State insurance regulators could impose more limits on hospital prices and hospital price increases.
Speakers talked about the idea Tuesday in San Diego, at a session at the National Association of Insurance Commissioners' spring national meeting.
Adam Fox, the deputy director of the Colorado Consumer Health Initiative, and Lindsey Murtagh, a distinguished senior fellow at Brown University, briefed members of the NAIC's Health Care Affordability and Mitigation Workgroup on hospital services price controls while describing ways to make hospital care more affordable.
Addressing hospital prices is important to controlling overall U.S. health care costs, because hospitals accounted for 32% of U.S. health care cost growth between 2005 and 2024, and 61% of the cost growth was attributable to increased prices, rather than to an increase in the amount of care provided, according to a copy of a Fox-Murtagh presentation slidedeck posted on the working group's section of the NAIC's website.
"Hospital prices for inpatient care paid by private insurance have grown at twice the rate as for Medicaid/Medicare," Fox and Murtagh said.
Fox and Murtagh noted that some states already impose controls on hospitals' prices, and that the controls can take different forms, such as a flat cap on prices or a limit on price increases.
A state could impose a flat cap on prices or simply limit how quickly prices can increase, Fox and Murtagh said.
If the limit is too high, that may give some hospitals room to raise rates, but, if the limit is too low, that "could negatively impact hospitals' viability," the speakers warned.
What it means: State efforts to regulate hospital service prices could expand this year.
The backdrop: Traditionally, states have been leery of trying to control health care prices directly.
Some economists argue that imposing limits on health care products and services makes, because health care providers start off with much more power over transactions than the patients have, due to the critical, urgent and complex nature of many types of health care services.
Other economists contend that imposing controls on health care services will pull some providers out of the market and, eventually, lead to shortages of the affected services from official sources and the creation of "black markets" or other alternative sources for the affected services.
Some states have shrugged off the objections.
Colorado has tried to use a new prescription drug price control law to cap the price of Enbrel, a drug that treats autoimmune diseases, and the manufacturer has gone to court to fight the price cap.
Indiana recently adopted a law that will limit how much some nonprofit hospitals in the state can charge employer-sponsored health plans that use direct contracting arrangements.
Hospitals in Indiana have objected to the law there but appear to be complying with it.
Fox and Murtagh's assessment: Fox and Murtagh told the attendees at the working group session that different kinds of state hospital price control efforts have had difference effects.
Rhode Island, for example, limits hospitals to increasing prices for participants in fully insured plans to a rate that's 1 percentage point higher than the overall inflation rate, the speakers noted.
Oregon limits how much some hospitals in Oregon can charge participants in the state employees' health plan.
The Oregon law has saved Oregon money without having much noticeable effect on the hospitals, according to Fox and Murtagh.
The Rhode Island law has cut fully insured health insurance premiums in the state by an average of $1,000 per plan participant per year, but it's reduced hospital revenues by about $160 million per year, the speakers said.
Other options: The speakers also talked about ideas for use of strategies other than price controls for holding down hospital prices.
The ideas discussed include:
◆ Increasing the amount of information that hospitals must provide about their owners and their finances.
◆ Imposing more oversight over hospital mergers and acquisitions.
◆ Limiting the ability of private equity firms and other for-profit companies to own hospitals.
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