On July 9, 2021, President Biden signed an executive order designed to promote competition throughout the American economy. Most of the Biden administration’s health-related proposals in this order either build on policies implemented by the Trump administration or are consistent with Trump administration direction. Republicans should work to support many of the reforms, particularly allowing people to purchase hearing aids over the counter, boosting government health care price transparency efforts, and confronting both hospital consolidation and occupational licensing burdens.
The Biden administration should look to build on other Trump administration efforts that promoted health care competition, such as site-neutral payments in Medicare and short-term health insurance plans. Further, Congress can take a step to combat growing hospital consolidation by repealing the ACA’s moratorium on physician-owned hospitals. On prescription drugs, policymakers should deal with facts, particularly that over the past several years drug price inflation has been nearly flat and significantly below overall inflation—rather that building a false narrative to sell a policy agenda.
Trump Administration’s Focus on Maximizing Health Care Choice and Competition
President Trump in October 2017 issued an executive order on expanding health care choice and competition. In addition to leading to several regulatory changes that expanded coverage options, the order led the government to produce a comprehensive 120-page report, (Reforming America’s Health Care System Through Choice and Competition (Choice and Competition report). The report offered more than 50 recommendations of ways to boost choice and competition in the health care sector.
Consistent with its general deregulatory approach, the Trump administration looked to rescind government rules that reduced competition. This was the vision articulated by the Trump administration in its report:
Many government laws, regulations, guidance, requirements and policies, at both the federal and state level, have reduced incentives for price- and non-price competition, increased barriers to entry, promoted and allowed excessive consolidation, and resulted in healthcare markets that lack the benefits of vigorous competition. Increasing competition and innovation in the healthcare sector will reduce costs and increase quality of care—improving the lives of Americans.
Biden’s Executive Order on Health Care Competition
Although there are differences in regulatory approaches, particularly in views on how much government policy is responsible for the problems in the health care sector, President Biden’s executive order shows that his administration intends to tackle several of the same areas as the Trump administration. President Biden’s executive order covers four areas related to the health sector: 1) hearing aids, 2) hospital consolidation, 3) insurance market consolidation, and 4) prescription drugs. The order also covers occupational licensing, which has significant implications for health care given that most health care jobs require licenses and the scope of practice within the licensed area can be quite restrictive.
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Executive orders do not, by themselves, change government policy. In essence, they represent a directive from the president to his subordinates in the executive branch to implement the policies outlined in the order. Executive orders are generally developed in collaboration with the federal departments that will oversee those policy changes. Executive orders signal that rulemaking—a process that typically takes years—is forthcoming.
Hooray for Over-the-Counter Hearing Aids
The executive order directs HHS to consider issuing proposed rules allowing hearing aids to be sold over the counter. The order argues that only a small percentage of people with hearing loss use hearing aids, in part because of the expense. The executive order cites a survey that shows the average hearing aid price is about $5,000 per pair. According to the order, “[a] major driver of the expense is that consumers must get them from a doctor or a specialist, even though experts agree that medical evaluation is not necessary. Rather, this requirement serves only as red tape and a barrier to more companies selling hearing aids.”
People generally know, or their relatives and friends know, when hearing loss is becoming an issue. Permitting hearing aids to be sold over the counter will increase the convenience and lower the cost of people obtaining the devices. It is a common-sense reform, fully in the direction of increasing consumer control over their health care, and the Biden administration should be applauded for taking it on.
One of the main problems in American health care over the past few decades is expanding market consolidation, with the most significant problem being hospitals merging with each other and acquiring physician practices. A new report from the American Medical Association found that “2020 was the first year in which less than half (49.1%) of patient care physicians worked in a private practice—a practice that was wholly owned by physicians.” According to the Biden executive order, “[r]esearch shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.” Ironically for the Biden Administration, the ACA added fuel to health care market consolidation. The figures below, reproduced from the Choice and Competition report, show how the number of hospital mergers and acquisitions, after declining for years, increased after 2009.
Continuing Trump Administration Policy
The executive order contains two directions around hospital consolidation. First, it encourages the Federal Trade Commission (FTC) and the Department of Justice (DOJ) to review and revise their merger guidelines to ensure patients are not harmed by such mergers. This is a continuation of policy begun under the previous administration with the Trump White House supporting the antitrust health care efforts of FTC and DOJ.
In a major and welcome continuation of Trump administration policy, President Biden’s executive order directs the Department of Health and Human Services (HHS) to support the previous administration’s health care price transparency rules as well as to finish rulemaking that it is statutorily required to do to implement the surprise billing reforms signed into law by President Trump in December 2020. (The Biden administration issued an interim final rule to start doing so on July 1, 2021.)
