Congressional Testimony Highlights Potential Areas for Future Legislative Action

In a recent Senate hearing, expert witnesses argued that the healthcare affordability crisis is driven by a fundamental lack of transparency and unchecked market consolidation.

Lack of transparency and consolidation are significant drivers behind the growing healthcare affordability crisis, according to testimony delivered from expert witnesses during a recent hearing held by the Senate Health, Labor, Education, and Pensions (HELP) Committee.

The hearing offered insight into potential areas that legislators may target to reign in healthcare costs. These included failing price transparency regulations, the recent rise in consolidation, the heavily scrutinized 340B Drug Pricing Program, and the role of pharmacy benefits managers (PBMs).

“Congress must make a serious effort to navigate a whole raft of perverse incentives throughout the healthcare system,” Sen. Bill Cassidy (R-La.), chair of the HELP Committee, said to kick off the hearing.

Noncompliance undermines price transparency rules

Federal price transparency initiatives are failing, according to Christin Deacon, a consultant who formerly served as the director of New Jersey’s state employee health plan.

“Price opacity in healthcare is not a bug in the system—it is the system,” Deacon wrote in her testimony, highlighting a 2024 study that found just 36% of hospitals were fully compliant with the federal rule.

While there has been bipartisan support for price transparency legislation, these efforts fail due to noncompliance and lack of enforcement, according to Brian Miller, MD, a professor of medicine at Johns Hopkins University and a former federal regulator. He argued for a stronger push for transparency at the point of care by embedding cost information into EHRs, which would improve decision-making between patients and physicians.

Market Consolidation is a Primary Driver of Rising Costs

Market consolidation, both horizontal and vertical, has been a primary driver of rising costs. For instance, the UnitedHealth Group is both the nation’s largest private payer and largest employer of physicians, with more than 90,000 doctors on its payrolls, according to Wendell Potter, a former Cigna executive who is now a vocal critic of the insurance industry.

This type of consolidation allows payers to sidestep regulations like the ACA's Medical Loss Ratio (MLR) rule, which requires them to spend a certain amount of premium dollars collected on medical care. By employing physicians, insurers can pay inflated rates to their own providers, count those payments as spending on medical care, and then funnel the money back to the parent company as profit.

“The government counts it as care, but it's really profit, just rerouted through a white coat,” Potter said.

Bringing PBMs and 340B back to their roots

While PBMs may have begun as simple administrators, the business model that they currently operate under is a “shell game” of “misaligned incentives, opaque rebates, and dangerous consequences,” according to Deacon.

These entities have transformed into powerful financial intermediaries that prioritize their own profits over cost savings for patients, Deacon says. For instance, PBMs have a financial incentive to favor high-list-price drugs on their formularies because these drugs generate larger rebates, which are rarely passed on to patients.   

Expert witnesses also called for reforms to the 340B Drug Pricing Program. While the program’s proponents say it helps health systems maintain financial health, critics say the program has expanded beyond its intended purpose to support low-income and uninsured patients.

Hospitals should be required to account for savings they generate from 340B funds, according to Benedic Ippolito, a senior fellow at the American Enterprise Institute. “If the goal of the program is to try and help hospitals afford care for people who don’t have coverage or cannot pay, then we ought to try to target those subsidies to those patients,” he said.