More Texans are struggling to afford healthcare, and state lawmakers want to understand what's prompting costs to increase.
Texas House Speaker Dustin Burrows called for the creation of the House Select Committee on Health Care Affordability earlier this year, tasking state representatives with examining factors that affect healthcare affordability in Texas. In a six-hour day that kicked off a two-day public hearing, lawmakers received a broad overview of the issue before focusing on the role that hospital and drug costs play.
"Our goal for the committee is to eventually arrive at policy solutions that will help decrease the cost of quality healthcare for our constituents," said Rep. James Frank, the committee's chair. "And, at the very least, stop the out-of-control healthcare inflation that is taking a bigger and bigger piece of every Texan's economic lives."
Frank, who represents House District 69, which includes Wichita Falls and Paducah, said the goal of this hearing isn't to discuss policy solutions – instead he wants policymakers to gather an understanding to inform future conversations.
"Many of us know that healthcare pricing is largely broken," Frank said. "But I think sometimes it's difficult to know why…By truly taking our time, it is also my hope that we can address the root cause of pricing problems as opposed to playing whack-a-mole with the symptoms."
The committee will return Friday, and will continue to hear invited testimony only. Frank said members of the public who wish to testify can submit written comments to the committee.
Healthcare affordability
Charles Miller, director of health and economic mobility policy at the public policy organization Texas 2036, said health insurance premiums have increased so much that voters are saying it's their number one priority "for the first time ever."
"We launched a voter poll last fall, and this issue was more important than property taxes, than homeowners' insurance, than disaster response, than water infrastructure," Miller said. "These are all the topics that have been taking up a lot of time at the Capitol, and health affordability is more important to Texas voters than all of them."
Even as gas prices climb, a recent poll from KFF – a nonprofit, nonpartisan organization that does research on health issues – showed the cost of healthcare remains at the top of economic concerns for the public.
In the U.S., data shows spending on healthcare is more than in any other large country with a similar sized economy.
Cynthia Cox, senior vice president with KFF, said that doesn't result in better health outcomes.
"We spend almost twice as much on average per person on healthcare," she said. "And yet, we live shorter lives. And on both of these metrics, the U.S. stands out as being very different from other countries."
At the same time, the cost of services has increased. Healthcare costs in the U.S. generally rise faster than inflation, leaving people to pay significant amounts of their paycheck toward health coverage.
Zack Cooper, a professor of public health and economics at Yale University, told lawmakers that since 2000, health care spending in the U.S. has grown three times faster than inflation – driving 90% of the growth in premiums.
For a family of four, Cooper said the average premiums for employer-sponsored health insurance is about $27,000 annually.
"Every family is basically buying a new Toyota Corolla worth of health insurance," he said.
Cooper noted rising healthcare costs are one of the leading causes of income inequality in the U.S.
The average family in the U.S. has about $8,000 in "liquid assets," or funds that can be quickly accessed, according to Cooper.
"You're spending more on health care than you are on your mortgage," he said. "If you get sick, chances are you're going to literally go through everything that you have."
In 2022, spending on hospital services accounted for 42% of personal healthcare spending for people with private insurance – like employer-sponsored plans or coverage through the federal health insurance marketplace. That represents the largest portion of healthcare spending – with physician services accounting for 31% and prescription drugs taking up 23%.
Based on data from the U.S. Bureau of Labor Statistics, Cooper said hospital prices have increased faster than "virtually every other sector of the economy."
High prices not only increase healthcare premiums but tend to drive people away from receiving needed care. While coverage can alleviate some of that cost, Cox said the issue of higher healthcare costs isn't solved by expanding the number of people with insurance.
"Of the $200 billion in medical debt that is owed in this country, most of it is owed by people who have health insurance," she said.
Hospital consolidation
Cooper highlighted the lack or the loss of competition among hospitals as a growing concern that could be increasing prices.
Since 2000, Cooper said there's been more than 1,300 mergers among the nation's approximately 5,000 hospitals.
Anthony DiGiorgio, a neurosurgeon and healthcare policy researcher at University of California, San Francisco, said that consolidation contributes to a payment system heavily regulated by third party payers that can create policies "so heavy-handed" they shape where care is delivered. Over time, he said those policies have "steadily weakened" independent physicians.
"When these independent physician practices disappear, patients lose their local options, their direct relationships," DiGiorgio said. "Instead, the patients are directed to these large systems, where the physicians are more loyal to a corporate hierarchy."
DiGiorgio, who works at a county level hospital, said strong hospitals are necessary for emergency care, teaching, transplant services and safety net functions.
"But, patients need a strong independent sector," he said. "Because it provides patient choice, creates local price competition, and keeps a lot of care closer to home if you live far away from academic centers."
DiGiorgio said in many cases, doctors don't have the ability to benefit from the same programs hospitals do, which can put them at a disadvantage and lead to higher costs for the same services.
In addition, he said regulatory burden prevents physicians from being able to run their own practice. For every one hour that doctors spend with patients, DiGiorgio said studies have shown doctors spend two hours on the computer filling out paperwork.
When a hospital system offers to internalize the bureaucratic processes for doctors, DiGiorgio said that can be paired with the "subsidy streams" that hospitals get, which he says makes saying no "just impossible."
Drug prices
In addition to concerns about rising drug costs and spending, lawmakers also focused part of the day on pharmacy benefit managers, or PBMs – companies that act as the "middleman" in the drug supply chain.
"Literally every state has passed at least one pharmacy benefit manager law," said Maureen Hensley-Quinn, a senior program director with the National Academy for State Health Policy.
PBMs were created to help insurers control prescription drug spending and manage pharmacy benefits. A PBM will negotiate with drug manufacturers, approve or deny claims and manage drug utilization. It can also determine at which pharmacies people are able to get benefits.
The idea was they would negotiate for better prices and limit unnecessary prescriptions and pass those savings on to the consumer.
However, consolidation and vertical integration have led many experts and policymakers to question what value PBMs offer.
In 2023, the four largest PBMs – OptumRx, CVS Health, Express Scripts and Prime Therapeutics – owned a combined 67% of the national market.
In addition, many experts and policy makers are concerned with "vertical integration" in the U.S. drug supply chain – which refers to when one company owns multiple parts of the supply chain. Vertical integration is typically linked to higher costs for consumers.
For example, CVS Health owns an insurance company, PBM, drug manufacturer, as well as retail and specialty pharmacies and provider clinics.
The vertical integration in the drug space has led state lawmakers across the country to take on PBM reform as a policy issue.
Rep. Trey Wharton, who represents House District 12 north of Houston, said the limited network of pharmacy options can be particularly difficult for people in rural areas.
"Sometimes your insurance plan doesn't have a pharmacy in the small town you live in, so you have to go out of town because it's not covered," he said. "Then, that's also causing the local independent pharmacist to have to sell out, because they can't even buy the drugs as cheap the drug is sold by the big pharmacy."
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