How can the same people argue that we cannot impose fair, objective caps or rules on amounts charged by hospitals, but can impose fair, objective caps or rules on amounts charged by drug companies? (Photo: Shutterstock)

As 2019 came to an end, and we entered the politically charged year of 2020, one topic dominated the debate stages and legislator's minds: health care. Specifically, two issues relating to health care seemed to be primary amongst candidate's and law maker's talking points; that being the cost of drugs and surprise balance billing.

Surprise balance billing is particularly troublesome because whether it's an emergency or out-of-network provider operating at an in-network facility, the patient either didn't know the provider was out-of-network, or had no choice in the matter. Politicians see this issue, and their mouths water. It victimizes innocent people, in dire need of care, when they are most exposed. It also represents a chance for bi-partisan "wins" in the hotly debated area of health care.

Related: The cost of out-of-network bills? $40 billion annually

Elsewhere, the self-same politicians also see the excessive cost of medicine; life saving drugs people must purchase (or perish). They see how the cost of drugs that have been around for decades (with little to no change in the medication itself), continue to increase. They see people losing their homes, all for the sake of buying life saving drugs. This, like surprise balance billing, represents another opportunity to achieve a bi-partisan win in the very popular area of health care.

Interestingly, however, despite their similarities, the proposed solutions for these issues are complete opposites, giving rise to what I call the "cost of care contradiction."

Presently, proposed solutions for the surprise balance billing issue–both at the state and federal levels–focus on two "ideas" and finding a balance between them. Some entities (mostly those who pay for health care) argue that providers charge arbitrary and excessive amounts for the care they provide. They want some sort of objectively fair, universal pricing parameters to be used to set forth market based "floors" and "ceilings" for what a provider should be able to charge and receive for care. What such parameters would look like are all over the map, from using Medicare's fixed fee schedules to private price indexes; from averaging what in-network providers accept to using cost-to-charge ratios and fixed "profit" margins over cost.

Meanwhile, others (mostly hospitals and health systems) want some form of arbitration to be put in place, where an arbitrator is presented with what the provider wants as payment, what the payer is willing to pay, and they then will select what the payer shall pay. Interestingly, many politicians–especially Democrats–seem to be siding with hospitals and providers, and promoting the idea of arbitration. Indeed, you can see it already in place in many Democrat-dominated States, such as New York.

At the same time, those looking to tackle the issue of drug prices have been pushing for caps on what drug manufacturers can charge, fixing how much pharmaceutical companies can make in profit, and other limits based on objective parameters. Interestingly, proponents for such measures are also heavily populated by Democrats.

The reason I call this interesting situation the "cost of care contradiction" is because health care is health care. Whether I'm injecting myself with insulin at home, or receiving a flu shot at a doctor's office, medical care and medicine are two parts of one whole. Health care is comprised of the patient, provider, facility, equipment, medicine, services and more. They are all pieces of the health care puzzle. This is why I'm so confused when I see the same people argue that we cannot impose fair, objective caps or rules on amounts charged by hospitals, but can impose fair, objective caps or rules on amounts charged by drug companies.

Consider the following scenario: I've just been diagnosed with Type 1 insulin-dependent Diabetes. I've gone untreated for months, have become very ill, and am at the hospital. While there, they provide intravenous fluids, and inject me with insulin. The hospital pays some wholesale price to the manufacturer, and then charges my insurance or health plan an inflated rate to cover the cost and earn a profit. That amount–billed to my plan–cannot be "capped" but will instead be "arbitrated" case-by-case, if no network agreement is in place.

Meanwhile, I go home, and subsequently purchase insulin for my own home use. Do I pay for the insulin? Some (co-pays, deductibles, etc.), but not all of the cost is borne by me. My insurance pays the pharmacy for the drug the same way my insurance pays the hospital for the same drug (administered to me while I was in-patient). Yet, unlike the hospital bill (which is sacred, and at best, can be arbitrated), the pharmacy and drug manufacturer's bill to my insurance is something we can cap.

If we believe that the cost of health care should be capped, then the cost of all health care should be capped. If we believe the cost of health care needs to be unfettered and solely negotiated before an arbitrator, then all costs of health care need to be unfettered and negotiated before an arbitrator.

Until people recognize that the cost of health care–whether we mean the cost of care itself, or the cost of insurance that pays for it–covers both the cost of provider care and drugs, and that similar solutions should be applied to both, then we will continue to see a cost of care contradiction.

Ron E. Peck, Esq., is executive vice president and general counsel with The Phia Group, LLC.

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