Hansen: What do Vermont’s health care transparency laws achieve?

By Meg Hansen

Like a gift that keeps on giving, Obamacare ballooned insurance premiums again this year. In Vermont, MVP Health Care (MVP) saw an average annual increase of 6.7 percent and Blue Cross and Blue Shield (BCBSVT) increased rates by 12.7 percent in 2018. BCBSVT and MVP have requested additional hikes of 7.5 percent and 10.9 percent respectively for next year.

State legislatures nationwide have been testing various policies to address the ever-growing unaffordability of American health care. For instance, in 2016, Vermont passed the first drug price transparency law (Act 165), allegedly aimed at lowering prescription drug prices.

Act 165 required the Green Mountain Care Board (GMCB) and Department of Vermont Health Access (DVHA) to compile an annual report listing up to fifteen drugs with the highest price hikes, and for which the wholesale price increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months. The State Attorney General’s office then asked drug manufacturers to explain the price changes.

Meg Hansen

Meg Hansen is executive director of Vermonters for Health Care Freedom.

Two years later, Democrat Rep. William Lippert (Chair, House Health Care Committee) lamented that the results were meaningless and “very disappointing.” Based on the information provided, legislators could not determine whether the price increases had been justified. In turn, drugmakers refused to disclose proprietary data, and further argued that the GMCB/ DVHA reports were inaccurate as omitted discounts and rebates offered to public and private payers.

Undeterred by the dismal outcome of Act 165, lawmakers passed Act 193 this year that expands the state’s power to dominate drug and insurance companies. Under the new Vermont statute, private insurers must now submit drug-pricing information. In addition, manufacturers must publicly provide (albeit redacted) all the information submitted to the state, and notify administrators before introducing a new prescription drug to the market.

Doubling down on demanding drug prices emboldens politicians to claim that they are tackling high prescription drug costs. In truth, it amounts to little more than posturing. Drug price transparency information does not measure value to the patient. Knowing the sticker prices of various expensive drugs offers no context about (1) efficacy of the drug, (2) whether it replaced other more expensive drugs, or (3) the total cost savings accrued by avoiding hospitalization and surgery. Without answering these significant questions, making judgments about the price of prescription drugs appears futile.

Moreover, the US prescription drug market is not a highly competitive market (i.e. few companies dominate and the barriers to entry are high). Thus enforcing price transparency will not bring down prices. Rather, it could incentivize competitors to raise drug prices and match that of the leading product without jeopardizing profit margins.

In contrast, the federal Department Health and Human Services recently announced tangible regulatory changes to encourage greater competition by increasing FDA approval of cheaper generics, and preventing brand name drugs from employing unfair tactics to monopolize the market. Legislators in Montpelier, drunk with pseudo-righteousness, ignored these efforts.

Vermonters should hold elected officials accountable by asking them to demonstrate how the transparency laws they enact increase patient access to treatment choices, and improve quality of life. In addition, we need to understand the ideology that informs our state’s healthcare transparency laws – exemplified in the 2016 US Supreme Court case Gobeille v. Liberty Mutual Insurance Co. (former GMCB Chairman Al Gobeille now serves as Secretary of Human Services in the Scott Administration).

Vermont operates an All-Payer Claims Database called VHCURES, which obligates “all payers” (governmental agencies, private insurers, self-insured employer plans, individuals, businesses, health care facilities) to submit insurance claims. This repository purportedly allows administrators to analyze relevant information and facilitate greater health transparency.

In 2011, Liberty Mutual Insurance Company refused to share reports from self-funded, self-insured health plans (including medical claims, pharmacy claims, member eligibility, provider information), contending that Vermont lacked the authority to enforce said data collection. In the hopes of setting a national precedent on the preeminence of state-mandated big health data in “reshaping” American health care, Vermont subpoenaed the insurance data in question (that of a mere 137 individuals).

Liberty Mutual filed a lawsuit in response, and eventually won a 6-2 ruling from the US Supreme Court. Patient rights advocacy groups welcomed the strike against Vermont’s bureaucratic overreach and undermining of medical privacy, whereas critics denounced the court’s decision as a major blow to healthcare transparency efforts at the state level.

As ground zero for left-wing legislative experiments in health care, Vermont will continue inching toward future challenges of patient privacy rights in the name of state-run drug pricing and healthcare transparency schemes. After all, sponsors of Act 165 and Act 193 stated that transparency represents the “first step toward cost containment.” What exactly are the contours of successive steps? Will our politicians offer transparency about their true intentions?

Meg Hansen is executive director of VHFC, a nonprofit committed to free-market reforms in American health care.

Image courtesy of Meg Hansen