Editing Openai/692cb885-da9c-8002-9696-e985fae204bd (section)

==== High Medical Prices: Escalating Costs and Policy Solutions ====

U.S. healthcare prices are the highest in the world, making medical care and insurance increasingly unaffordable. Research shows that Americans spend twice as much per capita on health care as peer nations, primarily due to higher prices rather than higher utilizationhealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=The%20largest%20category%20of%20health,drugs%20administered%20in%20inpatient%20and|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>healthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=Spending%20on%20health%20administration%20is,party%20payers%20and%20programs|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>. For example, in 2021 the U.S. spent about $7,500 per person on inpatient and outpatient care versus ~$3,000 in comparable countrieshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=The%20largest%20category%20of%20health,S|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>, despite Americans having fewer hospital stays and doctor visits on average. Many services and products – from hospital procedures and physician visits to brand-name drugs – cost far more in the U.S. than elsewherekff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/health-policy-101-health-care-costs-and-affordability/#:~:text=U,large%20and%20wealthy%20countries%20do|publisher=kff.org|access-date=2025-11-30}}</ref>. High prices, rather than greater service use, explain around 80% of the spending gap between the U.S. and other wealthy countrieshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=Image|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>.

 Figure: Per capita health spending by category in 2021 (U.S. vs. average of other wealthy nations). The U.S. spends dramatically more on inpatient/outpatient care and administrative costs than peer countries, despite similar utilization rateshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=The%20largest%20category%20of%20health,S|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>healthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=Spending%20on%20health%20administration%20is,party%20payers%20and%20programs|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>. Higher U.S. prices – not greater use of services – are the primary driver of excess spending.

Several factors contribute to high medical prices in the U.S. system:
* Limited Price Regulation: Unlike most countries, the U.S. traditionally lets private market negotiations set prices, with minimal direct regulation. Neither the federal nor most state governments have systematically regulated or negotiated the prices of medical services (outside of public programs) to the extent other nations dokff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/health-policy-101-health-care-costs-and-affordability/#:~:text=The%20U,name%20prescription%20drugs%2C%20hospital|publisher=kff.org|access-date=2025-11-30}}</ref>. This often leaves hospitals, physician organizations, and drug manufacturers free to charge much higher prices, knowing that insurers and patients have limited alternatives.
* Provider Market Power and Consolidation: The past two decades saw extensive consolidation among hospitals and physician practices, giving providers greater monopolistic pricing power. Over 90% of U.S. metropolitan areas had highly concentrated hospital markets by the mid-2010smilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=or%20improve%20efficiency,10|publisher=milbank.org|access-date=2025-11-30}}</ref>. As of 2024, 77% of physicians are employed by hospitals or corporations, up 15 percentage points in five yearsmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=or%20improve%20efficiency,10|publisher=milbank.org|access-date=2025-11-30}}</ref>. This consolidation consistently leads to higher prices – horizontal hospital mergers have raised prices by 20% or more in many casesmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=There%20is%20clear%20evidence%20that,Private%20equity|publisher=milbank.org|access-date=2025-11-30}}</ref>, vertical hospital–physician integration has raised physician fees ~14%, and private equity acquisitions of medical practices have driven price increases around 11%milbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=There%20is%20clear%20evidence%20that,Private%20equity|publisher=milbank.org|access-date=2025-11-30}}</ref>. In short, less competition means providers can demand higher payments, especially from private insurers.
* Opaque Pricing and Billing Practices: Prices for medical services are often non-transparent and vary wildly. Historically, hospitals and providers used confidential chargemasters and negotiated rates, making it hard for payers or patients to compare or challenge high prices. This opacity weakens price competition and enables excessive charges, especially for out-of-network or emergency care.