The Trump administration issued two landmark rules to inject price transparency into health care markets. The first rule requires hospitals to publicize the prices they receive for services for each plan the hospital contracts with as well as the cash rate. The second rule requires insurers to provide the prices that they pay—both in-network and out-of-network—for physician services and for facility-based care. The price transparency rules hold promise to improve consumer and employer shopping for health care and increase competitive pressure on providers to lower costs and prices. The Biden administration should be commended for continuing Trump administration policy in this area.
There are other policies that the Biden administration should pursue to combat growing hospital consolidation. The first is to build on the Trump administration’s site neutral-payment policies in Medicare. A 2018 HHS regulation reduced Medicare’s payments to certain off-campus hospital outpatient department visits so they are the same amount that Medicare pays for the service when they are provided in a physician’s office. The regulation also increased the number of services that ambulatory surgical centers (ASCs) can receive Medicare reimbursement for providing. These policy changes reduce Medicare spending and save seniors money, but perhaps more importantly they reduce the incentives for hospitals to acquire physician offices since they can no longer bill at much higher rates. This regulation is bipartisan and has been upheld by the Courts after a challenge from the American Hospital Association. The Biden administration should build on this recent momentum to expand the number of services where Medicare pays the same amount for the same care whether delivered in hospitals or physician offices and further expand the services provided by ASCs that Medicare reimburses.
Congress should rescind an ACA policy that reduced competition in the hospital market: the moratorium on physician-owned hospitals. The restrictions were intended to address potential conflicts of interest with doctors referring patients to their own hospitals. However, this moratorium reduced competition in the health care market and was counterproductive health policy, given that physician-owned hospitals tend to provide higher-quality care than traditional hospitals. The ACA moratorium on physician-owned hospitals was favored by large hospital organizations, which is an indication that it resulted in less competition for traditional hospitals. Given the substantial amount of hospital consolidation since the ACA was enacted, rescinding this moratorium on physician-owned hospitals should be a key priority to provide much-needed competition.
The Biden executive order also takes aim at consolidation in the health insurance industry, arguing that “many consumers have little choice when it comes to selecting insurers. And even when there is some choice, comparison shopping is hard because plans offered on the exchanges are complicated—with different services covered or different deductibles. In the order, President Biden “[d]irects HHS to standardize plan options in the National Health Insurance Marketplace so people can comparison shop more easily.”
The problem is Obamacare
While standardizing plan options may help some consumers shop, the key to help consumers is ensuring they have a wide variety of alternatives from which to choose. The ACA, of course, limited the plan designs for what people can purchase in the individual market. Perhaps the biggest irony, however, is that the ACA, which President Biden seeks to build upon, is largely to blame for consolidation in the health insurance industry—especially in the individual health insurance market. Prior to 2014, there were 395 insurers participating in the individual market across the country. In 2014, the first year of the ACA’s implementation, more than one-third of insurers dropped out of the market and just 254 insurers offered plans. As the individual market deteriorated, the number of insurers offering individual market coverage declined to 181 in 2018. With the improved individual market since 2018, there are now 256 insurers offering coverage—but this is still more than one-third below the pre-ACA level.
Don’t harm insurance competition and consumer options by restricting short-term plans
The Biden administration has signaled that it may restrict short-term plans. Short-term plans are health insurance products that are not subject to ACA regulations and can be more flexible and affordable for many households. Short-term plans also tend to be accepted by a much larger number of doctors and hospitals because they pay higher rates than ACA plans. For decades, federal regulation of short-term plans permitted the contract to last up to 364 days. The Obama administration issued regulations in late 2016 that restricted short-term plans to 90 days, and the Trump administration reversed those restrictions in a 2018 rule. Counter to concerns that states permitting short-term plans would experience deterioration in their individual markets, states that fully permit short-term plans had larger premium declines since 2018 and greater insurer entry in their individual market than states that restrict short-term plans. Allowing short-term plans increases beneficial competition in insurance markets.
President Biden’s executive order makes the false claim that prescription drug prices have increased at levels far above the general inflation rate. It also claims that nearly one-in-four Americans report difficulties paying for medications, and that nearly one-in-three Americans report not taking their medications as prescribed. The executive order states that “Americans pay more than 2.5 times as much for the same prescription drugs as peer countries, and sometimes much more.” The order outlines four actions for the government:
· Directs the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act (MMA) of 2003.
