A David and Goliath story: Why it was hard to legislatively cut health care costs
- Indiana’s health care costs are higher than they should be, driven at least in part by high market concentration in both Indiana’s hospital and insurance industries.
- State lawmakers passed three Republican priority bills aimed at reducing health care costs this legislative session, but some argued the legislation didn’t go far enough or address the whole puzzle of what drives high hospital prices.
- The health care industry is influential in the Indiana Statehouse, both as one of the top employers in the state and as a prolific contributor to political campaigns.
At the start of the legislative session, lawmakers pushing for health care cost-cutting bills knew they faced a challenge.
So much so that they nearly all used the same biblical tale to describe the situation: It was like David and Goliath. In their eyes, the legislatively powerful nonprofit hospitals were the giant Goliath and lawmakers were the smaller, weaker David, working to pass bills that could limit hospitals’ profits and in turn — they hoped — lower Indiana’s high health care costs.
Indiana lawmakers passed three Republican priority bills this legislative session aimed at reducing such costs, ranging from limiting physician noncompete agreements to creating benchmarks for how high hospital prices in the largest hospital systems should be.
While those carrying the bills lauded the progress, not everyone agrees the new laws, which are poised to start going into effect in the next couple of months, will reduce costs without dangerous unintended consequences.
Depending on who you ask, that’s because lawmakers weren’t looking at the complete puzzle of what drives high hospital prices, such as Medicaid reimbursement rates or the role of pharmaceutical companies, or because the measures were significantly watered down throughout the legislative session. Or maybe both.
For example, lawmakers removed a fine in House Bill 1004 for hospitals that charged high prices, and a bill reducing prior authorization requirements never crossed the finish line. And instead of banning all physician noncompetes, Senate Bill 7 just prohibited them for primary care physicians.
“Senate Bill 7 was a stone to throw at this Goliath as it passed the Senate,” Rep. Ethan Manning, R-Logansport, mused during a committee hearing in the second half of session. “As amended, I think we’re throwing a wiffle ball.”
The health care industry is one of the top employers in the state and generates nearly 15% of the state’s gross domestic product, so it’s all but unavoidable that the debate would be routinely muddied by the influential employers involved in it. Some of the state’s biggest employers are health care giants that sit just roughly a mile from the Statehouse, including Elevance Health (previously known as Anthem), Eli Lilly and Indiana University Health.
Still, the Indiana Hospital Association and the Indiana Insurance Institute rejected the notion that either of their industries was Goliath-like.
Likewise, those in the health care industry don’t always agree on which data to rely on and blame costs on other factors — or sometimes each other — making it difficult to pinpoint easy solutions.
There’s also simply ideological qualms over too much government involvement and a fear of unintended consequences, such as the potential closure of hospitals that provide valuable care in rural communities or an inadvertent increase in health insurance premiums.
“There seems to be this short sighted focus on ‘doing something’ to a certain number of facilities without a recognition of the consequences to the entire health care system around the state,” said Brian Tabor, president of the Indiana Hospital Association. “We kind of missed the opportunity to have a broader discussion.”
Which bills were signed into law
Lawmakers made lowering hospital costs a priority this legislative session after multiple reports found that Indiana’s health care costs are higher than they should be, driven at least in part by high market concentration in both Indiana’s hospital and insurance industries.
Health insurance premiums make up a larger share of a Hoosier worker’s salary than of an average American and there’s a large gap between what Medicare pays for hospital services compared to what commercial insurance pays in Indiana, signaling a high hospital cost problem.
The result was three new laws signed by Gov. Eric Holcomb, all of which were priorities of Republican legislative leaders.
House Bill 1004, which received the most attention throughout the legislative session, no longer contains its most controversial measure — fining hospitals that charge more than 260% the cost of Medicare. Instead, the final legislation requires the state to collect data on when Indiana’s largest hospital systems charge more than 285% the price of Medicare.
Starting in July, the new law will also require nonprofit hospital systems to charge for services based on where the service is actually provided. Currently, health providers can charge more for a procedure if it’s performed at an off-site, hospital-owned clinic — as if it were being performed at a hospital — rather than an independent clinic.