* High U.S. Input Costs: In some cases, higher prices also reflect higher input costs – for instance, U.S. physicians (especially specialists) and nurses earn higher salaries than in peer countries, and certain devices or equipment are costliercommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=,and%20peer%20nation%20health%20spending|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. However, these factors account for a smaller share of the spending gap than pure price-setting power. Studies estimate that about 30% of the excess spending in the U.S. vs. other nations comes from administrative and billing costs (addressed in the next section), ~20% from higher drug prices, ~15% from higher physician and nurse wages, etc.commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=,and%20peer%20nation%20health%20spending|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. This underscores that skyrocketing provider prices and administrative waste are prime targets for cost containment.

Reforming High Medical Prices – Policy Options: Tackling high prices requires interventions at multiple levels. Below we explore potential reforms and their financial impact at the federal, state, and private-sector levels. These include direct price regulations (like all-payer or Medicare-based rate setting, price caps, and reference pricing), efforts to increase competition and transparency, and measures to curb the pricing power of consolidated providers.

===== Federal Policy Options for Price Containment =====
* Establish All-Payer or Medicare-Based Rate Setting: A bold federal approach would be to regulate prices for hospital and physician services across all payers, for example by capping commercial payment rates at a specified percentage of Medicare rates. Medicare prices are often 40–50% lower than private insurance rates for the same services. If commercial plans had paid Medicare-equivalent rates for all services, U.S. health spending for the privately insured would have been '''$352 billion (roughly 35%) lower in 2021'''kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=quality%E2%80%94key%20considerations%20for%20any%20proposal,margin%20services%20or%20care|publisher=kff.org|access-date=2025-11-30}}</ref>. This indicates enormous savings potential from all-payer rate setting or global budgets. However, cutting commercial prices to Medicare levels would deeply impact provider revenues (average hospital revenue would fall ~35%kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=quality%E2%80%94key%20considerations%20for%20any%20proposal,margin%20services%20or%20care|publisher=kff.org|access-date=2025-11-30}}</ref>), so more gradual or moderated approaches are discussed. One option is setting uniform rates as a multiple of Medicare (e.g. 150% or 200% of Medicare prices) to preserve margins while reining in extremes. Policymakers could also target rate regulation to highly consolidated markets or high-priced providers firstkff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=Another%20consideration%20for%20policymakers%20is,due%20to%20low%20population%20density|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=Decisions%20about%20whether%20to%20target,blunt%20any%20adverse%20effects%20on|publisher=kff.org|access-date=2025-11-30}}</ref>. Adopting Maryland’s model nationally is another idea: Maryland is unique in operating an all-payer hospital rate system with global budgets (annual spending caps per hospital) which has slowed its cost growth. Vermont’s recent reforms (discussed below) also point toward all-payer global budgeting as a future strategymilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=The%20reference,implemented%20by%20Maryland%20in%202014|publisher=milbank.org|access-date=2025-11-30}}</ref>.
