[00:00:00] Welcome to the Health Policy podcast. I'm Brian Hyde, and today I'm joined by Pete Sepp, president of the National Taxpayers Union. And Pete, uh, tell us a little bit about yourself and a little bit about your organization, and then let's talk about healthcare. Sure. National Taxpayers Union is a nonprofit, nonpartisan citizen group. We were founded all the way back in 1969 to work for lower, fairer, simpler taxes, less wasteful government spending, and accountability from public officials at all levels. And in fact, in the early 1970s, we formed a citizens' advisory commission on healthcare policy in response at the time to, uh, proposals from Senator Ted Kennedy and others to have a socialized medicine-style system. And we came up with some interesting recommendations about healthcare choice and, uh, providing [00:01:00] paraprofessionals to deliver care. Some of them are still quite relevant today, and I think it illustrates that after 50 years, we keep asking some of the same questions about health policy, and we don't answer a whole lot of them from year to year as far as action from the government is concerned. So Pete, let's, let's begin with some of the concerns that you hear more often than not from people, you know, in, in the course of your work when it comes to healthcare. Um, I'm gonna guess costs are gonna be near the top of the list of their concerns. Yeah, it's not just the amount of cost, it's the unpredictability of cost. For example, when you might get a procedure like a biopsy in a doctor's office, well, your insurance might cover part of it, might cover none of it. Your out-of-pocket cost on average could be about $150. Now, if you go into a hospital outpatient [00:02:00] situation, and plenty of unassuming people do that, they say, "Well, maybe this outpatient clinic is more convenient to me with better times than my doctor. I'll get it done there." Suddenly the price is $800 for the very same procedure. This, in fact, was a statistic that Jason Smith, the chairman of the House Ways and Means Committee, recently cited in a hearing about healthcare costs. It's just one of the problems we see in the system: high costs, unpredictable costs, and opaque costs. It is very difficult for a patient or even a doctor to figure out why a certain charge is being levied for a given service. You know, uh, I, I know it's easy to point fingers and, and I, I too wanna kind of feel, "Okay, who do we blame for this? Is it the drug companies? Is it, uh, is it the, the insurers? Is it the hospitals?" [00:03:00] Who has the incentive to, to bring those prices up? There are bad incentives, frankly, baked into the entire system. With hospitals, for example, the, that site neutrality problem that I just discussed, they are incentivized to keep consolidating, bringing doctors under their rubric so that private practices no longer have as much freedom to price and charge what they want to their patients, and so the prices go up. Also, Medicare and Medicaid offer all kinds of perverse incentives, as does the 340B drug program. There, of course, we don't have even a reimbursement model for providing drug discounts to rural or underserved hospitals in urban areas. We actually just pay through the federal government to reimburse these [00:04:00] costs that so-called 340B discount drug, uh, outlets and hospitals, uh, end up providing. Well, that is something called the pay and chase model, whereby the government reimburses first without asking questions, which come very late in the process after the payments have been made, and then we wonder why there are so many improper payments occurring in the system. You know, we can go on about pharmacy benefit managers charging what's called spread pricing, and, uh, that means what they get to pocket versus, uh, what they pick up in discounts for their clients, their, their medical establishments and hospitals. We can talk about the red tape that occurs for biosimilar drugs, uh, having to go through a redundant process to be called an interchangeable with a brand [00:05:00] name drug of the same quality. Uh, there's legislation to fix that, and so it's really a circular thing. Hospitals have bad incentives. Pharmaceutical companies have bad incentives. Insurers have bad incentives as well. I believe on a previous podcast we talked about the No Upcode Act, where, uh, right now we've got a problem with providers, insurers, um, upcoding treatments so that, uh, they can get the maximum reimbursement for Medicare, and even if the patient may not necessarily need that treatment and might be able to get something that's just as good for a better price. Wow I g- well, you know, incentives are everything. Um, I'm curious too, you mentioned, you know, that, uh, it- the unpredictability i- is a big part of this equation. And, you know, I know when, when it comes to getting answers about, well, why does this cost what it does, [00:06:00] getting answers is not easy either. It seems like there is a lot of, uh, bureaucracy and administrative people that you have to wade through just to get somebody who knows the answer that, that you're looking for. Talk to me about, uh, th- this complexity. How much of it is really necessary, um, and, and how much of this, uh, accounts for some of the, the increased costs that we're