▶ 0:13:00Chair Scott: The U.S. senate special will come to order. Free-market capitalism has made the united states the envy of the world. It keep costs down. When you shop around, you think about price, quality, and value. The free market allows you to find the option that suits your needs and your budget. For too long americans have been robbed of the ability to make informed choices in health care because they don't have the information they need.
▶ 0:13:31Chair Scott: Our country has allowed the U.S. health care system to operate in the shadows without price transparency or true consumer choice. The result is a complicated system of inflated prices, shrouded in secrecy combat forces americans to ask the wrong questions. Instead of asking them is this the best doctor for my needs, ask, is this doctor in my network. Instead of asking if the cost of the surgery or medicine would be more affordable with better quality elsewhere, we ask how much is the co-pay.
▶ 0:14:01Chair Scott: Try to navigate the bureaucracy to get answers to health-care pricing can be incredibly intimidating, especially for vulnerable populations like many in our aging community. When health care emergencies happen, we don't always have time to research and shop around for a best option. For a huge section of our health care needs, there is clearly a better way to operate for everyone from patients to doctor.
▶ 0:14:24Chair Scott: I'm talking about chapel services, and they include elected -- shoppable services, and they include elective surgeries, lab tests, and more. These make up roughly 40% of all health care costs and they are significant to introduce consumer-driven, free-market reforms, into the space to drive down health care costs for all americans including our aging population. We know sites and pharmacies charge more than others with the exact same shoppable services.
▶ 0:14:55Chair Scott: For example, hospitals charge more than ambulatory surgical centers. In medicare we try to address this problem through payment reform, but in the commercial insurance space things get more complex. In the current commercial marketplace, it is up to every injury to reach a customer -- every insurer to reach a cost arrangement with health care providers. The differences get passed on to consumers at different rates. Because of these agreements, the costs are not always tied to quality.
▶ 0:15:26Chair Scott: Two patients could be receiving the same treatment, but one could be paying significantly more because of costs behind closed doors, and date that completely given quality and different service. Not tied to price at all. For example, m.r.I.'s are essentially fancy cameras to take lifesaving pictures. You have a digital camera, you have a phone. If there was a wide disparity in pricing and costs passed on to the insurance provider. Lab tests can they're the same.
▶ 0:15:57Chair Scott: The cost can vary widely by providers but you received the same quality lab result in a matter what you or your insurance provider pays. Generic drugs, up to 90% of the drugs dispensed at a pharmacy, is typically an upfront price transparency. That makes no sense. Typically more specific price examples, but providers like to publicly list the prices and rely on hiding the actual cost of the services they provide.
▶ 0:16:27Chair Scott: Not only does this secrecy make it difficult for consumers to make smart, market-driven choices, it allows prices to inflate and drives up costs for everyone. Price transparency is not a partisan concept. It is common sense. When patients can see prices, they can make informed choices. When providers compete on price, cost and quality go down.
▶ 0:16:51Chair Scott: We don't operate this way right now, there is too much inflated pricing and health care system, and that is true whether you are in a new york or florida. The current system does not incentivize people to seek low cost options. Health care doesn't have to be any more complicated than a lot of other things. I've spent most of my life in business and I ran one of the largest health care companies in the world.
▶ 0:17:15Chair Scott: When you making simple and focus on outcomes and quality, the result is lower costs, healthier patients, and a better system for everybody. Today we have the opportunity to hear from ministers who have put what I said into action. I look forward to hearing how they are providing a service for the aging population and all americans. I'm also eager to hear their thoughts on how we can empower patients to make decisions and reduce some of the inflated costs in our health care system.
▶ 0:17:41Chair Scott: I hope today's hearing will be the start of discussion on how price transparency and competition can drive down costs, improve quality for all americans, especially the aging population. I welcome the ranking member, senator from new york, senator children, for her opening -- senator gillibrand, for her opening statement.