Representatives from hospitals say that flexibility allowed them to treat patients where they are, instead of requiring them to travel to hospitals, but it also can mean higher costs for patients. Just like in the other part of the bill, there are numerous carve-outs, including for rural hospitals, oncology centers and behavioral health centers.
The legislation also encourages hospitals and insurance companies to participate in a program that would reduce prior authorization and gives physicians who own their own practices a tax credit.
Some lawmakers saw the bill as a good start, a way to get more data, while others viewed much of it as a do-nothing bill targeting a small subset of hospitals.
“We squandered the opportunity to help Hoosiers facing high health care costs,” Evansville Democratic Rep. Ryan Hatfield told State Affairs, “and instead passed a feel-good bill that will have little implications for the consumer.”
Lawmakers also approved Senate Bill 8, which requires pharmaceutical benefit managers, who negotiate agreements with drug manufacturers for insurance companies, to pass along discounts to those who are insured, and Senate Bill 7, which bans noncompete agreements between hospitals and primary care physicians.
Getting the three measures passed was so challenging that the latter barely crossed the finish line, due primarily to philosophical issues about the role of government and whether or not the state should limit noncompete agreements for one industry and not others. Even a Democrat, Hatfield, questioned why Indiana Republicans were more in-sync with Democratic President Joe Biden on the issue.
A House committee had to vote twice on the measure after it failed to obtain enough votes to advance the first time, a rare occurrence at the Statehouse.
Health care influence at the Statehouse
Lawmakers on both sides of the bills blamed how convoluted the process of lowering health care costs can be on the prowess of the health care industry, and the sheer number of groups and lobbyists with an interest in the debate.
“It's a behemoth. We’re talking about billion-dollar companies and folks that are making millions of dollars,” said Sen. Justin Busch, the Republican from Fort Wayne who carried SB 7. “Any time you step into a world where folks are making a ton of money, and we’re talking about really, really big business here, I think it’s going to be difficult every time.”
Both insurance and hospital groups frequently contribute to Statehouse candidates, with the top five insurance companies and the Indiana Insurance Institute contributing more than $1 million over a five-year period to state candidates and committees. Hospitals spent at least $600,000 as well.
Meanwhile representatives from both industries spent in the hundreds of thousands on lobbying efforts and entertainment at the Statehouse in 2022. (The 2023 reports aren’t yet available).
Those advocating for the bills, primarily in the business community, have their own powerful connections, too. Al Hubbard, an influential Republican who once served in the White House, leads Hoosiers for Affordable Healthcare.
Andy Downs, director emeritus at the Mike Downs Center for Indiana Politics at Purdue-Fort Wayne, said it’s not that lobbying or campaign contributions guarantee a candidate will vote in line with your goals.
“What they are much more likely to guarantee is access,” Downs said. “If you give $2,500 to your favorite candidate, your favorite candidate is probably going to answer your call when you call, which means you may be in a better position to argue your point.”
On the hospital’s side, that increased access meant the opportunity to cast doubt on studies completed by the RAND Corporation, a nonpartisan think tank, that showed hospital prices were higher than they should be. Hospitals took issue with the methodology, though multiple studies confirm Indiana has a high health cost problem.
Valparaiso Republican Sen. Ed Charbonneau, the sponsor of House Bill 1004, said the dispute over the validity of the numbers impacted discussions on health care costs. In the end, House Bill 1004 primarily collects more data, instead of relying on the data that already exists to take action.
The insurance fight was less obvious. House Bill 1003, which originally would have limited prior authorization requirements for physicians with a good track record, was dramatically weakened after the Insurance Institute of Indiana testified against it. The amended language, which just encourages insurance companies to limit prior authorization, was later placed in House Bill 1004.
Rep. Hatfield argued Republican lawmakers put too much emphasis on punishing a select few hospitals and not enough on insurance companies. He said lawmakers were fearful of upsetting Anthem, which is headquartered just a mile away from the Statehouse.
“I genuinely do not believe that it’s the unintended consequences that lead to inaction,” Hatfield said, “but rather the hold by the special interests, in particular the insurance companies and the insurance industry, over the legislative process that prevents us from taking bold action on health care costs.”