* Implement Broad '''Price Caps''' or Reference Pricing: Rather than fixing exact rates, the federal government could impose price ceilings on what providers can charge. For example, capping out-of-network hospital or physician charges at a reasonable multiple of Medicare or average in-network prices would protect patients and also pressure in-network rates downwardkff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=Price%20caps%20could%20also%20be,of|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=capping%20out,network%20prices%20alone%20may%20not|publisher=kff.org|access-date=2025-11-30}}</ref>. Research shows that when out-of-network prices are capped (as in Medicare Advantage, where the default is Medicare’s rate), negotiated in-network prices tend to gravitate closer to that benchmarkkff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=closer%20to%20the%20out,network%20prices%20nearly%20as%20much|publisher=kff.org|access-date=2025-11-30}}</ref>. Policymakers could also cap in-network prices for certain high-cost procedures or services, or overall price-growth caps tied to inflation. Reference pricing is a related strategy: a payer (or government program) sets a maximum contribution for a service, often based on a reference (like median market price or an international price index), and providers charging above that reference must justify or patients pay the difference. At the federal level, prescription drug pricing is seeing a form of reference-based negotiation. The Inflation Reduction Act of 2022 empowered Medicare to negotiate prices on select high-cost drugs. In the first two rounds of this policy, Medicare has achieved substantial discounts – for example, the 2025 negotiation of 15 costliest drugs is projected to cut their prices by 36%, saving about $8.5 billion in 2027reuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=Nov%2025%20%28Reuters%29%20,in%20net%20covered%20prescription%20costs|publisher=reuters.com|access-date=2025-11-30}}</ref>reuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=negotiated%20prices%20for%2015%20of,in%20net%20covered%20prescription%20costs|publisher=reuters.com|access-date=2025-11-30}}</ref>. These negotiated prices are being benchmarked in part against what other countries payreuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=irritable%20bowel%20syndrome%20medicine%20Linzess,of%20%24136%2C%20down%20from%20%24539|publisher=reuters.com|access-date=2025-11-30}}</ref>. Expanding Medicare’s negotiation authority to more drugs (and potentially tohospital services or equipment contracts) could capture greater savings. Some proposals also suggest international reference pricing (often called “most-favored-nation” pricing), where U.S. payers would not pay more than an average of what other wealthy nations pay for the same drug or servicereuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=Analysts%20said%20they%20will%20also,nation%20pricing%2C%20or%20MFN|publisher=reuters.com|access-date=2025-11-30}}</ref>. This could dramatically lower prices for medications that are much cheaper abroad.
* Promote Price Transparency and Antitrust Enforcement: The federal government has recently mandated price transparency for hospitals and insurers – requiring hospitals to post machine-readable prices for all services and insurers to disclose in-network and allowed amounts. Enforcing and enhancing these rules can empower payers and patients to identify egregious prices. Transparency by itself doesn’t set prices, but it exposes price variation and can shame some providers into moderating charges or justify regulatory intervention for outliers. Additionally, robust antitrust enforcement is crucial to prevent further consolidation and anti-competitive behavior. The current administration has signaled a tougher stance on healthcare mergers. The FTC and DOJ are increasingly challenging hospital system mergers, acquisitions of physician groups by dominant health systems, and even anti-competitive contract clauses (like all-or-nothing contracting or gag clauses that prevent sharing price information). Blocking mergers that would create monopolies can save future cost increases – for instance, stopping a hospital merger that might have led to a 20% price hike averts that added costmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=There%20is%20clear%20evidence%20that,Private%20equity|publisher=milbank.org|access-date=2025-11-30}}</ref>. Federal regulators and Congress can also boost competition by banning certain practices that inflate prices, such as “site-neutral payment” reforms (paying the same for a service regardless of whether it’s done in a hospital outpatient department or a free-standing clinic). Site-neutral payment policies effectively cut prices for hospital-owned facilities (which often charge facility fees far above independent clinics). MedPAC estimates site-neutral payments for certain services could save Medicare billions and similarly reduce commercial costs. Congress is considering such policies to discourage hospitals from buying up physician offices just to charge more.
* Reforms to Drug and Device Pricing: Beyond Medicare negotiation, federal policy could include capping price increases for drugs (e.g. penalties if list prices rise faster than inflation, a provision already applied to Medicare Part D in the IRA) and encouraging generic and biosimilar competition to bring prices down. The creation of Prescription Drug Affordability Boards (PDABs) at the state level (discussed below) could be mirrored federally or supported via grants. Additionally, allowing safe importation of lower-cost drugs from Canada or Europe is another tool states and the federal government have explored (with FDA pilot programs under review)nashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,health%20plans%20in%20the%20state|publisher=nashp.org|access-date=2025-11-30}}</ref>. For medical devices and equipment, bulk purchasing by Medicare/VA or reference pricing could help standardize lower prices.