▶ 0:18:00Sen. Gillibrand: Thank you, chairman scott, for calling today's hearing, thank you to all of our witnesses. It is going to be an excellent hearing. Everyone is here because we agree the cost of health care is too high. In the richest country in the world, is an acceptable that one in three adults skip or postpone getting health care that they need because of the cost. It is unconscionable that one in three adults do not take the medication as prescribed because of costs.
▶ 0:18:27Sen. Gillibrand: This afternoon we will hear from a wide range of witnesses who will share their expertise on how americans' ability to separate health plans, medical services --shop for health plans, medical services, and drugs can help them access the care they need and afford. Tens of millions of americans visit the health insurance marketplace to shop for a plan that works for their families.
▶ 0:18:50Sen. Gillibrand: They are able to see if plans include the doctors they need or the medications they need and weigh the differences between them based on premium costs, deductible amounts, and other factors that matter to their households. It is the ultimate shoppable service. Unfortunately at the end of this year, crucial tax credits that help hard-working families afforded the health plans are going to expire.
▶ 0:19:16Sen. Gillibrand: On average those families are going to have to pay twice as much for premiums, in 2026 and many enrollees will have to pay more, costs they definitely cannot afford. Nearly 5 million americans will likely lose their health care coverage. These enhanced tax credits particularly help many of the 5 million adults between ages 50 and 64 who by their insurance through the marketplace.
▶ 0:19:39Sen. Gillibrand: He's enrollees are people who -- these enrollees are people had to scale back hours of the doctor care for aging parents, people forced to work part-time until they retire because of a physically demanding career, or people who retire early and cannot get private insurance because of pre-existing conditions. Over half of the people set to lose tax credit eligibility altogether are within this end range, many with incomes just above the eligibility cut off the standard tax credit.
▶ 0:20:09Sen. Gillibrand: By january they could pay tens of thousands more in premium costs, a lot of money out of your pocket when you are trying to save for retirement. And it really every state -- in nearly every state there is in a training and older adults can pay as much as three times as younger adults to. Losing tax eligibility will compound those higher costs.
▶ 0:20:33Sen. Gillibrand: These old enrollees also have a greater health care need even if premium costs increase dramatically, more likely to keep there banking coverage and forth to make difficult coverage between basic necessities, whether it is food or rent. Older adults who ultimately lose their coverage may avoid seeking care until their needs become an emergency and will then enter the medicare program at 65 in poorer health and require more cost intensive care.
▶ 0:21:03Sen. Gillibrand: I've heard from a lot of constituents across the state about the positive impact of these enhanced premium tax credits on their ability to live and potentially have to make those devastating choices that will make it very difficult to survive. One constituent asks, do I pay for my health care coverage and be healthy, or pay for the food for my family. This is what it comes down to, I'm always going to choose my family.
▶ 0:21:30Sen. Gillibrand: Now if I go to a doctor for my debilitating migraines or diabetes or emergency care, I will have to pay more out of pocket. Another constituent shared, "I depend on my health insurance for daily medication, appointments, and procedures. I'm a new yorker that has worked full-time since I was 19 and still can't get ahead in life. I can't afford to see the doctor without insurance. My employer plan is unaffordable.
▶ 0:21:58Sen. Gillibrand: What am I supposed to do?" these tax credits have been a key driver of the record 24.3 million americans who have signed up for coverage in the marketplace. They play a vital role in bringing down costs and accessing high-quality care. Cost of care is still incredibly high. This is not the entire solution. It will address an urgent affordability crisis that is happening right here, right now.
▶ 0:22:23Sen. Gillibrand: For example, people in idaho who have already started setting up for coverage, in less than 10 days people will across all the other states, too. If congress doesn't act to extend these credits before enrollment begins, americans will experience sicker shock at the rate hikes and may decide to drop coverage with only a very slim possibility of them ever being able to come back.
