Key Senate committee eyes healthcare reform in the name of affordability

As described at a recent Senate hearing, hospitals, insurers and pharmacy benefit managers (PBMs) all are under scrutiny by Congress in efforts to curb the growth in healthcare costs.

The Senate Health, Labor Education and Pensions (HELP) Committee held a July 31 hearing to examine ways to make healthcare more affordable for consumers and other purchasers, and the discussion focused on various stakeholder groups.

“Congress must make a serious effort to navigate a whole raft of perverse incentives throughout the healthcare system,” Sen. Bill Cassidy (R-La.), chair of the HELP Committee, said at the start of the hearing.

He added, “What we hope to do here is recognize that the problems are diverse. They’re intertwined.”

An opportunity to pass some of the concepts into law will be available during the appropriations process for FY26, although unlike during the process for passing the budget reconciliation bill earlier this summer, the GOP majority in the Senate will need Democratic support for any measure.

One looming issue affecting the affordability of healthcare, or at least health insurance, got little play during the hearing. The pending expiration of enhanced subsidies for buying insurance in the Affordable Care Act marketplaces, which the Congressional Budget Office has said would increase the number of uninsured by more than 2 million next year, received only passing mentions.

Revisiting price transparency

Arguments in favor of hospital price transparency are nothing new. The recent hearing focused, in part, on the implications for employer-sponsored insurance.

“If an employer cannot see what they are paying to a hospital, what the prices they’re paying [are], what is coming out of the bank account and what the prices that their insurance company has negotiated on their behalf [are], they are unable to control that cost,” said Chris Deacon, JD, principal with VerSan Consulting.

She added that the focus tends to be on giving employees transparency for shoppable services, but it’s at least as important to bring more clarity to prices for high-cost services.

“It’s the employer and their vendors that are going to look at those prices and make sure that what they’re paying for is accurate,” Deacon said.

A recently introduced bipartisan bill would require hospitals to post cash prices instead of estimates, continuing a push that CMS has taken up this year. Addressing a longstanding complaint of employer advocates, it also would ensure group health plans have unfettered access to their own claims data.

Such provisions would be “transformational for employers and their ability to exert the market power that they should have to lower costs,” Deacon said.

Transparency also should be used to shed light on facility fees at hospital outpatient departments (such a provision nearly passed Congress at the end of 2024) and to allow for accessible prices in electronic health records, said Brian Miller, MD, MBA, MPH, associate professor of medicine and business at Johns Hopkins University. The latter step would give physicians and patients a better opportunity to discuss prices together.

340B concerns

Congress continues to examine the prospect of adding restrictions in the 340B Drug Pricing Program. A preliminary discussion draft that has been circulating since early 2024 calls for enhancing program integrity via measures affecting the definition of a 340B patient, the availability of 340B discounts for care provided at child sites, and transparency requirements.

Cassidy said legislation could be necessary to better pinpoint the scope and purpose of the 340B program.

“The common understanding among legislators, whether it’s true or not, is that the discounts received by hospitals are supposed to make healthcare services more affordable and accessible for low-income and uninsured patients,” Cassidy said. “But the law is actually unclear.”

Savings from the program should be more precisely allocated, said Benedic Ippolito, PhD, senior fellow with the conservative-leaning American Enterprise Institute

“If the goal of the program is to try and help hospitals afford care for people who don’t have coverage or cannot pay, then we ought to try to target those subsidies to those patients,” he said. “Right now we really don’t do that.”

He added, “Just tell us how many of these people you treat, and we’ll try and help subsidize the care for those people. That seems like a very natural way to do it.”

Administrative snags abound

One witness said transparency can only go so far in making healthcare prices more rational and affordable.

“You can’t comparison-shop your way into an ICU with a heart attack or in the many communities where there is only one hospital system,” said Adam Gaffney, MD, MPH, assistant professor at Harvard Medical School.

A comprehensive solution requires insurance reform that eliminates the copays, deductibles, narrow networks and administrative requirements that, Gaffney said, can eat up a quarter of hospital revenue. The best way to achieve such a system without causing overall healthcare spending to surge would be to implement Medicare for All, he added.

Deacon shared an example of a claim filed by a provider for more than $4 million. The provider ended up with an $875,000 payment, while Cigna retained $2.5 million in fees and the third-party vendor MultiPlan kept $677,000 for negotiating the price of the claim via an algorithm.

Thus, nearly 80% of payment for the care episode went to non-healthcare activities.

The Affordable Care Act’s requirement that insurers maintain a medical-loss ratio (MLR) of 80% to 85% proved to have a loophole, said Wendell Potter, a patient advocate and president of the Center for Health and Democracy, because insurers began buying up physician practices and other providers.

“They now pay themselves, satisfying MLR requirements while shifting more money to corporate profits,” he said.

PBM reform

Bipartisan legislation was proposed during the prior Congress and revived earlier this year in the House to delink PBM compensation from the list price of a drug and the accompanying negotiated discounts. The hope is that such a provision would remove incentives for PBMs to promote expensive drugs. Compensation instead would take the form of fixed fees.

As is, “PBMs create formularies that prevent you from using the generic drugs at less cost,” said Sen. Roger Marshall (R-Kan.), lead sponsor of the prior bill. “They push you to use the more expensive ones.”

“That game incentivizes drug companies to have a higher list price,” said Potter, who was in corporate management at Cigna before shifting to patient advocacy around 2008. “And then the middlemen are sucking so much money from the pharmacy supply chain.

“When I was at Cigna, Cigna didn’t own a very big PBM. It bought Express Scripts a few years ago [in 2018], and now it is largely a PBM that also has insurance plans.”