* Financial Impact: Federal price reforms can yield significant savings but must be calibrated to avoid harming access. As noted, all-payer rate setting at Medicare levels might save on the order of '''$300–$350 billion per year'''kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=quality%E2%80%94key%20considerations%20for%20any%20proposal,margin%20services%20or%20care|publisher=kff.org|access-date=2025-11-30}}</ref>, though such an aggressive approach would face industry pushback and require offsetting support for providers in underserved areas. More moderate caps (e.g. capping commercial rates at 150% of Medicare) would save somewhat less but still hundreds of billions over time, while giving providers higher-than-Medicare revenue. Medicare’s drug price negotiations are already slated to save tens of billions over the next decade in the Part D programreuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=Nov%2025%20%28Reuters%29%20,in%20net%20covered%20prescription%20costs|publisher=reuters.com|access-date=2025-11-30}}</ref>, and expanding this authority would multiply the effect. Transparency is harder to quantify, but even a 5% reduction in prices for the highest-cost hospital regions (due to public pressure or competition) could save on the order of tens of billions annually, given hospital care alone is a $1.3 trillion expense. Vigorous antitrust actions, by preventing future price hikes from mergers, protect consumers from hidden “costs” that would have materialized – for example, blocking a merger that would have added $100 million in annual costs keeps that money in consumers’ pockets or public programs. In summary, federal intervention sets the stage for broad cost containment by resetting the baseline of prices or curbing price growth nationally.

===== State Policy Innovations to Regulate Prices =====

States serve as laboratories for healthcare cost reforms, and recently many states have advanced policies to tackle high prices and provider market power:
* All-Payer and Reference-Based Price Caps: In 2025, states broke new ground by extending reference pricing caps beyond state employee plans to the broader market. Vermont became the first state to enact across-the-board hospital price caps for all payers, directing its Green Mountain Care Board to set upper limits on hospital payments as a percentage of Medicare ratesmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=In%20June%202025%2C%20Vermont%20became,are%20passed%20along%20to%20ratepayers|publisher=milbank.org|access-date=2025-11-30}}</ref>. These caps (to be in place by 2027) are a stepping stone toward all-payer global hospital budgets by 2030 for Vermontmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=settings%2C%20such%20as%20primary%20care,services|publisher=milbank.org|access-date=2025-11-30}}</ref>, similar to Maryland’s global budget model. Indiana likewise passed a law capping hospital prices (though limited to nonprofit hospitals): by 2029, Indiana’s nonprofits must lower their average prices to or below the statewide average (which will be calculated by the state) or else lose their tax-exempt statusmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=Like%20Vermont%2C%20Indiana%20also%20established,nonprofit%20hospital%20fails%20to%20meet|publisher=milbank.org|access-date=2025-11-30}}</ref>. This approach essentially pressures high-priced hospital systems to rein in charges under threat of significant penalty. Washington State, meanwhile, built on earlier efforts by capping prices in its public employee health plan: reimbursement to in-network hospitals is limited to 200% of Medicare rates (185% if out-of-network)milbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=|publisher=milbank.org|access-date=2025-11-30}}</ref>. Washington also set minimum floors for primary care and rural critical-access hospitals (e.g. paying at least 150% of Medicare for primary care) to ensure cost-cutting doesn’t undercut essential servicesmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=As%20of%20this%20legislative%20session%2C,law%20establishes%20separate%20reimbursement%20caps|publisher=milbank.org|access-date=2025-11-30}}</ref>. These state initiatives were inspired by evidence from earlier pilot programs: Oregon’s state employee plan capped hospital payments at 200%/185% of Medicare and saved over $81 million in the first plan year (around 5% of costs)kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=In%202017%2C%20lawmakers%20in%20Oregon,of%20total|publisher=kff.org|access-date=2025-11-30}}</ref>. Montana’s state employee plan similarly saved $47.8 million over 3 years by using reference-based pricing agreements with hospitals (capping inpatient at ~220% and outpatient at 230–250% of Medicare)kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=between%20230%C2%AD%E2%80%93250,by%20the%20decrease%20in%20prices|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=prices%20of%20between%20239%E2%80%93611,by%20the%20decrease%20in%20prices|publisher=kff.org|access-date=2025-11-30}}</ref>. The average state could save ~$150 million in their employee plan by implementing such caps, according to one analysismilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=employee%20health%20plan%20used%20reference,2%20million%20from%20the%20policy|publisher=milbank.org|access-date=2025-11-30}}</ref>. Now that Vermont and Indiana are applying caps market-wide, we will see much larger impacts. For instance, Vermont expects its all-payer hospital cap and subsequent global budgets to bend the cost curve statewide, directly lowering premiums for employers and consumers as mandated savings are passed throughmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=hospital%20price%20caps%20for%20all,law%20also%20permits%20GMCB%20to|publisher=milbank.org|access-date=2025-11-30}}</ref>.