▶ 0:22:48Sen. Gillibrand: I stand ready to work with my college this to reach a bipartisan deal and extend critical tax credits that will allow consumers to shop for health care plans and cover the cost of medical services and drugs and what they need to get further health care. I look forward to the discussion about how to lower costs. You know you all have really great ideas that I want to hear about. And I'm excited that this committee is working on how to lower costs. Thank you.
▶ 0:23:15Chair Scott: Thank you. I would like to welcome our witnesses, all of whom are at the forefront of challenging the status quo in the health care system but I would like to recognize mark cuban, our second shark this year. Mr. cuban is the cofounder of cost-plus drugs company, and innovative online pharmacy that is changing how americans purchase medications.
▶ 0:23:36Chair Scott: He lists the medication's actual costs and a 15% transparency markup and ultimately to consumers. For millions of americans are struggling with high prescription costs, this model has shown that transparency and competition can deliver real savings. Thank you for being here. You may begin your testimony.
▶ 0:24:01Mr. Cuban: Here we go. My "shark tank" companies hate selling on amazon, but most don't have a choice. 162 million americans shop there, and if you want to reach them, you have to play by amazon's rules. Amazon knows this and takes full advantage, adding and raising fees, even launching competitive knockoffs.
▶ 0:24:24Mr. Cuban: They get away with it because they control the marketplace and because 160 29 people shop there, which makes amazon -- 162 million people shop there, which makes amazon wealthy. Over 300 million americans have some kind of coverage, commercial, aca, medicare, or medicaid. Everyone of those plans hires a benefit manager, or pbm.
▶ 0:24:51Mr. Cuban: The biggest pbm's, all owned by the largest insurance companies, control pharmacy benefits for about 270 million americans. That's a lot of power. It's also 70% more people than amazon reaches. Like amazon, pbm's control store shelves, but there shelves are called formulas.
▶ 0:25:14Mr. Cuban: The list of drugs insurance will cover and if a drug isn't on the formula, it is invisible to doctors and patients. But here's the kicker --unlike amazon, which once lower prices, pbm's prefer higher prices. They say they want to lower drug costs, but they don't. The auction to the highest bidders. Drug companies pay the rebates and fees the pbm's demands of the drugs can be covered and prescribed.
▶ 0:25:44Mr. Cuban: If they don't pay, they lose access to millions of patients and plenty of doctors, costing them billions. These rebates and fees are based on a percentage of the drugs in the wholesale acquisition cost. The higher the list price, the more money pbm's make. Because pbm's are so powerful, that becomes the reference point for the entire drug supply chain. Take a hypothetical $600 brand-name drug.
▶ 0:26:12Mr. Cuban: The pbm strongly suggests the manufacturer set the price at $600, with a 50% rebate and another 10% in fees, leaving the manufacturer with $240 left. Meanwhile, wholesalers by the drug at that same $600 list price. How many industries do you know where the wholesale was paid the full list price? The three major wholesalers all use the same list price and get paid almost identical fees.
▶ 0:26:39Mr. Cuban: There is zero competition, and the fees are also, because they are tied to the list price, they make more money when prices rise. Pharmacies buy from wholesalers at a 5% discount. You would think pbm's to reimburse them more than their cost so they could get the prophet. They don't. When a pharmacy fills a brand prescription for a patient, it is often reimbursed less than what it paid for. If it doesn't fill enough of the money-losing prescriptions, pbm's or wholesalers can penalize them.
▶ 0:27:09Mr. Cuban: It is no wonder independent pharmacies are disappearing. What does the patient pay? If they are uninsured, they paid out $600 list price. If they are insured, after the deductible they still pay the full $600. That is crazy. We were told that pbm's negotiate lower prices for patients, but they are so bad at their jobs they can't even get patients a deal that is better than the retail price.
▶ 0:27:35Mr. Cuban: The rebates and fees that they collect on that $600 flow straight from the patient's pocket to theirs. Patients are getting ripped off because pbm's and wholesalers insist on using inflated list prices instead of transparent net prices. Because the whole system is built around list prices, everyone, pbm's, wholesalers, and insurers, have an incentive to keep prices rising, and they almost always do. It is causing patients tens of billions of dollars in forcing many to go without medications they need.
