State lawmakers critical of health care costs get feedback from hospitals, insurers

Indiana’s legislative leaders said Tuesday they are reviewing a raft of written responses from hospitals and health insurers on how to lower the cost of health care across the state.

The letters, totaling more than 50 pages, showed little agreement over who is to blame for the cost of health care or how to fix the problem.

House Speaker Todd Huston and Senate President Rodic Bray did not say whether they plan to move ahead with earlier warnings that they might draw up some type of legislation to lower prices.

“Hoosiers are rightfully frustrated about rising costs and simply can’t afford inaction on reducing health care expenses,” Huston, a Republican from Fishers, said in written remarks.

The two legislative leaders asked 20 health care executives in December to submit a plan by April 1 that would lower Indiana’s “out of control” health care costs to the national average or lower by 2025.

“Absent a viable plan, we will be left with no choice but to pursue legislation to statutorily reduce prices,” the December letter from Huston and Bray to health care leaders said.

It’s unclear whether any of the responses the legislative leaders received will amount to a “viable plan” in their eyes.

Indiana ranks sixth in the nation for hospital price disparities—ahead of New York, California, Massachusetts and other larger states with higher costs of living—when it comes to what privately insured people pay for care compared to what Medicare would have paid for the same service, according to a 2020 study by RAND Corp.

Huston and Bray released written responses from six of the state’s largest hospital systems—Indiana University Health, Ascension St. Vincent, Franciscan Alliance, Deaconess Health System and Parkview Health—along with responses from two professional trade groups, the Indiana Hospital Association and the Insurance Institute of Indiana.

The responses varied in length from a one-page letter from Community Health Network to 21 pages (with appendixes) from the Insurance Institute of Indiana.

Several of the letters pointed out steps the organizations have already taken, such as providing millions of dollars’ worth of charity and discounted care, negotiating lower prices with insurers and freezing prices for several years.

But when it comes to who is responsible for the high cost of health care, many of the organizations pointed fingers to different players in the wide-ranging industry.

Community Health Network said that hospital prices are just one part of the overall cost equation. It pointed to a recent study by Kaufman Strategic Advisors that found from 2015 to 2020, claims paid to hospitals, physicians and other providers rose at a rate “significantly lower” than the increases in prescription drug costs and health insurance plan administrative costs.

“In short, we suggest that it’s counterproductive to set specific pricing targets based on measures that don’t accurately reflect the costs paid by patients and employers,” wrote Bryan Mills, president and CEO of Community Health. “That said, we’re all on the same page when it comes to concerns about access and affordability.”

Evansville-based Deaconess Health wrote that Indiana health insurance premiums increased by an average of 4.4% per year between 2010 and 2020, while hospital prices rose an average of 2% a year during the same period.

“This is also at a time when insurance companies are experiencing record profits,” wrote Shawn McCoy, CEO of Deaconess Health.

Some said that passing new laws on health care prices would not address the issue, and that players are already working to lower prices through negotiated insurance contracts and price freezes.

“The market is working, and we should let it continue in the most consumer- and business-friendly manner possible,” wrote Brian Tabor, president of the Indiana Hospital Association  “Heavy-handed government interventions, such as the statutory price setting of one industry mentioned in your letter, will not accomplish this goal of sustainable long-term savings.”

Some others said the state must bear some responsibility for the high cost of health care in Indiana, because the state does so poorly in rankings for obesity, smoking, air and water pollution, childhood immunizations and other health factors.

“What are some of the reasons the costs are so high?” asked Kevin Leahy, president and CEO of Mishawaka-based Franciscan Alliance. “Indiana ranks 47^th out of 50 states in public health funding. It is much less costly to prevent disease than it is to treat illness.”

Likewise, the Insurance Institute of Indiana placed some blame at the feet of Indiana lawmakers for passing laws that it said raised the cost of health care.

“If the goal of the General Assembly is to truly reduce health care costs, then it is imperative the legislature reevaluate its own role as a stakeholder,” wrote Marty Woods, the institute’s president. “For more than three decades, the insurance industry has seen its cost-control policies limited and even prohibited by statute. Unnecessary and inefficient regulatory reporting requirements have been implemented. At the same time, coverages have been mandated and expanded without seriously looking at the levels in which these actions drive up overall costs.”

Indiana University Health, in a letter released last week, pointed out that it had announced plans to freeze prices for five years to achieve national average commercial pricing—and was set to reach its goal by Jan. 1, 2025—almost a year earlier than the date it announced as a goal a few months ago.

Some hospital systems said they had only a limited role to play in setting and negotiating prices.

“The reimbursement rate agreed upon between a health care provider and insurance company is only a starting point in the price that is ultimately offered to the end consumer,” wrote Jonathan Nalli, senior vice president of St. Louis-based Ascension and ministry market executive of Ascension Indiana. “For example, an employer that works through a health insurance company is subject to the insurance company’s underwriting process–or reselling model–over which the health system has no control or influence.”

Huston and Bray, both Republicans, gave little indication of how they would proceed, given the wide-ranging responses. But they made clear they had no intention of letting go of the issue.

“Our overarching goal is to bring down the cost of health care, and deliver real savings for everyday Hoosiers and business owners,” Huston said in written remarks. “While I’m still reviewing all of the responses from Indiana’s insurers and nonprofit hospitals, I’m fully committed to continuing these discussions and meeting with stakeholders.”

Bray said he was “encouraged” by the responses.

“Having affordable health care in Indiana is extremely important,” he wrote. “…I look forward to continuing this discussion in the coming weeks as we process the information provided so we can identify solutions that will lower the cost of health care for all Hoosiers.”