spending? Is it, is it because there's so much bureaucratic overhead? Yeah, there certainly is. And of course, the bureaucratic overhead for coding certain procedures and making sure that insurers and all the federal government and state and local government healthcare programs have oversight, some of it might be important in that we wanna know where the money is going and why, but so much of it doesn't do anything to simplify and expose where the money is going and why. It's simply make work. In fact, uh, all the time I hear from [00:07:00] doctors, nurse practitioners, and others who say they work in practices of, say, 10 employees, where three of them, even four of them, do almost nothing all day but file insurance and other reimbursement paperwork, either with private companies or with the government. That is an incredible amount of bureaucratic overhead that has little to do with oversight. We've got to make it better. And in fact, uh, I've seen articles in magazines such as Reason, which is kind of a, a libertarian-oriented publication, and, uh, they profile doctors who no longer accept insurance and are able to reduce their prices for given services by 65, even 75%, by simply not going through all of that trouble. Man, based on what you just [00:08:00] described, though, I, I can see why, you know, that kind of complexity, um... It would require a lot of people to, to maintain- Yeah ... that, that level of, of complexity. Talk to me a little bit about outcomes. D- does the, does the complicatedness of the system in any way affect the outcomes in a positive way? In a positive way, I see very little of it. Again, you might get some infrastructure in there that it provides oversight on improper payments. We've gotten pretty good at the federal level about identifying improper payments in, uh, Medicare Part D, Part A. Also, in the joint federal state program, Medicaid. Uh, there we find staggering amounts of improper payments every year, $25 to $30 billion worth in Medicaid alone, and, uh, a lot of that doesn't even count some of the programs that are on the [00:09:00] periphery of Medicaid, like that 340B drug discount program I was mentioning. So having this procedure of documenting what patients get for services, what kind of medicines they take, that's great because it helps to track payments through the system. But if you do things like provide upfront reimbursement and you have to pay, you do the pay and chase model, well, that's going to make improper payments much more difficult to recover, and that is a problem we have across our healthcare system. Private insurers use recovery, um, firms that will follow up claims that are made, ask for documentation and whatnot. They have some success. Uh, the federal government has less. They often have to result to outright prosecutions of healthcare providers. And [00:10:00] when a case like that winds up in court for years, that's taxpayers actually shelling out more for lawyers, investigators, and whatnot just to s- get justice and start to recover those funds. So we're seeing that now in California with hospice providers. We've seen some of it in Minnesota and other places e- even with Medicare as well as Medicaid. I mean, based on what you've outlined here, Pete, um, uh, there's plenty of room for, for reform. Uh, what are some of the structural factors that, that prevent that reform from taking place? Well, I think there's a whole layer of laws and regulations that basically freeze the healthcare system in time. Uh, when you think of hospitals, for example, um, administrative spending in, uh, hospitals [00:11:00] accounts for somewhere between 15 and 30% of total healthcare expenditures. Uh, that has been a constant now for at least 20 years as many of the reimbursement programs have gotten, uh, more opaque, more complex. Um, out-of-network billing at, uh, in-network hospitals, uh, that's a trend that was dramatically, uh, evident in the mid-2010s where, uh, out-of-network billing rose from about one-third t- of emergency room visits to more than, uh, 43%. That led to the No Surprises Act in 2020, trying to pull the curtain back on billing practices. Hasn't really worked as well as most experts thought it would. Uh, you also have what are called certificate of need laws at the state level. Uh, basically, providers have to obtain [00:12:00] approval before expanding facilities or offering new services, especially in hospitals. Well, if you are increasing the overhead on hospitals, you are letting hospitals bill at higher rates for the same services, and the government reimburses them, and you're limiting the number of hospitals that can enter the market, you have a severely distorted healthcare system, and the distortions are all upward. They do nothing to reduce prices, only raise them. So let- And those have been frozen in place for years. Let's talk about, uh, what would a properly aligned system look like? What, what would we have to change to, to, to get the d- the better results? Yeah, o-on the hospital side alone, we need to introduce the concept of what's called site-neutral billing. In other words, if you [00:13:00] get the same procedure in a doctor's office versus a hospital inpatient versus a hospital outpatient, you get reimbursed for roughly the same things. Roughly, I