health care seemed to be primary amongst candidate's and lawmaker's talking points; that being the cost of drugs and surprisebalance billing.

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Surprise balance billing is particularly troublesome becausewhether it's an emergency or out-of-network provider operating at an in-networkfacility, the patient either didn't know the provider wasout-of-network, or had no choice in the matter. Politicians seethis issue, and their mouths water. It victimizes innocent people,in dire need of care, when they are most exposed. It alsorepresents a chance for bi-partisan "wins" in the hotly debatedarea of health care.

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Related: The cost of out-of-network bills? $40 billionannually

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Elsewhere, the self-same politicians also see the excessive costof medicine; life saving drugs people must purchase (or perish).They see how the cost of drugs that have been around for decades(with little to no change in the medication itself), continue toincrease. They see people losing their homes, all for the sake ofbuying life saving drugs. This, like surprise balance billing,represents another opportunity to achieve a bi-partisan win in thevery popular area of health care.

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Interestingly, however, despite their similarities, the proposedsolutions for these issues are complete opposites, giving rise towhat I call the "cost of care contradiction."

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Presently, proposed solutions for the surprise balancebilling issue–both at the state and federal levels–focus on two"ideas" and finding a balance between them. Some entities (mostlythose who pay for health care) argue that providers chargearbitrary and excessive amounts for the care they provide. Theywant some sort of objectively fair, universal pricing parameters tobe used to set forth market based "floors" and "ceilings" for whata provider should be able to charge and receive for care. What suchparameters would look like are all over the map, from usingMedicare's fixed fee schedules to private price indexes; fromaveraging what in-network providers accept to using cost-to-chargeratios and fixed "profit" margins over cost.

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Meanwhile, others (mostly hospitals and health systems) wantsome form of arbitration to be put in place, where anarbitrator is presented with what the provider wants as payment,what the payer is willing to pay, and they then will select whatthe payer shall pay. Interestingly, many politicians–especiallyDemocrats–seem to be siding with hospitals and providers, andpromoting the idea of arbitration. Indeed, you can see it alreadyin place in many Democrat-dominated States, such as New York.

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At the same time, those looking to tackle the issue of drugprices have been pushing for caps on what drug manufacturers cancharge, fixing how much pharmaceutical companies can make inprofit, and other limits based on objective parameters.Interestingly, proponents for such measures are also heavilypopulated by Democrats.

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The reason I call this interesting situation the "cost of carecontradiction" is because health care is health care. Whether I'minjecting myself with insulin at home, or receiving a flu shot at adoctor's office, medical care and medicine are two parts of onewhole. Health care is comprised of the patient, provider, facility,equipment, medicine, services and more. They are all pieces of thehealth care puzzle. This is why I'm so confused when I see the samepeople argue that we cannot impose fair, objective caps or rules onamounts charged by hospitals, but can impose fair, objective capsor rules on amounts charged by drug companies.

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Consider the following scenario: I've just been diagnosed withType 1 insulin-dependent Diabetes. I've gone untreated for months,have become very ill, and am at the hospital. While there, theyprovide intravenous fluids, and inject me with insulin. Thehospital pays some wholesale price to the manufacturer, and thencharges my insurance or health plan an inflated rate to cover thecost and earn a profit. That amount–billed to my plan–cannot be"capped" but will instead be "arbitrated" case-by-case, if nonetwork agreement is in place.

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Meanwhile, I go home, and subsequently purchase insulin for myown home use. Do I pay for the insulin? Some (co-pays, deductibles,etc.), but not all of the cost is borne by me. My insurance paysthe pharmacy for the drug the same way my insurance pays thehospital for the same drug (administered to me while I wasin-patient). Yet, unlike the hospital bill (which is sacred, and atbest, can be arbitrated), the pharmacy and drug manufacturer's billto my insurance is something we can cap.

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If we believe that the cost of health care should be capped,then the cost of all health care should be capped. If we believethe cost of health care needs to be unfettered and solelynegotiated before an arbitrator, then all costs of health care needto be unfettered and negotiated before an arbitrator.

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Until people recognize that the cost of health care–whether wemean the cost of care itself, or the cost of insurance that paysfor it–covers both the cost of provider care and drugs, and thatsimilar solutions should be applied to both, then we will continueto see a cost of care contradiction.

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Ron E. Peck, Esq., is executive vicepresident and general counsel with The Phia Group,LLC.


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