Mayor Pete is Right: It’s Time to Cap Prices

Notably, his proposal would cap hospital out-of-network rates, ban surprise medical billing, and limit out-of-pocket costs for Medicare beneficiaries.

Photo by Gage Skidmore

by Arielle Kane, Director of Health Care | Progressive Policy Institute

Presidential candidate Pete Buttigieg released the framework of his health care plan today. Though his public option proposal seems to be garnering the most media attention, the plan has some underappreciated details that don’t require new government programs but are likely to have an immediate impact on costs.

Notably, his proposal would cap hospital out-of-network rates, ban surprise medical billing, and limit out-of-pocket costs for Medicare beneficiaries.

These ideas are similar to a proposal PPI released just last week where we propose capping out-of-network provider rates at a percentage of Medicare rates. As we explain, a cap on out-of-network provider prices would have the effect of cutting in-network prices. Providers (including hospitals) will have no incentive to remain outside of networks if the price they can charge is capped at levels comparable to what they would receive for delivering services to patients in-network anyway.

Buttigieg proposes setting provider rate caps in the private market at 200 percent of Medicare rates. That is a good start, although in our proposal, PPI is more aggressive over time, starting at 200 percent and then steadily decreasing to 120 percent of Medicare rates. Regardless of the amount of the cap, it would allow all Americans to benefit from the leverage of the government’s bargaining power without dramatically increasing government spending.

Buttigieg also proposes banning “surprise bills” or the practice of in-network hospitals charging patients out-of-network rates for physicians that they saw during their visit. He says that these bills are “fueled by profit-driven firms in private equity,” and says that under his plan they would not be able to charge more than in-network rates. In the absence of more aggressive rate caps, a ban on the practice of surprise billing would protect consumers in need of medical care.

Finally, Buttigieg seeks to protect seniors enrolled in traditional Medicare. Today, traditional Medicare beneficiaries today pay multiple premiums for Part A (hospital care), Part B (doctors and outpatient care) and Part D (prescription drugs). To further complicate matters, each Part requires beneficiaries to pay different deductibles, co-pays and co- insurance — with no limit on out-of-pocket spending. Beneficiaries enrolled in Medicare Advantage, however, have one combined benefit with easy-to-understand premiums and co-pays and an out-of-pocket cap. Buttigieg proposes capping out-of-pocket costs in traditional Medicare.

This is once again a good start, but PPI’s proposal would streamline the program even further. We propose consolidating Parts A, B, and D into a streamlined “Medicare One” benefit with one premium, one annual deductible, one co-pay rate for spending above that deductible, and an out-of-pocket cap like the one that exists in Medicare Advantage plans. This will not only protect consumers financially, but also give them a better experience when dealing with the administrative components of their coverage. Together, PPI’s proposed health reforms would save the federal government more than $730 billion over 10 years while dramatically expanding coverage and cutting costs for consumers.

Buttigieg has proposed some radical ideas to improve health care in the United States. However, the media should look beyond the inter-party debate of who does or doesn’t endorse a Medicare-for-all package. PPI for one, is thrilled to see candidates like Buttigieg endorse feasible proposals that could make health care more affordable for millions of Americans without increasing the costs to taxpayers.

Radically Pragmatic. We seek to advance progressive, market-friendly ideas that promote American innovation, economic growth, and wider opportunity.

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