* Increasing Competition and Oversight of Consolidation: States are also directly addressing provider monopolies. In 2024, Indiana and New Mexico enacted laws requiring notice and state review of any proposed hospital mergers or acquisitionsnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,hospital%20and%20health%20system%20costs|publisher=nashp.org|access-date=2025-11-30}}</ref>. More states are considering such “merger review” or pre-approval requirements to stop deals that would create dominant systems. Some states are revisiting Certificate of Need (CON) laws – while traditionally CON regulations aimed to prevent redundant facilities, today there’s debate: some argue loosening CON could allow new entrants and more competition, whereas others prefer tightening CON or adding state oversight of expansions to control consolidationnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,increase%20competition%20and%20address%20consolidation|publisher=nashp.org|access-date=2025-11-30}}</ref>. Massachusetts has a Health Policy Commission that reviews major provider transactions for cost impact and can impose conditions. California in 2023 launched an Office of Health Care Affordability with authority to review large healthcare mergers and set cost growth targets. These state oversight mechanisms act as a check on unchecked growth of big health systems. Additionally, states have moved to ban anti-competitive contract clauses between providers and insurers: for example, some states prohibit “all-or-nothing” contracting (where a hospital system forces an insurer to include all its facilities in-network) and anti-steering or anti-tiering clauses that previously allowed dominant hospitals to block insurers from steering patients to lower-cost competitors. By outlawing these practices, states foster more price competition and give insurers leverage to negotiate better rates.
* Prescription Drug Pricing Initiatives: States are tackling drug costs through multiple avenues. Over 10 states have established Prescription Drug Affordability Boards (PDABs) – independent boards that review extremely high-cost drugs or those with rapid price increases and can set upper payment limits for certain payers. For instance, Maryland’s PDAB (the first in the nation) can put price caps on select drugs purchased by state and local government plans, and other states (e.g. Colorado, Washington) have similar powersnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>. Insulin price caps have become common – nearly 22 states limit insulin co-pays (often $25 or $35 per month). In 2024, New York went further by eliminating cost-sharing for insulin altogether for state-regulated plansnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,health%20plans%20in%20the%20state|publisher=nashp.org|access-date=2025-11-30}}</ref>, essentially ensuring insulin is free at point of sale (shifting cost to insurers/employers, who in turn have negotiating pressure on insulin manufacturers). Washington capped out-of-pocket costs for asthma inhalers and EpiPensnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,health%20plans%20in%20the%20state|publisher=nashp.org|access-date=2025-11-30}}</ref>. While these caps help patients directly, some states are also exploring drug price regulation at the source: Vermont, for example, is studying a drug review board to potentially regulate launch prices or price hikes for medications (similar to how some countries use health technology assessments to set drug prices)nashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>. States are also enforcing transparency from pharmacy benefit managers (PBMs) and banning PBM practices like “spread pricing” to ensure savings from negotiated drug rebates are passed to consumersnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,particularly%20independent%20pharmacies%2C%20and%20more|publisher=nashp.org|access-date=2025-11-30}}</ref>. For example, Idaho, Vermont, and Washington in 2024 all enacted comprehensive PBM reforms to increase transparency and fairness in drug pricingnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,hospital%20and%20health%20system%20costs|publisher=nashp.org|access-date=2025-11-30}}</ref>.