▶ 0:28:04Mr. Cuban: But here's the saddest part, self-insured employers, states, and federal government that all keep on sending contracts for this broken system. We blame pbm's, but the real problem is the ceos and administrators and state officials who keep renewing these contracts. Everyone of them complains about rising health care costs while signing deals that may prices go up. Big brand pharma is part of the problem, too. They hate pbm's but still play along.
▶ 0:28:34Mr. Cuban: Manufacturers, wholesalers, and pears moved in at pricing, we need to price after all rebates and fees, patients' out-of-pocket costs could drop by have overnight, saving patients billions every year. There's a reason the U.S. has the highest drug prices in the world. We are the only country that uses pbm's. There is a reason we have some of the lowest question of the lowest que price generics. What do we do? One, count all caps payments towards deductibles.
▶ 0:29:03Mr. Cuban: Two, pays patient out-of-pocket costs on a net price, not list price. Three, simulate formularies from pbm student end their power-- pbm's to end their power. Four, specialty tears. We will put patients, not pbm's, back at the center of health care. Thank you.
▶ 0:29:24Chair Scott: Next I would like to introduce Dr. t smith--Dr. keith smith, cofounder of the surgery center of oklahoma and free market medical association. Dr. smith is a nationally mechanized leader in health care and transparency and free market reform. He established the surgery center of oklahoma, one of the first facilities in the nation to post all-inclusive, upfront prices for every single surgical procedure covering the surgeon, facility, and anesthesia in one transparent bundle.
▶ 0:29:56Chair Scott: The standard consistently delivers care at a fraction of the cost of traditional hospital settings while maintaining exceptional outcomes and patient satisfaction. In addition to his clinical work, Dr. smith cofounded the free market medical association, which brings together physicians, employers, and patients to promote transparent, market-driven solutions in health care. His leadership has inspired similar models across the country, proving that when providers can't beat on pricing -- can beat on price and quality, patients win.
▶ 0:30:27Chair Scott: Please begin your testimony for .
▶ 0:30:30Dr. Smith: Thank you. The surgery center of oklahoma was founded in may of 1997 the goal was to gain control of the medical and financial treatment of her patients. The problem was that even a minor surgical procedure meant bankruptcy for many patients, including insured patients. Consistent with attempts to maximize revenue, big hospitals denied physicians many times the tools and supplies they thought appropriate to treat patients.
▶ 0:30:57Dr. Smith: And at hospitals continued to --and yet hospitals have guarded ever-increasing profits to this day. We save patients tens of thousands of dollars. Currently the only ones walking to our door are patients paying for their own care. If someone else is paying, they don't care how expensive something is.
▶ 0:31:24Dr. Smith: We exclude entrance from the very start, which meant that we had to be -- we exclude insurance from the very start, which meant that we had to be creative. It was a simple math, what feed did the surgeon think was fair, what was fair for anesthesia, and what was the materials-based charge for the facility. It turned out our prices were less than the patient's in- network and deductible co-pay.
▶ 0:31:48Dr. Smith: Today our total charges are still 1/6 to 1/10 of one large hospital systems near us charge for the same procedure, and even more extreme price discrepancies are routine. In fact, we recently performed a tonsillectomy on a child for $ 38,075 after the family had been quoted $72,000 by a dallas area hospital.
▶ 0:32:15Dr. Smith: Our prices remain half of what medicare pays hospitals and less than medicare payments to hospitals for the same procedure. The surgery center of oklahoma quoted prices on the phone to two patients until 2009, which is when I launched the first website displaying all-inclusive surgical prices. I had three goals in mind, all of which I would argue have been achieved. First, I wanted sticker shocked patients to easily find us.
▶ 0:32:46Dr. Smith: Second, I wanted to start a price war so patients far from oklahoma could use our pricing as leverage. Third, I wanted to better understand why the same market discipline industries must endure is seemingly not a thing in health care. The first patients to arrive after we posted our prices were canadians. These patients our these patients o are forced to wait in lines longer than the misery they can endure to get cap c care.