The Indiana Insurance Institute, though, said it was equally impacted by the bills that legislators passed. Another bill that was not dubbed a priority bill among legislative leadership requires insurance companies to speed up the prior authorization timeline and creates a pilot program reducing prior authorization for state employees.
Marty Wood, president of Indiana Insurance Institute, argued lawmakers were likely also influenced by another health care entity, this time pharmaceutical Eli Lilly. The company, which has contributed $246,000 to candidates and other state committees in the last five years, did not respond to a question about if it was involved in this year’s health care cost debate. However, the company called SB 8, the pharmacy benefit manager bill, “ground-breaking legislation.”
Some lawmakers still worry that the new laws, however watered down they may be, will have unplanned outcomes on health care access throughout out the state.
“I’m worried that what we’re doing is going to minimize that quality and access for everybody,” Sen. Jean Leising, R-Oldenburg, told State Affairs. “So then, will it have rippling effects to my small hospitals in my district?”
While some hospitals across Indiana are still collecting much more than they spend, others are struggling after the pandemic. Just this week, Community Health Network announced it would be cutting jobs, and a recent report found that seven unnamed rural hospitals in Indiana are at risk of closing.
Already, a third of Indiana’s counties have no inpatient delivery services, and 8% of the state is located more than 45 minutes away from a trauma center.
“They like their hospitals,” Carmel Republican Rep. Donna Schaibley, the author of House Bill 1004, said of her fellow lawmakers. “Sometimes I think they have trouble disengaging what’s going on as far as hospital administration and wonderful doctors and nurses that take care of you every day.”
During the legislative session, hospitals and insurance companies advocated for a different way to cut health care costs for Hoosiers: increase Medicaid reimbursement rates for hospitals, so less of the costs are shifted onto those with private insurance. The base Medicaid rates haven’t been increased in decades.
“It’s a choice the legislature is making and they understand that there’s a cost shift going on,” Wood said, “but right now, they’re pointing the finger rather than addressing their own part of the problem.”
Holcomb’s administration is planning to review reimbursement rates for hospitals during the next budget cycle, but Tabor warned that could be too late for struggling hospitals. It’s also unclear if that answer would do much to lower health costs: Both Michael Hicks, a Ball State University economist, and Seth Freedman, an Indiana University professor specializing in health economics, cast doubt on the concept of cost shifting.
“What that’s kind of assuming is that the providers have some way of raising prices to their private paying patients that would increase their profit on those patients, but they’re only going to do that if Medicaid pays the low prices,” Freedman said. “That doesn’t really make sense right? If they can raise prices on their private payers, we expect them to do it anyway, no matter what Medicaid payment rates are.”
During the debate on House Bill 1004 the final night of session, Sen. Jean Breaux, D-Indianapolis, shared perhaps the most transparent take on the dilemma lawmakers faced when dealing with the complex issue of cutting health care costs.
“I feel like just throwing up a coin and whichever side it falls on,” she said, before voting against the bill. “I really don’t know what’s the best thing to do here.”
Contact Kaitlin Lange on Twitter @kaitlin_lange or at [email protected].
Header image: Lawmakers passed multiple bills this legislative session with a goal of cutting health care costs. (Credit: Maudib)
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Treasurer Elliott explains his plans to keep the new ESG policy from becoming a ‘witch hunt’
He calls himself the “nerdy cowboy” — wearing boots with his suit and winning his election, in part, by driving his truck to far, less-populated corners of the state. State treasurer Daniel Elliott, a farm owner from Morgan County, took over the Indiana Treasurer of State office at the start of the year, but he’s …
Plans to turn junkyards and landfills into massive park take shape in southern Indiana
CLARKSVILLE — What once was undisturbed wildlife along the shore of Silver Creek now contains a trail of weedy gravel leading to a discarded mobile home. It’s the only thing left from a junkyard stationed among this patch of forested landscape.
“We call it the graveyard,” Vern Eswine, communications director of River Heritage Conservancy, said on a recent May afternoon. “The first thing you saw as you pulled into New Albany was all these trucks and buses and junk sitting here.”