* Other State-Level Price Measures: A notable trend is states targeting specific billing practices that inflate costs. Facility fee bans or limitations are emerging: Connecticut extended its ban on additional facility fees for telehealth servicesnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>, so providers can’t tack on extra charges beyond the professional fee. This is essentially a site-neutral payment reform at the state level to prevent hospitals from charging more for services delivered remotely or at hospital-owned clinics. Some states also set or negotiated out-of-network payment standards for surprise bills (building on the federal No Surprises Act) – for instance, Oklahoma in 2024 adopted reference-based reimbursement for out-of-network ambulance servicesnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>.
* Financial Impact: State reforms, while varied, are starting to move the needle on costs. Reference pricing and caps in public employee plans have saved states tens of millions within a few yearsmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=network%20hospitals,2%20million%20from%20the%20policy|publisher=milbank.org|access-date=2025-11-30}}</ref>milbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=employee%20health%20plan%20used%20reference,2%20million%20from%20the%20policy|publisher=milbank.org|access-date=2025-11-30}}</ref>, and by expanding these caps to all payers, states like Vermont anticipate hundreds of millions in savings annually once fully implemented (Vermont’s hospital spending was >$2.5 billion annually, so even a 10% price reduction would save $250M+). Stronger competition oversight prevents future price hikes that could cost state residents dearly – for example, stopping a merger that would have allowed a hospital to charge 30% more in a region protects employers and consumers from those higher premiums (potentially saving hundreds of dollars per person annually in that area). Drug affordability boards, although new, aim to negotiate or cap certain high-cost drugs; if, say, a state PDAB caps the price of a $1 million gene therapy to $700k for state plans, that’s $300k per treatment saved for payers (and similar logic for insulin: capping co-pays reduces patient costs immediately, while pushing manufacturers to keep net prices lower). In aggregate, states that aggressively pursue cost containment could slow healthcare premium growth and yield billions in system-wide savings, especially as more states learn from early adopters. Importantly, many state actions also serve as pilots for federal policy – successful state models (like Maryland’s all-payer system or Massachusetts’ cost growth benchmark, which kept growth around 3.2% for several years) could be scaled up nationally to amplify savings.

===== Private-Sector Initiatives and Market-Based Approaches =====

In parallel with government action, employers, insurers, and healthcare purchasers in the private sector are adopting strategies to mitigate high prices:
* Employer Reference Pricing and Direct Contracting: Large employers and union plans have pioneered reference pricing for certain “shoppable” services. For example, the California Public Employees’ Retirement System (CalPERS) set a reference price for procedures like knee surgeries and colonoscopies – they would pay, say, $30,000 for a knee replacement, and employees going to a hospital that charged more would pay the difference out-of-pocket. This steered patients to cost-effective providers and forced some high-priced hospitals to lower rates to avoid losing patients. The result was millions in savings and dramatically reduced price variation for those services. Many self-insured employers are now adopting similar reference pricing or centers of excellence contracts (negotiating a fixed bundled price with select high-quality hospitals for surgeries, often including travel costs for the patient). These private initiatives effectively regulate prices via market pressure, and when done at scale (e.g., Walmart’s direct contracting with top hospitals for spine surgery at a fixed price), they can influence local pricing norms.
