The Baltimore Sun
March 29, 2011
A probe of alleged anti-competitive agreements between Blue Cross Blue Shield companies and hospitals has been expanded by the U.S. Justice Department beyond Michigan, where an antitrust lawsuit that alleged the agreements raised hospital prices was filed last year.
CareFirst BlueCross BlueShield, Maryland’s largest insurer, confirmed to the Wall Street Journal that it received a civil investigative demand from the Justice Department but declined to comment further.
Federal and state investigators also have sent civil subpoenas to Blue Cross Blue Shield units in Kansas, Missouri, Ohio, West Virginia, North Carolina, South Carolina and the District of Columbia, a person familiar with the matter said.
The expansion of the Blue Cross Blue Shield investigation is important because “they’re using exclusionary practices to hold competitors at bay,” said David Balto, an antitrust attorney and senior fellow at the Center for American Progress, a Washington-based policy group that generally favors Democratic initiatives.
The department’s Michigan complaint said Blue Cross negotiated contracts with 70 of the state’s 131 general acute- care hospitals that led to higher prices for the insurer’s competitors. In some cases, the hospitals charged rivals 30 percent to 40 percent more than Blue Cross, the department said at the time.
http://www.baltimoresun.com/business/bs-bz-carefirst-justice-20110329,0,7272326.story
And…
One state’s hospital cost solution: regulated prices
By Christine Vestal
The Pew Center on the States
March 29, 2011
The new federal health law has created a flurry of hospital mergers as the industry prepares for major changes in financing and delivery of care. Some worry that the resulting behemoths will have too much price-setting power.
In one state, however, monopoly pricing won’t be a problem. The state sets the prices.
For more than 30 years, Maryland has regulated the rates hospitals can charge, while all 49 other states have relied on market mechanisms to keep prices in check. For the most part, it has worked. The urban hospitals that serve large numbers of uninsured Maryland patients are financially strong, instead of nearly bankrupt like most inner-city hospitals. And everyone — private insurers, the uninsured, and those on Medicaid and Medicare—is charged the same amount.
Maryland has the lowest price in the country for average hospital cases — a little more than $13,000, compared to a national average of $32,500. The cost of health insurance in Maryland is second lowest in the nation as a percentage of median income.
Whether other states will emulate Maryland’s system is an open question. Any attempt to invoke cost regulation relies heavily on the people involved and the voluntary cooperation of the state’s hospitals. That is not always easy to achieve. In the end, however, (Maryland’s chief regulator Robert) Murray insists that the regulatory approach relies on a simple concept: “It’s no surprise that when people try to stick to a budget, they tend to limit their needs. Hospitals are no different.”
http://www.stateline.org/live/details/story?contentId=562689
Comment:
By Don McCanne, MD
Because of market dominance, Blue Cross Blue Shield plans have been able to negotiate lower hospital prices in many regions throughout the nation. Hospitals, in turn, have been able to negotiate higher prices for insurers that do not dominate the markets, resulting in higher premiums and consequently less ability for the smaller insurers to penetrate these markets. The U.S. Justice Department quite appropriately is investigating these agreements.
The Blue Cross Blue Shield plans competing unfairly in the private market have proven once again that private insurers are not capable of providing equitable financing of our health care.
If instead of using market dynamics to price hospital services, what would happen if the government regulated the rates? We have an example of that in Maryland which uses an “all-payer” system. The state sets the prices. All insurers, including Medicare and Medicaid, pay the same.
How well has that worked? Maryland’s hospital prices are the lowest in the nation – only 40 percent of the national average. That has resulted in insurance premiums that also are amongst the lowest in the nation.
Although the all-payer system has had a very favorable impact on pricing, there are still many other inefficiencies and inequities in a financing system that depends on private insurers. A single payer system would eliminate the private insurers and establish global budgets for hospitals – funding them just as you would police, fire, libraries, and other public or quasi-public institutions.
As Maryland’s chief regulator stated, “It’s no surprise that when people try to stick to a budget, they tend to limit their needs. Hospitals are no different.”
Given that we have a finite though generous amount of funds available to pay for health care, we can get the best value if we do that within a government budget, administered efficiently through a single payer system.