· Directs HHS to increase support for generic and biosimilar drugs, which provide low-cost options for patients.
· Directs HHS to issue a comprehensive plan within 45 days to combat high prescription drug prices and price gouging.
· Encourages the FTC to ban “pay for delay” and similar agreements.
Misdiagnosing the problem
Counter to the narrative in the executive order, the prices of prescription drugs have remained flat over the past five years. The figure below contrasts the 12-month percentage change in the Bureau of Labor Statistics consumer price index (cpi) with its prescription drug cpi. In most months over this period, prescription drug cpi has been below cpi. Between June 2020 and June 2021, prescription drug prices declined by 2.5% while general prices soared 5.4%. The executive order avoids mentioning that Americans have access to far more new drugs that people in other countries, where the government regulates the prices of pharmaceuticals. For example, of 290 new active substances that became available between 2011 and 2018, 89% were available in the United States versus 48% in France, 62% in Germany, and 50% in Japan. The Biden administration may be misleading about the drug pricing problem to support its policy aims to further empower HHS to set pharmaceutical prices—the main aspect of Speaker Pelosi’s drug pricing legislation.
Continuity with Trump administration approach
Although the executive order makes false claims about the rise in prescription drug prices, President Biden’s administrative drug pricing agenda appears to have many similarities with the Trump administration’s agenda in this area. At President Trump’s direction, HHS developed a plan to utilize the powers granted the Secretary of HHS in the MMA to safely import prescription drugs from overseas. And in September 2020, HHS approved the state of Florida’s plan, as well as those of a handful of other states, to import drugs from Canada. Expanding generic and biosimilar drugs was a priority of the Trump administration, with an unprecedented number of generics approved by FDA during the administration. This development is a factor in the flat drug prices over the past five years.
Occupational licensing requirements
Although not specifically contained within the health care section of the Executive Order, the occupational licensing direction is relevant for health care. According to the Executive Order, “[o]verly burdensome occupational licensing requirements that impede worker mobility and suppress wages also restrict competition.” According to the Order, “almost 30% of jobs in the United States require a license, up from less than 5% in the 1950s.” The Order argues “That locks some people out of jobs, and it makes it harder for people to move between states—particularly burdening military spouses, 34% of whom work in a field requiring a license and are subject to military-directed moves every few years.” The Order encourages the FTC “to ban unnecessary occupational licensing restrictions that impede economic mobility.”
State action required
In health care professions, most of the occupational licensing restrictions, such as scope of practice requirements, are state-enacted rules. It’s unclear what steps the FTC can take to ban unnecessary occupational licensing restrictions, and given the independent nature of the FTC, the White House cannot compel any such action. The Trump Administration’s Choice and Competition report contained the following recommendations, which show the bipartisan nature of these reforms:
· States should consider changes to their scope-of-practice statutes to allow all health care providers to practice to the top of their license, utilizing their full skill set.
· The federal government and states should consider accompanying legislative and administrative proposals to allow non-physician and non-dentist providers to be paid directly for their services where evidence supports that the provider can safely and effectively provide that care.
· States should consider eliminating requirements for rigid collaborative practice and supervision agreements between physicians and dentists and their care extenders (e.g., physician assistants, hygienists) that are not justified by legitimate health and safety concerns.
· States should evaluate emerging health care occupations, such as dental therapy, and consider ways in which their licensure and scope of practice can increase access and drive down consumer costs while still ensuring safe, effective care.
· States should consider adopting interstate compacts and model laws that improve license portability, either by granting practitioners licensed in one state a privilege to practice elsewhere, or by expediting the process for obtaining licensure in multiple states.
· The federal government should consider legislative and administrative proposals to encourage the formation of interstate compacts or model laws that would allow practitioners to more easily move across state lines, thereby encouraging greater mobility of healthcare service providers.
The health care sector suffers from a lack of competition. Although partisan divisions on health care policy are deep and long-standing, much of the health care policy direction in President Biden’s executive order closely aligns with policy aims and achievements of the Trump administration. Republicans should support the Biden administration in these areas, such as allowing people to purchase hearing aids over the counter, boosting government price transparency efforts, and confronting both hospital consolidation and occupational licensing burdens. Republicans should also push for additional reforms like expanding coverage options, expanding site neutral payments, and rescinding the ACA’s prohibition on physician-owned hospitals. On drug pricing, before changing policy, policymakers must deal with facts—overall prescription drug prices have been flat for five years and Americans have more access to new medications that people in other countries.