Address regulatory burdens, antikickback laws to lower healthcare costs, experts say

A man taking cash out of his wallet
A panel of experts from across the healthcare system discussed the causes of and solutions to rising drug prices last week. (Getty/lzf)

The skyrocketing cost of healthcare is a result of a system working as intended—to “extract resources from” the people using it, experts say. 

Glenn Rodriguez, M.D., board chair of CareOregon and an adjunct associate professor of family medicine at Oregon Health and Science University, said the American healthcare system is designed to be hard for patients to understand. 

“This system is set up to obfuscate,” Rodriguez said. “It’s designed to make it impossible for people to make informed choices.” 

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Because patients have limited ability to navigate the system, they have limited power to negotiate or push for change in the cost of care, said Gerard Anderson, Ph.D, a professor at the Johns Hopkins Bloomberg School of Public Health and Medicine. 

Anderson and Rodriguez were among the panelist at an event dissecting the cost of healthcare in the U.S. hosted by the Alliance for Health Policy. 

RELATED: Policy experts blame provider consolidation, lack of price transparency for skyrocketing medical costs

Lowering costs will require leaning on private payers to set better rates, Anderson said. Public payers pay significantly less than private ones, he said, and private insurers have the negotiating power that their individual members don't. 

Anderson has been studying the cost of healthcare for decades, and costs for care in the U.S. have consistently been higher than those in other developed countries. At present about 17.2% of the U.S. gross domestic product is spent on healthcare; the next closest country is Switzerland at 12.4%. 

If the United States were to drop to that rate, it would save $630 billion each year—essentially the equivalent of the country's entire trade deficit, he said. 

But despite high spending, Americans use fewer services, Anderson's research has found. For example, the hospital occupancy rate in the U.S. is about 63%, while the mean for Organization for Economic Cooperation and Development countries is 75%. 

"What's interesting for me is for all this money, we actually get less service," Anderson said. 

Other research also suggested that the U.S. lags behind in outcomes compared to other developed nations

RELATED: CMS—Healthcare spending growth slowed in 2016; per capita spending topped $10K 

The panelists presented a slate of different ways to address the pricing problem. In addition to Anderson's call for private payers to set fairer rates, Joanna Hiatt Kim, vice president of payment policy for the American Hospital Association, suggested addressing administrative burden on providers as a solution. 

Hospitals, health systems and post-acute care providers spend $39 billion each year keeping up with regulatory requirements, she said, and it's increasingly a drag on clinicians' time. 

"We pull clinicians away from patients and put them on paperwork," Kim said. 

The panel also highlighted the rising cost of drugs as a major component of the pricing problem. Kim said that between 2008 and 2016 brand name drug prices doubled, fueling an increase in hospital costs as well. 

RELATED: High drug prices are forcing patients to make risky choices, experts warn 

Dan Leonard, president of the National Pharmaceutical Council, disputed the argument that drug prices themselves are to blame and instead said that much of the cost is inflated in the supply chain through the rebate process. Pharmaceutical companies often blame pharmacy benefit managers for increasing patient costs. Last week, Department of Health and Human Services Secretary Alex Azar also blamed PBMs for creating a "broken system."

He also said that rising rates of chronic diseases like diabetes are driving up cost more than the price of medications. 

Value-based payments could bend the cost curve, Leonard said, but regulators need to make it easier for pharmaceutical companies and providers to work together on these models. Antikickback legislation, for example, poses a significant barrier to expanding these models. 

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