* Price Transparency Tools and Plan Design: Insurers and employers are rolling out tools that enable employees to compare prices for medical services and choose lower-cost options. Under the federal transparency rules, insurers now publish massive data files of negotiated rates; tech firms are crunching this data to build consumer-friendly price comparison apps. While healthcare isn’t a truly consumer-driven market in emergencies, for elective outpatient services these tools increase pressure on overpriced providers. Some employers also use tiered networks or narrow networks, wherein providers are tiered by cost and quality – patients pay less (or nothing) if they use “preferred” high-value providers. For instance, an insurer might designate certain labs or imaging centers as Tier 1 (low-cost) with zero co-pay, while using a high-cost hospital’s MRI could come with a hefty co-pay. Such benefit designs incentivize patients to choose lower-price facilities, thereby forcing providers to compete on price. Early evidence shows tiered networks can reduce employer spending by steering usage to more efficient providers.
* Negotiating Leverage through Alliances: Coalitions of purchasers (like the Health Transformation Alliance or regional employer health coalitions) pool their covered lives to negotiate better deals. By banding together, employers gain bargaining power closer to that of a public purchaser. Some are even contracting directly with provider systems for a flat per-member-per-month payment (similar to an HMO model) to cover all care – shifting risk to the provider in exchange for cost control. Others leverage third-party negotiators or benefit consultants to push back on hospital contracts with unreasonable terms. While individual employers often lacked leverage, these collaborative approaches are beginning to crack the pricing power of dominant providers in certain markets.
* Private Antitrust Litigation and Market Pressure: The private sector isn’t waiting for government alone – there’s a rise in lawsuits by employers or health plans against hospital systems for anti-competitive practices. For example, the Blue Cross insurers in some states sued hospital systems over contract clauses that inflate prices, leading to settlements that prohibit those practices and deliver price concessions. Additionally, large national employers can threaten to exclude an entire health system from their employee plan if prices are too high (e.g., Wal-Mart reportedly did this in areas to force price cuts). These market pressures, while uneven, show that private payers are increasingly unwilling to simply absorb ever-higher prices.
* Financial Impact: Private-sector measures, when effectively implemented, can yield moderate savings and complement public policies. For instance, CalPERS’ reference pricing program for just a couple of procedures saved a reported $5 million in one year and cut surgical prices by 20% at some hospitals (as the overpriced providers lowered fees to avoid losing patients). Broadly, the RAND Hospital Price Transparency studies have shown employers pay 2.5x Medicare rates on average; if employer coalitions negotiate that down even to 2x Medicare, that’s a 20% cost reduction – which for a Fortune 500 company’s health spend could mean tens of millions saved annually. Price shopping tools have shown patients often will choose cheaper options when informed – one study found giving consumers transparency and rewards for choosing lower-cost providers yielded average savings of ~$300 per procedure for imaging and lab tests, about 10–15% off those service costs. Scaling this up, if even 10% of elective outpatient spending in the U.S. (a subset of the ~$4 trillion) sees a 10% price reduction from consumer choice, that’s on the order of $10–$20 billion in savings. In sum, while private strategies alone may not fix the systemic pricing problem, they can drive incremental efficiency and send a message to high-cost providers, especially when aligned with supportive public policy (e.g. price transparency mandates or antitrust enforcement).