Much has already been cleared, the latest steps in a process that began in 2016 to transform an unsightly mix of junkyards, landfills and other industrial properties into a massive park along the Ohio River in southern Indiana. Think hiking trails, kayaking and treehouses, but also the restoration of land and preservation of wetlands and waterways.
It’s called Origin Park, and Eswine is among an army of people who have been working — often behind the scenes, but increasingly out in the open — to ensure that the transformation takes shape. Hopefully sooner than later.
River Heritage Conservancy, the nonprofit group driving the change, is close to either acquiring or reaching agreements for about 430 acres. And it just received maybe its most important endorsement to date: The two-year budget passed by the Indiana General Assembly last month contained $37.5 million to accelerate Origin Park’s timeline.
The funding is key to a business plan at the center of Origin Park’s ambitions. It will pay for about half of the costs associated with building a 35-acre Outdoor Adventure Center that will house ziplines, climbing walls and manmade water recreation. The goal is to charge fees for access to that part of the park in order to pay for the conservation of the rest — not only protecting the wildlife but also ensuring free access to hundreds of acres of Indiana nature. And it’s just across the bridge from a city full of potential visitors in Louisville.
Plans for the Outdoor Adventure Center
Planners originally slated the Outdoor Adventure Center as maybe the third phase of the project. Work can soon begin, though, because of the cash infusion from the state.
“We basically push a lot of our deadlines way forward because of that,” Eswine said. “And now that’s totally jump-started our ability to actually start planning and permitting, just to actually start building this thing while we’re finishing phase one.”
The state’s spending on Origin Park is just one part of a larger investment into conservation and nature projects that have been celebrated by Gov. Eric Holcomb and legislative leaders in recent weeks: $30 million for new trails; $10 million to the President Benjamin Harrison Conservation Trust Fund; $5 million for ongoing storm damage cleanup at McCormick’s Creek State Park; and $1.9 million toward acquiring the land for the closed Minnehaha Fish and Wildlife Area. The list goes on.
Perhaps the most ambitious plan of them all, though, is Origin Park.
“We’re not going to own it, but in terms of setting aside property for the public, we’ll be making significant gains,” Holcomb told reporters following the passage of the state budget in late April. “I’m very pleased with the trails and park potential to keep our momentum going.”
Where Eswine stood next to the mobile home, at the northern end of the park, will one day become the Outdoor Adventure Center.
The plan for the Outdoor Adventure Center is modeled after Whitewater in Charlotte, North Carolina. A group from Origin Park visited there for inspiration, learning that it pulls in $2.5 million to $3 million in revenue each year, Eswine said.
The company that built Whitewater is going to build Origin Park’s version, Eswine said. Projections show it will draw up to $3 million in revenue each year.
In materials shared with Indiana lawmakers, planners said the park will also drive at least $8 million in new spending to nearby towns.
The goal is to open the Outdoor Adventure Center by 2028.
But that’s just a small slice of the overall plan. Other parts of the park are already open, with a lot more on the way.
Contrasts of abandonment and restoration
Just downstream from the mobile home is a new entry point into the water called Croghan Launch, which opened to the public in March.
A paved ramp gives way to a place to drag canoes and kayaks into Silver Creek. The creek is deep and wide enough for anglers, too. On a recent May afternoon, a man who had launched his motorized boat at a different point still waited near Croghan, fishing rod in hand. The creek serves as a tributary into the Ohio River.
On the other side of the boat launch, however, a landfill looms. Someone might think it’s just a hill, but it’s still there, towering beyond stretches of trees and grasses.
What will happen with some of the spaces remains to be seen. At one landfill, for example, park planners watched for years as a once-level horizon grew in height, driven by trucks that were dumping in heaps every day. That finally stopped about four months ago when the conservancy group acquired the land.
“You can’t really do anything with this. You can be on it, but you can’t dig into it,” Eswine said about the landfill. “There’s plans for it, but we’re not really dealing with that part right now.”
