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Continuing in the theme of states trying to curb the rise of healthcare costs, there is an article on NPR about two changes that the state of Indiana has legislated. The first change is that employers can now negotiate directly with hospitals, who are obligated to offer prices "no more expensive than 2.6 times Medicare prices." In exchange, the healthcare providers get "more patients and faster payment." The second change is that by 2029, large nonprofit hospitals risk their non-profit status if their prices continue to be above a statewide average.

The first change imposes a price ceiling, which economists point out will distort the market. While 2.6 times Medicare prices might sound reasonable, many providers will not accept Medicare because the payment is too low. One interesting aspect of this change, however, is that it will likely encourage employers to build more direct relationships with providers, which might remove some administrative overhead.

The second change seems to be a significant deterrent for high prices. However, the details matter for how non-profit providers with high prices actually lose their status. Additionally, if these non-profit health systems end up as for-profit corporations, it is unclear whether the prices will simply resume their previous trajectory.

In an attempt to limit the growth in healthcare spending, California is considering fining "hospitals, medical groups, insurers, and others" if their services grow in cost above the state's targets (as reported by KFF Health News). Unsurprisingly, the hospital industry is fighting back with a lawsuit. California is not alone in trying to rein in costs: "Connecticut, Massachusetts, Oregon, and Rhode Island have also authorized the use of some type of financial penalty. The specifics of each vary widely, although so far no state has applied them."

Clearly, the rise in healthcare costs seems unsustainable. At the same time, fining organizations for rise in costs seems legally dubious. Instead, the state might be able to revoke non-profit status for institutions whose costs rise too quickly. At the very least, the state could be more aggressive in disallowing mergers. Potentially, the state could also affect patient volumes by encouraging patients to seek lower-cost providers.

KFF Health News reported on California's successful effort to bring its own branded insulin to market. "Seven months after the launch of its own low-cost insulin brand, state health officials said California has distributed more than 120,000 five-pen packs of insulin glargine priced at $55 each, significantly less than the $89 to $411 that the state says most popular brand names charge before any retail markups or consumer discounts."

The volume sounds low, potentially because "patient advocates said many people with diabetes aren't aware it's an option." It is also unclear how widespread insurance acceptance of this new option is, and how much the out-of-pocket cost differences are for patients with insurance. Nevertheless, it is at least symbolically meaningful that the state was able to establish this as an option for diabetic patients. It would be interesting to know how much the state has had to spend on this effort, and whether the investment will pay off in the long-term.

Continuing with last week's theme, KFF Health News published another story about how shopping around for health care (this time with a driving radius of a few hours) can yield dramatic price differences (e.g. $16,000 vs $40,000). While both prices exceed the out-of-pocket maximum that insured patients would generally need to pay, the health insurance plans would pay different amounts, meaning that patients who visit the more expensive providers will contribute to higher health insurance premiums. This article specifically noted that mergers of health systems have contributed to higher prices by forming monopolies ("anyone who pays for health insurance pays a price for hospital monopolies, as insurers boost premiums as medical costs rise").

While the Federal Trade Commission (FTC) was formed to protect against anti-competitive mergers, the article cites a paper that found that "the FTC intervened in only about 1% of such cases from 2002 to 2020 to stop a hospital merger." In addition to the suspected higher prices, research has sadly found "that the quality of care declines when hospitals have little competition."

Medical tourism is when a patient travels outside of his or her local vicinity to receive care elsewhere. Generally, people think of medical tourism as visiting a foreign country, but KFF Health News published an article about someone in the US traveling to another state (from Maine to Maryland). One of the patient's local option estimated a cost near $23,000 to treat his hernia. The patient ended up selecting a surgery center and ended up paying less than $5,000 (including travel costs). One difference between the two options is that the local option would have been performed laparoscopically, and "Laparoscopic procedures generally cost more because surgeons use more advanced tools." Nevertheless, that patient "was fully recovered within two weeks," so the benefit of laparoscopy might not have made much functional difference in this case.

Many in the country do not shop for medical procedures because they have health insurance and the difference in out-of-pocket costs might not be substantial. However, as health insurance premiums rise, more people will be tempted to do as what the patient profiled in this article did.