▶ 0:33:16Dr. Smith: That was members of cost-sharing miseries. Approximately half are patients travel from out-of-state and out of the country looking for care. The news of the success of our model has grown. So has the number of facilities, and I'm happy to report hospitals have copied us. Price matching in the industry has had a deflationary effect even on the price gouging facilities, because they stand to lose business and patients if they don't compete.
▶ 0:33:44Dr. Smith: Our model also increases the quality of care because physicians with unpredictable outcomes shy away from this tightly disciplined space. The good surgeons would rather perform surgery at my facility due to better conditions and higher pay they actually received. While building the surgery center and changing the market, my mission has now grown.
▶ 0:34:05Dr. Smith: I now also run a company which facilitates payment bundles for the surgery center of oklahoma and is now curating and implementing surgical bundles for many other facilities now attempting to accommodate price-sensitive buyers. I'm also a cofounder of the free market medical association, a mission-driven organization that looks to bring buyers and sellers together in the united states, promotes market discipline in the industry, and now has 37 state chapters.
▶ 0:34:35Dr. Smith: To the industry bigshots, or as I call them, the cartel, the health care system in this country isn't broken. It is working exactly as it was designed, meant to enrich the corporate elite and intermediaries at the expense of patients and the american people at large. Fortunately, the alternative approach I've described is becoming more widespread.
▶ 0:34:58Dr. Smith: As insurance deductibles bloom and delays n and delays and denials become more commonplace, affordable, high-quality care is available for victims of the system. I predict that shoppable medical services will become particularly critical for older americans as an increasing number of physicians opt out of or summarily curtail their exposure to medicare. Thank you.
▶ 0:35:21Chair Scott: Thank you, Dr. smith. I would like to introduce Dr. don mould, the chief health director for the california public employment retirement system.
▶ 0:35:40Chair Scott: Under his leadership, calpers pioneered the use of reference-based pricing, where they set clear benchmarks for elective procedures like joint replacements, allowing patients to shop for care. Dr. mould brings valuable insight into how large producers can use data and competition to work the way every other market does to the benefit of the consumer for thank you for being here. Please begin your testimony.
▶ 0:36:10Mr. Mould: Chairman scott, ranking member gillibrand, members of the committee, thank you for inviting me to testify on behalf of the california public employees retirement system. My name is don mould, and I serve as chief director. Calpers is the largest commercial health benefits producer in california and the second largest in the nation.
▶ 0:36:36Mr. Mould: We contract with the numerous large health insurance companies to provide a variety of health care offerings. In 2024 we spent $12.5 billion to purchase benefits for active and retired members and families. Calpers employees range of innovative cost strategies.
▶ 0:36:59Mr. Mould: Among these is representative pricing from which is an effective tool for 2011 calpersa reference replacements. Throughs program, 46 california hospitals that meant quality standards agreed to fix price of $30,000 for these surgeries.
▶ 0:37:23Mr. Mould: Embers who chose -- members who chose reference price facilities paid standard coinsurance, while those who opted for nonparticipating facilities or responsible for any costs about the reference price in addition to the standard coinsurance.
▶ 0:37:37Mr. Mould: Within two years, the program increased the proportion of members that used the preferred facilities from about 50% to 64%, but what was particularly noteworthy was that the non-reference price facilities produced their charges to meet the calpers reference price. As a result, price variation decreased dramatically.
▶ 0:38:01Mr. Mould: The average price dropped from $35,000 to $25,000 while the non-reference price facilities docket their from $43,000 to $27,000. We anticipated savings from the consumer choice effect. The most significant impact with the donor pressure overall. The program remains in place today and analysis bills sustain savings of $4 million annually through 2020.
