After threatening to take steps to curb Indiana’s health care costs, considered among the highest in the nation, state legislators ended the 2023 session with mixed results.
House and Senate leaders promised in a 2021 letter to Indiana’s largest hospitals and insurers that if they didn’t come up with a plan to bring down prices to national averages, lawmakers would have “no choice but to pursue legislation to statutorily reduce prices.”
Unsatisfied with the industries’ response to that letter, legislators opened the session with a slate of bills taking bold shots at controlling prices. They proposed banning noncompete clauses for doctors, preventing hospitals from billing excess fees, and most significantly, instituting penalties for hospitals that don’t keep their prices in line with a certain threshold.
Session’s end saw a few key wins for health care billing and transparency, but also some major compromises on broader reform. Most notably, the penalties in House Bill 1004, authored by Rep. Donna Schaibley, R-Carmel, were replaced with instructions to collect data over the next two years to see how much health care costs are out of whack and whose fault that is. Then a panel of legislators will decide, in roughly two years, what to do about it.
Though they didn’t come down with a heavy hand to control costs, House and Senate leaders said they’re satisfied with what they accomplished.
“You’re never gonna have a piece of legislation like that end the same way it begins, because we need to take in everybody’s thoughts and ideas, concerns and considerations, which we did,” Senate President Pro Tempore Rodric Bray, R-Martinsville, told IndyStar. “I’m pretty happy with the way it turned out.”
No one, though, is completely happy with where lawmakers landed. Advocates for hospitals think the measures went too far, fearing they may wind up having a detrimental impact on patient care. Advocates for lower costs say that while they’re pleased with the progress, there’s still work to be done.
Inside the Senate Chamber of the Indiana Statehouse, Senate President Pro Tem Rodric Bray, R-Martinsville, and Sen. Sue Glick, R-LaGrange, speak Wednesday, July 20, 2022, about bills they are introducing and a Senate schedule for the special session that will begin July 25.
Devin Anderson, a board member of Hoosiers for Affordable Health Care, a grassroots organization that has been pressing for legislative action in recent years, said the result will allow hospitals to fall short when it comes to cutting costs.
“We have made a huge step in dealing with this large problem in this past session,” Anderson said. “Honestly we would prefer it to be more and faster. We would have liked for there to have been more teeth in it.”
From the beginning, House Bill 1004 targeted large hospitals, and there was no consensus among lawmakers over whether hospitals alone deserved that target. Over time, bills racked up exemption after exemption to spare most kinds of hospitals from the new laws, and the Indiana Hospital Association attempted to cast doubt on existing studies on health care costs. The end result tasks the state with collecting patient revenue and claims data directly from Indiana hospitals and commercial and government insurance reimbursement rates.
All along, hospitals and insurers have said they preferred to work out solutions outside the Statehouse. Brian Tabor, Indiana Hospital Association president and CEO, said he and his members view the actions legislators took this session as “very short-sighted” and counter to a sustainable solution for Indiana’s health care costs.
Not only do the new policies target the state’s largest hospital systems, but the financial pressures that result could lead some to close services such as obstetrics or shut down outpatient offices where they can no longer bill at the higher hospital rate, he said.
“The problem with legislation is that you get unintended consequences, and I think that some of the unintended consequences of the legislation that passed are things that will not just affect the hospitals negatively but also patients,” Tabor said. Some hospitals are already blaming the legislation for financial decisions. Last week, Community Health Network announced that it plans to restructure its workforce and make changes that could impact jobs.
Officials declined to specify what particular aspects of the legislation are behind the concern, how many people would be laid off or when. No notices have been filed with the state that large layoffs are imminent in the next two months.
In an emailed statement, they said recent state and federal legislation will “challenge our financial future.”
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Lawmakers made gains in some areas that could lead to lower health care prices, but not until at least 2025.
With Senate Bill 8, insurers will have to pass along to individual health payers at least 85% of the rebates they negotiate with drug manufacturers in exchange for covering the drug; to employers, they must pass along 100% of the rebates.
With House Bill 1004, hospitals will be on the hook for submitting data to the state for a comprehensive cost comparison study of hospital prices and insurance claims. A cost oversight committee comprised exclusively of lawmakers will then review the data and make recommendations for potential additional policy changes to reduce prices further and encourage more competition in the marketplace.
Within House Bill 1004, the state’s largest non-profit health systems — such as IU Health, Community Health Network, Franciscan Health, and Ascension St Vincent — will be barred from charging a facility fee for some outpatient services delivered at off-campus sites, a practice that hospitals argue helps defray the cost of providing charity care and care for those on Medicare and Medicaid.
