Washington Health Policy Week in Review
Senate Panel Examines Competition's Role in Health Care Costs

By Mary Agnes Carey, CQ HealthBeat Associate Editor

SEPTEMBER 6, 2006 --- Market consolidation among health care insurers is boosting insurers' profits while driving up costs and hurting the quality of patient care, physicians told the Senate Judiciary Committee on Wednesday.

But a witness for the insurance industry said that "vigorous competition" exists among health care insurers and that health plans are working to promote more transparency in terms of quality and cost—efforts that will benefit both providers and consumers.

The session demonstrated the difficulties lawmakers face in trying to determine the factors behind rising health care costs and develop strategies to control them. While the panel reached no conclusions—the hearing was cut short due to a Senate floor vote—it was another reminder of the ongoing tensions between insurers, providers, and patients and Congress' role in that dynamic.

Committee Chairman Arlen Specter, R-Pa., said that as he traveled his state over the August break he heard many complaints about rising health care costs, especially from small business owners. Judiciary member Sen. Tom Coburn, R-Okla., an obstetrician, discussed his own frustrations as a physician with reimbursements from private insurers and federal health care programs.

"Fixing the problem is creating a real market for health care in this country," Coburn said, urging changes such as better financial incentives for innovative care and fewer dollars spent on insurance administrative costs.

Edward L. Langston, chair-elect of the American Medical Association's board of trustees, said health plans are pursuing "aggressive acquisition strategies to assume dominant positions in their markets," a trend that "will lead to a health care system dominated by a few publicly traded companies that operate in the interest of shareholders rather than patients."

Congress, as well as federal regulatory agencies, must address "the serious public policy issues raised by the unfettered consolidation of health care markets," Langston said.

Another witness, Pennsylvania Medical Society President Mark A. Piasio, said that while many Pennsylvania insurers are posting huge profits and surplus reserves, premiums continue to skyrocket and patient cost-sharing has increased without any improvements in care. From 2000 to 2004, Piasio said, Pennsylvania health insurers increased premiums 40 percent per enrollee, from $2,161 to $3,022, nearly double the U.S. average, while insurers' surplus reserves rose from $5 billion to $6.8 billion.

Federal regulators should be more active in monitoring such activity, said Sen. Patrick J. Leahy, D-Vt. In a statement, Leahy said the Justice Department and Federal Trade Commission "should be vigorously enforcing the antitrust laws not just against physician groups, as it has, but against insurance companies engaging in anticompetitive behavior"

A witness for the insurance industry, Stephanie W. Kanwit, special counsel for America's Health Insurance Plans, said her group members operate in one of the most highly competitive industries in the country and that consumers benefit from that competition. "Consumers have lots of options," Kanwit said, adding that there are multiple competing health plans purchasing physician services in every major metropolitan area in the U.S., each offering multiple products to consumers and employers. For example, she said that in Los Angeles there are 16 HMOs, 20 in Miami, and 14 in Philadelphia.

To counter claims that insurers dictate prices and coverage terms to physicians, Kanwit presented insurance industry data that found the average physician contracts with about 13 health plans and receives about half of his or her practice revenues from health plan contracts. She also discussed her group's work with the Ambulatory Care Quality Alliance, a coalition that includes insurers, employers, physicians, and government agencies, to develop measures to help patients and purchasers evaluate the cost, quality, and efficiency of care delivered. The group also aims to have such data help practitioners determine how their performance compares with their peers in similar specialties.

As the hearing closed, Specter encouraged representatives of the Justice Department and the Federal Trade Commission who had testified at the hearing to scrutinize an upcoming merger between Pennsylvania insurers Highmark and Independence Blue Cross. He also urged Kanwit to push her members to testify before the panel the next time they are asked to do so. Five insurers were invited to testify at Wednesday's hearing but none did.

"That's not a very good sign if the Senate Judiciary Committee wants to have a hearing on this issue and insurers won't come in," Specter said.


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