The Senate health committee on Thursday released its draft legislation to tackle healthcare costs, with provisions that read like a road map of how hospitals and insurers use contracts to dominate their competitors, consolidate their business and keep patients in the dark.
The proposal marks the healthcare legislative swan song of Sen. Lamar Alexander (R-Tenn.) as head of the Senate health committee. The package aims to clear up some of the system's opaqueness; mend loopholes exploited by hospitals, insurers and manufacturers; and cut some fat out of the healthcare industry through simple reforms.
On the most visible level, this package is the Senate vehicle for the much debated ban on surprise medical bills. However, this discussion draft doesn't settle the contentious question of how Congress should implement the ban and instead posits three ideas that the committee still needs to decide upon.
The first option would require a hospital to guarantee patients that, for practical purposes, all its physicians are in-network. To make good on this guarantee, physicians could either contract with the hospital's insurers or stay out of network but submit their charges through the hospital so the insurer gets only one bill and the hospital has to incorporate the doctor's fee. Specialists and those that employ them have opposed this idea.
Under the second option, insurers, hospitals or physicians could choose arbitration to resolve disputed charges higher than $750, and the arbiter would have to look at median insurer-negotiated rates from the same geographical area as a guideline.
The third option is identical to the proposal the House Energy and Commerce Committee offered last week: An insurer would pay the surprise bill at the median contracted rate for that region to the hospital or doctor in question.
The health committee's proposal would force air ambulances to separate out medical charges from the transport costs in the bills they send to patients and health plans. Congress mostly failed to grapple with the high-profile issue last year in its Federal Aviation Administration reauthorization bill.
The committee also tucked other consumer protection measures in the package, including a mandate for the industry that patients receive their full bill within 30 business days. If the bill comes later, the patients wouldn't be obligated to pay.
Hospitals, physicians and health insurers would also have to give patients "good-faith" estimates of their out-of-pocket costs within 48 hours of a request.
Insurers' provider directories would have to be kept up to date. If patients can prove that their plan's directory steered them to an out-of-network physician or hospital, they would only be on the hook for their in-network co-pay.
The proposed contract reforms go beyond the obvious patient headaches within the healthcare system. A swath of provisions would correct hospital and insurer manipulations of contracts, which play a big role in setting the prices patients must pay and determining where they have to go for care.
This batch of proposals includes a ban on gag clauses that some hospitals include in their insurer contracts. Hospitals could no longer prevent patients or any other party from seeing all hospitals' cost and quality data. Insurers would be able to access and share anonymous claims data to monitor the quality of their contracted providers.
Another provision would put a stop to "anti-tiering" or "anti-steering," where hospitals through their insurance contracts keep patients from choosing treatment at competing health systems.
There would be no more "all-or-nothing" clauses where hospitals force insurers to contract with all their facilities by saying if they don't contract with all of them they can't contract with any.
Hospitals could also no longer hide certain anti-competitive contract features from the employer plans they contract with. Plan sponsors would have to sign off on all contract terms before entering into an agreement with a hospital network or third-party administrator.
The Government Accountability Office would be mandated to investigate profit-sharing between hospitals, contract management groups, specialty physicians and specialty physician contractors.
Insurer contracts get looked at too. Dominant health plans would no longer be allowed to use their market leverage to hold local hospitals and physicians hostage for the best payment rates, to the detriment of competing companies.
And there are several measures targeting pharmacy benefit managers. Under one proposal, PBMs would have to send quarterly reports on the costs, fees and rebates to the employer plans they contract with.
Spread pricing of the rebates PBMs collect from manufacturers would be banned. PBMs could no longer profit off health plans or patients by demanding higher drug prices than they paid the manufacturers, and they would have to pass along 100% of the manufacturer rebates or discounts to their plan sponsor.
The committee also wants to start grappling with the big picture of U.S. healthcare costs. The legislation would set up a not-for-profit "transparency" group to gather anonymous claims data from employer insurance, Medicare and participating states to get a grip on how to lower costs. The legislation authorizes grants to spur states to launch similar efforts.
Drug pricing takes up another big section of the legislation, with a passel of companion bills to House efforts, including measures to stop manufacturer gaming of exclusivity periods and boosts for more generics and biologics. Notably, this draft doesn't include the Creates Act — which can be teed up for a vote in the Senate at any time.
The package addresses public health by seeking to boost vaccination rates and check the U.S.'s dismal maternal mortality rates. It also incorporates a number of health IT provisions.
Alexander is aiming for a committee mark-up before the end of next month. He has said he wants a bill on President Donald Trump's desk in July.