Gloria Sachdev, president and CEO of the Employers’ Forum of Indiana, considers the facility fee change the best of all the progress made this session. The employer-led health care coalition has worked to bring down hospital costs in Indiana for years ever since a 2017 Rand study the group sponsored found out-patient health care costs here were “shockingly high.”
“That is really going to create direct savings for everyone,” she said.
Determining just how much people may save and hospitals could lose, however, is difficult, she said. Claims often include the hospital’s billing address as the site of care even if the patient visited an off-site clinic.
Other new laws started out as sweeping measures and were watered down.
House Bill 1004, which started out with a financial penalty for hospitals that overcharge, became a three-part data-reporting law. The only penalty left in the bill is a $1,000 fee each day they’re late with the data.
The sole Indiana Republican senator who voted against House Bill 1004, Evansville Sen. Vaneta Becker, told IndyStar she felt there wasn’t enough focus on the insurance industry’s role in price gauging. Her colleague across the aisle, Democratic Sen. Jean Breaux of Indianapolis, felt similarly ? that lawmakers didn’t have a holistic enough picture.
“When it first came to us, it was strictly, ‘let’s slap the hospitals,'” she told IndyStar after the final version passed the Senate. “There’s a lot of arbitrariness we do around here.”
Executives from both insurance companies and hospitals attended many meetings with lawmakers, Bray said; but the state has far less control over the insurance market, which is dominated by large-employer plans that are federally regulated.
What happens now?
Many of the employers Andrew Berger represents at the Indiana Manufacturers Association easily see a 5%-10% increase in health care premiums each year, particularly since the hospital industry has become more and more consolidated.
What lawmakers did this session won’t change that reality.
“How many studies do you need before people in hospital board rooms say let’s be a little more accommodating here with our billions of dollars, I don’t know,” Berger said.
Berger said he did not mind the current’s law lack of penalties for hospitals that fail to comply with the effort to reduce costs. He worried penalties might only add costs to the overall system and possibly get passed on to consumers.
Bray, too, told IndyStar he “never liked the idea of price caps,” even though that’s what his 2021 letter implied ? he said he had concerns back when they drafted the letter that price caps would lead to some hospitals raising their prices to meet the cap and too much government control.
But Berger and other watchers are hopeful that the data requirements will encourage the market to adjust itself ? after all, hospitals and insurers would be facing the ramifications of their own data.
“In two years when this data comes out, that will be an opportunity for the legislature to have data that is so clear, that if there’s something wrong with it, it’s the fault of the hospitals,” Ball State University economist Michael Hicks said.
That’s Hicks’ optimistic view ? that this process will be the nudge necessary to make hospitals and insurers take real action that they thus far have not. The more pessimistic scenario would be that nothing changes and desperate circumstances will push the state toward a single-payer system.
“If the Indiana legislature supermajority… are unable to constrain hospital monopoly behavior and pricing, then no one’s going to be able to do it,” he said.
Should lawmakers raise Medicaid rates
As debate raged in the legislature, hospital advocates noted that one persistent issue has been Indiana’s low Medicaid reimbursement rate to hospitals and providers, which has not seen an increase in three decades.
House Bill 1004 requires the state Family and Social Services Administration to compile data on Indiana’s reimbursement rate compared to national rates, then make recommendations to the legislature on whether and how much lawmakers should raise the rates. Bray said it’s something the legislature is interested in looking at, possibly as soon as lawmakers write a new state budget in two years.
“We can acknowledge that some of our Medicaid rates need to be a little higher,” he said.
Other states are already taking steps in that direction: Kentucky recently approved a measure to reimburse Medicaid patients at commercial rates.
State-by-state comparisons can be tricky because of the nature of the government-sponsored program, but Tabor said he hopes that lawmakers consider raising the rate as soon as possible as they move forward, particularly for the sake of hospitals who have a high percentage of Medicaid patients in their payer mix.
“I don’t believe we can wait for another budget cycle given the vulnerabilities of many of our rural and safety net hospitals,” he said. “It is incredibly urgent.”
Anything to lower health care costs
For the average person, however, the issue centers not on who is to blame but the final amount for which a person is on the hook after seeking health care services.
As an independent patient advocate with Clear Healthcare Advocacy, Jenni Nolan helps people decode complicated medical bills and determine what they do and don’t owe. She frequently sees people with high deductible plans struggle to pay thousands in medical expenses.
“I’m all for anything that’s going to lower the cost of health care,” said Nolan, a member of the Employers’ Forum. “I don’t have a lot of sympathy for the hospitals right now. I love the care we can get in this country and in this state but I think at the end of the day, they’re in it for the money and I don’t feel real sorry for them.”