Summary of High-Price Reforms: The table below summarizes key reform options to address high medical prices, along with examples and estimated impacts:

| Policy Option                                | Level                                          | Description & Examples                                                                                                                                                                                                                                                                                                                                                                                                                                    | Potential Impact                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| -------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ |
| All-Payer Rate Setting / Global Budgets      | Federal or State                               | Set uniform payment rates for all payers (often tied to Medicare rates) and/or cap total spending per hospital (global budget). Example: Maryland’s all-payer hospital model; Vermont’s law phasing in all-payer hospital budgets by 2030
milbank.org
.                                                                                                                                                                                                   | Very large savings by eliminating price extremes. KFF estimates using Medicare rates for all private plans could save ~$352 billion in one year
kff.org
 (but with substantial provider revenue cuts). More moderate caps (e.g. 150–200% of Medicare) would still save tens of billions while preserving some margin. Maryland contained per-capita hospital cost growth to ~2%/year (below national average) under all-payer global budgets
milbank.org
.                                                                                                                        |
| Price Caps / Reference Pricing               | Federal, State, or Private                     | Limit the maximum price for services (percent of Medicare or a fixed reference). Examples: Montana & Oregon capping state employee plan hospital payments at ~200% of Medicare saved $47.8 M (2017–19)
kff.org
 and $81 M in one year
kff.org
; Vermont (2025) and Indiana (2025) extend caps to all hospitals statewide
milbank.org
milbank.org
. Employers like CalPERS set reference prices for surgeries, forcing high-cost hospitals to lower rates. | Significant savings targeted at overpriced services. State employee plan caps saved ~5% of costs
kff.org
; applied broadly, similar 5–10% cost reductions across commercial markets could yield dozens of billions in savings nationally. Reference pricing by employers has cut certain procedure prices ~20% and steered patients to lower-cost providers (millions saved for large employers).                                                                                                                                                                                 |
| Anti-Consolidation & Competition Enforcement | Federal (FTC/DOJ) and State (AGs, Commissions) | Prevent or mitigate provider monopolies through merger reviews, anti-trust lawsuits, and regulating anti-competitive contract clauses. Examples: FTC blocking hospital mergers (e.g. prevented a merger in New Jersey that would have combined the only two hospitals in a city); Indiana’s 2024 law requiring state approval for hospital acquisitions
nashp.org
; states banning contract clauses that prevent tiered networks.                         | Avoids future cost hikes of 10–30% that often follow mergers
milbank.org
. Hard to quantify “savings” except by comparison to higher alternate future costs. However, preventing a single large hospital merger can save local employers and patients from millions in annual price increases. Over time, preserving competition keeps downward pressure on prices, which could be worth tens of billions nationally versus a fully consolidated system.                                                                                                                          |
| Drug Price Regulation                        | Federal and State                              | Government negotiation or caps on drug prices; promote generics. Examples: Medicare negotiation (IRA 2022) cutting negotiated drug prices ~36% for 2027 on key drugs
reuters.com
; State PDABs setting upper payment limits; capping insulin co-pays at $35 (now national for Medicare, many states for commercial).                                                                                                                                      | High impact for targeted drugs. Medicare’s negotiation on 25 drugs by 2030 is estimated to save tens of billions. States’ PDABs could similarly trim extreme drug costs for state plans (e.g. saving $millions on a single expensive therapy). Insulin cap laws greatly reduce out-of-pocket costs; if paired with pricing reforms, overall insulin spending could drop substantially. An international reference pricing policy for drugs is projected to cut U.S. brand-name drug prices 30–50% on average, yielding tens of billions in annual savings if implemented broadly. |
| Price Transparency & Consumer Tools          | Federal (mandates) and Private (tools)         | Mandate disclosure of hospital and insurer prices; develop consumer-facing price comparison and reward programs. Examples: CMS Hospital Price Transparency rule (2021) and Transparency in Coverage rule for insurers (2022) – now databases of prices are emerging; employers offering shopping rewards (e.g. cash incentive if an employee chooses a facility that charges less for an MRI).                                                            | Indirect but meaningful impact. Transparency alone might shave a few percent off prices in competitive markets (hospitals that were 500% of Medicare might drop to 400% if exposed, for instance). Even a 5% reduction in prices for shoppable services due to informed consumers could save several billion dollars. Over time, transparency can compound with other tools (e.g. making reference pricing easier to implement) and foster a culture of accountability for high-cost providers.                                                                                   |

Table Note: Estimated impacts are rough and context-dependent. Large savings from price regulation must be balanced against potential effects on provider finances and patient access. Effective policy design (phasing in caps, exempting critical rural providers, etc.) can mitigate unintended consequenceskff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=that%20much%20is%20likely%20to,130%C2%A0%2C29|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=effects%20would%20be%20larger%20for,providers%20to%20participate%2C%20commercial%20payers|publisher=kff.org|access-date=2025-11-30}}</ref> while still capturing most of the savings.