▶ 0:38:31Mr. Mould: In 2012 calpers introduced a second reference pricing program for colonoscopy, cataract, and arthroscopic services, establishing a set reference price for procedures performed in hospital outpatient settings to incent members to choose end of the toy centers--and dilatory centers.-ambulatory centers.
▶ 0:38:52Mr. Mould: -as with hip replacements, it resulted in $59 of savings per year, and average reduction of -- $5 million of savings per use, an average reduction of 21%. The reference pricing program to 12 additional procedures in 2018. Last year calpers and lamented a member incentive for cash implemented a member incentive program to encourage members to use independent labs instead of much more costly hospital-owner labs.
▶ 0:39:22Mr. Mould: Early data suggests that preferred levees increased by a modest 4% and save members $2.4 million in the first year. This program is different from earlier reference pricing programs and that eliminates cost-sharing for members using the low-cost land but does not increase their cost -- low cost labs but does not increase cost-sharing for higher cost labs. It shows promise but it has its limits.
▶ 0:39:48Mr. Mould: For smaller producers without the data resources of calpers access to transparent pricing information is critical. Moreover, research suggests that if implemented as broadly as possible, reference pricing only saves about 5% of the total cost of care. Overall savings are limited by the small number of procedures where reference pricing makes sense. While reference pricing is well-suited for elective procedures with significant price differences, many health-care services are far less shoppable.
▶ 0:40:16Mr. Mould: This is one of the reasons why calpers adopts a broad-based approach for reducing costs. For example, we have included cost guarantees in our newest contracts with our third-party administrators and our pharmacy benefits manager in order to achieve critical financial alignment. Addressing high-cost markets is also a priority.
▶ 0:40:37Mr. Mould: Calpers pays prices that are about one third higher in northern california than it does in southern california, largely because of a comparative lack of provider competition in the north. Thank you again for inviting me to participate in today's hearing. Calpers is part of the savings we have achieved through a reference pricing programs-- proud of the savings we have achieved throughout reference pricing programs, one part of the broad-based approach to reign in health care costs. I welcome your questions.
▶ 0:41:05Chair Scott: Thanks for being here. I would like to turn it over to ranking member joe manchin introducer witness. --ranking member gillibrand to introduce her witness.
▶ 0:41:15Sen. Gillibrand: I would like to introduce our final what is, jeanne lambrew, the director of health care reform and senior fellow at the century foundation, previously having served in president obama's administration as director of the office of health reform the U.S. department of health and human services, where she worked to ensure passage of the affordable care act. Dr. lambrew served as president obama's deputy assistant for health policy where she helped to guide the limitation of the affordable care act. Most recently Dr.
▶ 0:41:41Sen. Gillibrand: Lambrew served as the commissioner of the department of health and human services in maine the appointment of governor janet mills. Thank you for being here, and you may begin your testimony.
▶ 0:41:54Dr. Lambrew: Chairman scott, ranking member gillibrand, members of the committee, thank you for the opportunity to testify for some as you have heard from other witnesses, competition, streamlining, and shopping can optimize value. However, the nature of illness and injury and the cost means most people cannot finance health care on their own. This is why every industrialized nation has some sort of health insurance system.
▶ 0:42:19Dr. Lambrew: As such, I will discuss shopping and transparency for health plans rather than health services with a focus on older americans purchasing coverage on their own. The affordable care act created a shopping platform called health insurance marketplaces. Marketplaces offer health plans that have different levels of coverage. Shoppers can see if there doctors and drugs are covered, and some marketplaces are active purchasers, requiring insurers to use the strategies discussed here today.
▶ 0:42:51Dr. Lambrew: This shopping experience is enhanced by premium tax credits. These credits are competitively set based on the benchmark plan. Currently eligible employees pay no more than 8.5% of income for the benchmark plan, with lower-income people playing lower --paying lower percentages. With your tax credit you can shop for any plan in the marketplaces.
▶ 0:43:14Dr. Lambrew: While improvements can and should be made, the marketplaces mode. Remembrance average 2% in the past 5 -- enrollment has doubled since 2020 to 24 million people. About half of these people are self-employed or small business workers, and many are rural residents or veterans. Market place coverage is especially important for older americans.
