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

===== 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.