At one of the now-closed junkyards, the debris is mostly cleared but what remains is a barbed-wire fence running along a concrete pad where a semi-truck trailer has been sitting for what seems like decades by the look of it. But almost as if to prove Origin Park’s mission about the importance of reclaiming this space for wildlife, a wild turkey trotted just beyond the trailer on its way to a patch of trees.
Moments like that are common right now. The park is a study in contrasts between abandonment and restoration. It’s not just wild turkey surviving among the vestiges of a junkyard; within some draining wetlands live beaver that recently dammed Mill Creek, and soaring above a landfill is a red-shouldered hawk.
The lands are home to flying squirrels too, Eswine said, and more than 150 types of birds. A late May hike revealed the unmistakable calls of eastern wood-pewee and Carolina wren, in addition to much of the backyard fare typically found in Midwestern cities, such as American robins, blue jays and northern cardinals.
A 2019 ecological report also identified 20 species of mammals, including four types of bats, and several amphibians, reptiles and insects that have found homes amid the emerging wilderness.
Elevated walkways and protecting wetlands
What’s unique about much of this land is that it’s within the flood plain. Rather than fight the occasional floods, Origin Park’s planners are incorporating it into the design. Elevated walkways will allow visitors to have access year-round.
“It will literally be in the trees,” Eswine said. “When we started developing this park, we embraced the fact that it’s going to flood more often than not.”
Another goal is to add protections for the wetlands contained within Buttonbush Woods.
And on the southern end of the property, which stretches along the banks of the Ohio River, much of the land is eroding into the waters below. It’s so bad that a riverside road has been closed to motorists because large pieces of concrete have snapped like a Hershey bar. Planners are hoping to bring in a partner organization to slow the erosion.
Meanwhile, Origin Park is being supported by the Environmental Protection Agency. An $800,000 grant, announced last week, will help pay for cleanup of polluted and industrial sites inside the park.
Eswine, who runs New Albany-based The Marketing Company and has lived in southern Indiana for almost all of his adult years, said he is witnessing a revival among Indiana’s river communities, where downtowns are booming and festivals are filling with visitors.
And he sees Origin Park, which is aptly named to acknowledge that it’s linked to a new beginning, as inherently connected to the region’s revival.
“There is a lot of history along these banks, other than just the formation of Clarksville, New Albany and Jeffersonville,” Eswine said. “Wildlife and civilizations have called this home and we’re trying to honestly get back and protect as much as we can.”
Contact Ryan Martin on Twitter, Facebook, Instagram, LinkedIn, or at [email protected].
The debt ceiling, a lack of integrity and the possible fallout
In the coming days, the United States again confronts our statutory debt ceiling. This is a 1917 law (increased every year or so) establishing a cap on federal government debt. The law itself runs up against the 14th Amendment to the Constitution, which was intended to reassure bondholders that we pay our Civil War debts. That means the debt ceiling may be unconstitutional, giving the Biden administration the option of simply printing money to cover the debt.
The debt ceiling law is politically convenient because it offers an opportunity for members of both parties to engage in a bit of political theater. It is important to remain focused on the real issue of debt rather than the political shenanigans. I expect some sort of compromise, but that is more hope than actual analysis.
Neither the Republicans nor Democrats have performed satisfactorily on this ballooning public debt. The GOP showed zero concern about debt when a Republican president was in office. Not a single Hoosier Senator or member of Congress voted against the Trump administration’s Tax Cut and Jobs Act (TCJA) or the CARES Act. These bills fall in first and third place in terms of recent contributions to the debt.
The Democrats, who voted almost unanimously against the TCJA, voted unanimously for the American Rescue Plan, which came in second place for debt loading. There’s not a clean hand in Congress on the current debt. Insofar as I can tell, the sole Republican speaking honestly about the GOP’s profligate history is Mike Pence.
As I wrote at the time, each of these large spending bills had some merits, and there remain reasonable arguments for each. The problem is that so many now in office want to remake themselves as thoughtful budget hawks, but when it mattered, they were nothing of the sort. It is the lack of integrity that highlights the real problem. No one can be honest about the root of the problem.
In 1946, right after winning World War II, our debt-to-GDP ratio stood at 119%. Today it sits at 121%, down from 127% two years ago. But, there is no peace dividend. Our spending problems are not about our military spending, which is today at near historical lows as a share of GDP.
