Banning Hospitals' 'Certain Contracts' Could Save Americans $45 Billion, Report Finds

Authored by Travis Gillmore via The Epoch Times,

A ban on certain contracts between hospital systems and health insurers could save Americans around $45 billion, according to a report from White House analysts released on June 18.

"The Council of Economic Advisers' findings reinforce that the Trump administration is delivering meaningful cost reductions for American patients," White House spokeswoman Allison Schuster told The Epoch Times by email June 19, noting the president's surgical approach to policy development that prioritizes fiscal discipline.

"By harnessing the use of free-market competition, President Trump has found a real solution to lowering costs instead of blindly throwing more taxpayer money at the problem."

Administration officials are exploring how best to manage hospital systems and insurers without relying on price controls or heavy-handed regulations.

At issue are three clauses, known as "anti-steering, anti-tiering, and all-or-nothing" contracts, which critics say shield healthcare providers from competition, thus increasing prices for consumers.

Anti-steering clauses block insurers from incentivizing or guiding clients toward cheaper options or providers, even when their data indicate clear savings potential.

Anti-tiering is used to stop insurers from categorizing hospital systems in less desirable benefit tiers that would reduce profit margins by forcing the providers to cover higher patient costs.

Bundled, also known as all-or-nothing, contracts require insurers to include all hospitals and physicians in a system, eliminating the option to negotiate independently.

Combined, the provisions result in more expensive healthcare, with higher rates, less efficiency, and limited insurance plan innovation due to reduced competition.

In markets where the clauses in question are widespread, a ban would lead to an 18 percent decline in hospital and physician prices, amounting to approximately $4,100 per inpatient admission, according to the report.

Premium prices would decline by about 7 percent, saving the average family about $1,800 annually, the report found, with aggregate reductions totaling about $45 billion and up to $63 billion.

Workers would benefit from higher take-home pay and lower out-of-pocket costs thanks to the reduced insurance costs. Small businesses and employers would also get relief with lower costs.

Analysts arrived at the numbers by calculating several variables, including the increased leverage insurers would gain while bargaining, with an expectation that prices would drop by about 8 percent as a result.

Allowing steering and tiering will improve patient management and shift care toward lower-cost providers, with transparencies helping reduce prices by about 4 percent, according to the report.

Free-market dynamics are expected to drive dynamic competition, with efficient, low-cost competitors helping further drive down costs by about 3 percent.

Proposed policies prioritize healthcare in rural areas, with bans aimed at lowering premiums while boosting independent rural hospitals.

Crackdowns are underway in the form of federal legal proceedings, with eyes on a national framework to codify the proposals.

"Thanks to the Trump administration's crackdown on anti-steering, anti-tiering, and all-or-nothing contracts by hospitals, everyday Americans are directly benefitting from lower premium contributions and higher take-home wages," Schuster said.

Congressional lawmakers are considering a similar course of action with the Healthy Competition for Better Care Act introduced by Rep. Jodey Arrington (R-Texas), which would outlaw the anti-competition clauses.

Some states, including Connecticut, Massachusetts, and Texas, prohibit certain clauses, though coverage and enforcement vary.

The report referenced two recent civil antitrust actions brought by the Department of Justice, one against OhioHealth filed in February and settled June 18, with no admission of wrongdoing and the hospital forbidden from using anticompetitive clauses.

"Providing affordable healthcare to Americans is uncontroversial and this Department of Justice will not tolerate corporate prioritization of revenue in contravention of our antitrust laws," Associate Attorney General Stanley Woodward said in a statement.

A case against New York-Presbyterian Hospital, filed in March, is pending. Justice Department filings allege the hospital is insulated from price competition by contractual clauses, thus raising healthcare costs for New Yorkers.

A settlement with Sutter Health of Northern California from 2022 offers a successful precedent, according to the report, with the system agreeing to pay $575 million in fines and stop using the contractual clauses and succeeding in the aftermath of the agreement, later receiving recognition for its rural facilities.

Trump has repeatedly placed healthcare at the front of his second-term agenda, seeking to address the root causes of high medical costs, including with the release of TrumpRX.gov for prescription medicine at reduced prices.

He's taken his message on the road around the country in recent weeks, highlighting his actions and plans to further address Americans' healthcare cost burdens.