say, because, okay, an inpatient hospital, well, you might spend, uh, a night in a bed, and that's going to cost more than going in and out of an in-- a, a clinic in the course of a day. Okay, fine, but we shouldn't have price differentials that are four, five times different. That's one reform. Uh, no up code is another. Uh, that's on the insurer end, but it also involves the facilities, the doctors and the hospitals themselves. If you say that you have to provide evidence of a patient's condition that is contemporaneous, in other words, you can't say that, "Well, um, this patient had a [00:14:00] code for his, uh, heart problem three years ago, and we think it's gotten worse. We're not going to ask the patient or the doctor for any documentation that they visited the doctor recently," well, th-that is going to create distortions as well and price increases. You have to get rid of these certificate of need laws or at least streamline the approval process for new or expanded facilities. You have to take a look at the tax exemptions for nonprofit hospitals versus for-profit ones that do pay taxes. In fact, there are statistics that say nonprofit hospitals actually provide less charity care than for-profit ones. We're going to have to revisit that in a thoughtful manner. Uh, there are other areas in prescription drugs. I mentioned, uh, the, uh, red [00:15:00] tape around biosimilars. There's a bill in Congress, S 1954, that would, uh, dramatically streamline the red tape around biosimilar approval. I'm mentioning all of these because I think you really have to approach this systemically. You don't have to do it all at once. You don't have to be comprehensive everywhere, but you do have to make small changes throughout the system. Otherwise, you're, you're really just pulling a thread on one part of the fabric, and something else in another part of the fabric is going to unravel at the same time that you don't know about. Change can be gradual, it can be small, but it's got to happen comprehensively in each area of the system if we're going to get good results. Pete, you mentioned that, uh, you know, there, there are people calling for reform, and they focus on things like price [00:16:00] transparency or insurance reform or, uh, regulation. Do they tend to focus on, uh, the, the wrong symptoms or, or focus too much on one symptom as opposed to, you know, the, the broader approach you just described? And I'm, I'm just curious, what gets the most attention and, and therefore prevents solving the, the bigger problem? Yeah, I think you, you've really hit the nail on the head here, that we are not necessarily focusing on the wrong problems, but we focus in too closely on one problem rather than numerous problems. And policymakers will say, "Well, we can only solve one thing at a time." And my response would be, "Well, if you wanna do something really big, you may only be able to solve one problem at a time. But if you wanna do things incrementally, you can solve a bunch of them at once, make gradual, modest changes everywhere." And I, I think one [00:17:00] of the inordinate focuses we see is on prescription drugs, and it's natural because it's the one thing that most patients have some kind of payment responsibility for. A copay of 5, 10, 20 bucks at the pharmaceutical counter, or worse, if they're paying out of pocket for a full cost, that's a horrible hit. And as a consumer, you appreciate what you see at the cash register much more than a 20-page bill you might get from your insurer that says, "Well, here's 20 grand in costs. Your responsibility was 100." And you just say, "Oh, okay." You file it away, and you don't appreciate all of the incredible distortions that went on in providing your medical care. Again, we're talking with Pete Sepp. He is president of the National Taxpayers Union. And, and I have to [00:18:00] ask you, Pete, for people who want to get a better understanding of this issue, what are some of the resources you'd recommend that they turn to? Well, definitely they should take a look at our website at NTU, our initials for National Taxpayers Union, ntu.org. We have a wide range of materials from op-eds that boil down these healthcare problems into 600 words or less- Detailed comments on rulemakings in the Department of Health and Human Services, other pla- uh, places in the executive branch. We have letters to members of Congress and testimony on legislation that's before the various committees. So all kinds of levels of depth that, uh, folks can check out. I'd also urge folks to, uh, take a look at, uh, official government statistics when they come out on healthcare costs. There's something called the National [00:19:00] Health Expenditures Survey that, uh, Department of Health and Human Services and, uh, Census and others work on to show where the cost growth is in the health system. And, uh, if you've, uh, taken any kind of, uh, basic mathematics in high school or college, you can understand the spreadsheets they've got there, and in the process, uh, get a better grip on where the cost drivers are in the system. Pete, I appreciate you bringing clarity to this issue, and I hope we get a chance to talk about it again. Pete Sepp with the National Taxpayers Union, thank you so much for joining us on the Health Policy Podcast. My pleasure.