Gov. Ned Lamont recently proposed legislation to reduce healthcare costs in Connecticut. Swift action is critical as recent data revealed healthcare spending in the state surged by 6 percent between 2020 and 2021, far exceeding the established target of 3.4 percent.
The complexity of the proposed legislation mirrors the complicated issue of escalating costs and acknowledges that no simple solution exists for unsustainable increases in healthcare costs.
The governor also has a separate proposal to eliminate medical debt. The healthcare cost proposal would complement it by preventing some key causes of medical debt — the leading cause of bankruptcy in the U.S.
I’ve seen the healthcare cost issue from a variety of perspectives, first as a vice president of the largest health insurer in the country, and now as a healthcare entrepreneur and investor involved in the creation of nine companies committed to lowering healthcare costs.
The governor’s proposal is wisely focused on hospitals and pharmacy, which is where we tend to see the extreme high prices that cause medical debt. While many elements of the proposal are thoughtfully designed, there are still some areas where the state could further address existing gaps.
How Gov. Lamont’s healthcare proposal affects hospitals and providers
The governor’s proposal eliminates hospital facility fees charged at free-standing offices and clinics. This is a no-brainer. Medical offices and clinics aren’t hospitals, so why should hospital fees apply?
One of the best ways patients can avoid high-cost medical bills is to schedule elective procedures at ambulatory surgery centers (instead of hospitals). Often, the same procedure with the same physician can cost a fraction of the hospital’s price. The ability of hospitals to charge facility fees at non-hospital settings is yet another an example of our complex healthcare pricing system that needs to be simplified.
In addition, the proposal limits the out-of-network rate to 100 percent of the Medicare rate. Out-of-network price gouging is much less of an issue following the federal No Surprises Billing Act, but patients still need additional protections.
Medicare typically represents the healthcare pricing floor — payers generally do not reimburse healthcare providers less than Medicare — so limiting out-of-network charges to 100 percent of the Medicare rate is certainly bold. I suspect the intent here is to push providers to participate in networks.
An alternative approach could involve regulatory oversight of health plans’ endeavors to include specific providers in their networks. For instance, if all anesthesiologists within a particular region are out of network, the state could establish a framework to guarantee that negotiation discussions take place at regular intervals.
One measure not addressed by the proposal that has worked in other states would be to mandate simple and clear standards for hospital financial assistance policies. All nonprofit hospitals are mandated to have a policy that provides a sliding scale of discounts to patients based on their income and ability to pay. However, these programs can be difficult to understand and access.
The state could create one standard financial assistance process for all hospitals in Connecticut and manage the application process securely via the web. With a standard process that patients can easily access, more patients will apply and qualify for free or discounted hospital services. Hospital financial assistance is already law — it just needs to be made more visible and efficient.
Pharmacy changes in Gov. Lamont’s healthcare cost proposal
The governor’s proposal strengthens the federal 340B program. This program provides significantly discounted drugs specifically to hospitals and clinics that treat low-income patients. Drugmakers have challenged its expansion, so clarifying and strengthening the program will help eliminate controversy and make sure it does what it’s designed to do: support patients who need it most.
The proposal also creates a drug discount card for state residents. There has been an increase in awareness of drug cash pricing among healthcare consumers, even if they don’t know the term “cash price.” The governor’s proposal creates a similar discount program for Connecticut residents.
Differentiating and promoting the state program could be a challenge. One very effective way to do it would be to require pharmacies to automatically charge patients the Connecticut discount program rate if their out-of-pocket cost is ringing up at a higher amount.
This would get around the main limitation of prescription cash price programs: They require patient knowledge and action. Even if you’ve seen a thousand TV commercials for this type of service, you may not remember to check the app when you’re sick and need to pick up medicine.
The proposal also establishes an annual list of drug-price changes. While there’s nothing wrong with this idea, it seems unlikely to make a significant impact. Patients will only be concerned with the out-of-pocket cost at the retail point of sale when they need a drug, not looking at a trend line of historical price increases.
Additionally, the proposal would require pharmaceutical representatives to disclose information about generics and efficacy across different races and ethnicities. While this is useful information, channeling it through marketing representatives seems like an indirect route to cutting healthcare costs. The pricing mechanisms in the pharmaceutical industry are the main issue, and these are addressed elsewhere in the proposal.
Regardless of how this plays out, the issue of healthcare costs is so central to every Connecticut resident and the economic well-being of the state that it should be a topic of discussion in every legislative session. Hopefully it culminates with an impactful outcome.
Mike Waterbury is CEO of Canton-based Goodroot, a community of companies reinventing healthcare one system at a time.