The big-budget items driving our deficit are spending for Medicaid, Medicare, Social Security, and federal government and military retirements. And yes, I know Social Security and Medicare are supposed to be separate budget items. They are not.
If we cut all foreign aid (including Ukraine defense), housing subsidies, environmental remediation, research, discretionary education spending, immigrants, parks, and clean air or water, we wouldn’t make a dent in our debt. Altogether, these spending items wouldn’t even cover the interest payments on our debt.
In order to reduce our debt in the coming decades, we are going to have to do two very unpopular things: raise taxes and cut spending. We are going to have to do more of both than almost anyone really imagines.
On the revenue side, we are going to have to sunset the TCJA and raise marginal income tax rates on middle- and high-income households. By middle, I mean everyone who pays an income tax. Also, we probably must extend the Social Security taxes (FICA) across all earned income types.
On the spending side, we are going to have to extend retirement age, probably to 70 years or so for younger workers. We won’t have to means-test benefits, because we will have higher taxes on more affluent households. But, we will reduce retirement benefits for younger workers, and end the practice of increasing Social Security for older adults who work. We are also going to have to reduce the rate of inflation adjustments for Social Security recipients.
If all of that sounds distasteful to you, too bad. What I have just outlined is probably the easiest resolution to our current debt problem. But, what if we choose a different path?
We could cut defense spending. I’d vote to eliminate the entire Marine Corps. If we did that, it would only take another 117 years to eliminate today’s debt, though that wouldn’t come close to balancing the current budget. So, we’ll have to cut something else. If we cut our foreign aid, we could pay off the current debt, not counting interest, in 600 years. Alternatively, we could reduce overall Social Security costs by 10%, through later eligibility, and extend FICA taxes to a further 10% of earnings, and retire the debt in 60 years.
It is probably wise to ignore the political talking points about our debt and focus on the arithmetic. Still, many might wonder what if we ignore all this and blow off our debts, and default. After all, many Americans declare bankruptcy. Well, that step would be somewhere between a crisis and a full-blown economic catastrophe.
The United States borrows money like every other government does. We have treasury bills notes, bonds, inflation-indexed securities, floating rate notes, domestic series bonds and the like. Altogether this is about $31.5 trillion in borrowing. About 13 cents on every federal tax dollar collected goes to paying interest on these debts (or about twice the annual cost of the entire Marine Corps).
The reason the U.S. can borrow all this money is simply that everyone believes we will pay it back. Our creditworthiness ensures a reasonably low rate of borrowing and keeps our currency as the world’s reserve currency. So what happens if we default?
Well, there will be a flight away from U.S. securities. This will lead to financial markets devaluing our bonds, leading to higher borrowing rates on futures. Since our bonds turn over all the time, that would mean an almost immediate increase in the share of taxes we have to spend to service the debt.
If the U.S. defaults on our debts, the stock market will decline precipitously. It would strengthen China and Russia, while weakening the U.S., perhaps sliding our economy into recession along with most of our allies. The worst forecast I have seen suggests that an extended default would result in a Great Recession-level shock to the global economy.
I think this is an unlikely scenario, only because the domestic political backlash would be so severe we will come to some compromise. But, I’m a notoriously bad political forecaster. Rather than risking default, we’d be wise to heed the rare wisdom of then-President Donald Trump’s advice on the debt ceiling: “That’s a sacred element of our country. They can’t use the debt ceiling to negotiate.”
Michael J. Hicks, Ph.D., is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. He can be reached on Twitter @hicksCBER.
Header Image: Debt ceiling (Credit: Douglas Rissing / Getty Images/iStockphoto)
Thousands of Hoosiers will soon lose Medicaid access, but the cost of the program is still increasing
Hundreds of thousands of Hoosiers are poised to lose Medicaid insurance access over the next year due to the end of a COVID-19 pandemic-era federal policy that prevented states from kicking people off Medicaid. Despite that, state costs for the health program serving more than 2.2 million low-income Hoosiers, including more than 60% of Indiana’s …