Report: Price regulation best policy proposal for health spending

As the country turns its attention to lowering hospital prices, some worry the move could have unintended consequences on private health plans.

According to a report, the Rand Corporation looked at three hospital pricing policies to see what impact they would have on the insurance market. The examined policies are: regulating hospital prices, improving price transparency, and increasing competition among hospitals.

Overall, the authors of the report estimate that price regulation could have the greatest impact on hospital prices and spending but it would likely face political challenges, the report says.

They found:

  • Regulating prices for all private plans, either by setting or capping prices, could reduce hospital spending by $61.9 billion to $236 billion when at 100 to 150 percent of Medicare rates; a 1.7 percent to 6.5 percent reduction in national health spending. Setting prices for a public option or for highly concentrated hospitals could reduce the impact on spending, while capping price could increase the impact.
  • Increasing hospital price transparency could help reduce hospital spending by $8.7 billion to $26.6 billion by reducing prices.
  • Increasing hospital market competition could reduce hospital spending by $6.2 billion to $68.9 billion by reducing prices. Due to how concentrated the hospital markets are today, this would need a radical restructuring for prices to reach competitive levels.

The federal government has already put a rule in place seeking to increase price transparency. Starting in January, hospitals are required to make some of their prices available to potential patients either by posting a comprehensive machine-readable file with all items and services or in a display of shoppable services in a patient-friendly format. The Centers for Medicare & Medicaid Services intends to audit a sample of hospitals starting this month as well as investigating complaints submitted by third parties.

The rule was opposed by the American Hospital Association and other industry groups, which sued to block it from taking effect last year. That case was dismissed