▶ 0:43:43Dr. Lambrew: Nearly one in four marketplace enrollees is aged 55 to 64. Nearly one in 10 older americans relies on coverage purchased on the round. In the uninsured route among people ages 50 to 64 has dropped by 50% due to marketplace changes and aca reforms. This is about to change. The budget reconciliation law and recent rules will reduce marketplace coverage. Moreover, the enhanced premium tax credits currently in place will end in december.
▶ 0:44:14Dr. Lambrew: As a result, the average marketplace enrollee will pay more than twice as much out of pocket for premiums starting in january. There is no historical precedent for such a large one-year increase for so many americans. The cost increase will be even higher for people with incomes above 400% of the federal poverty level if the cut off of premium tax credit is reinstated.
▶ 0:44:38Dr. Lambrew: Over half the people using tax credit eligibility will --losing tax credit eligibility will be people ages 50 to 64. A 60-year-old couple with income $85,000 will face an average increase of $22,000. This represents 27% of their household income. And the income varies by location. The same couple will pay $20,000 more in savannah, georgia, and $31,000 more.
▶ 0:45:09Dr. Lambrew: If this couple. The extra amount until they become medicare-eligible, it will consume over 60% of the typical retirement savings. Others will simply be unable to afford these premiums. They will become uninsured. Older people losing coverage are at greater risk of unmet needs, worse health, and premature death. The impact will extend to other americans as well. Medicare costs are likely to rise to pay for the unmet needs of previously uninsured enrollees.
▶ 0:45:38Dr. Lambrew: The individual market stability and affordability will be reduced, according to all insurance commissioners across the country. In the words of the american hospital association, there will be an impact on the entire community, even those with coverage, because of an influx of uninsured patients into emergency departments, causing longer waits, stressing the whole health care system and the inability to get the care they need.
▶ 0:46:03Dr. Lambrew: In conclusion, americans want clear choices and affordable options for health coverage as well as health care. Extending tax breaks for private health insurance can help achieve that goal. Thank you for the opportunity to present this testimony.
▶ 0:46:19Chair Scott: Thank you. We will go to questions. We will start with senator tuberville.
▶ 0:46:24Sen. Ever Felt: --
▶ 0:46:26Sen. Tuberville: Thank you all for being here today and talking about a topic that is important to all americans, and out-of-control health care system, which it is for the Mr. cuban, bypassing traditional pms can deliver real savings at counters. President trump has announced trump rx, a new website to connect patients with the best prices.
▶ 0:46:52Sen. Tuberville: How might trump rx and direct-to-patient programs improve affordability for patients?
▶ 0:46:59Mr. Cuban: We will work with trump rx. It's incredible, stupendous, the most incredible program ever. We are excited to offer than our api so they will be able to download our daily prices so when they go down kemeny -- everybody benefits. As I mentioned in my comments, our branded drugs are more expensive because ppm's are involved.
▶ 0:47:25Mr. Cuban: With trump rx, that allows manufacturers to work around the ppm's and work directly to patients. I think it will save seniors committee will save everybody a lot of money.
▶ 0:47:36Sen. Tuberville: Do you think this is the future?
▶ 0:47:39Mr. Cuban: I don't think it's off the ultimate problem of how the system is designed but it is something we obviously agree on because that is what cost plus drugs is full so republic prices every day.
▶ 0:47:51Sen. Tuberville: Your company publishes prices with full cost breakdowns. How does the transparency safe patients -- save patients money?
▶ 0:48:02Mr. Cuban: Every patient can look at the price for the medication, so there is no uncertainty. That builds trust. I was telling people in our company that what we really sell his trust. That is what has allowed us to grow quickly.
▶ 0:48:19Sen. Tuberville: If you sold present begin somebody else went through ppm's, how much cost with a safe --with a safe?
▶ 0:48:28Mr. Cuban: If you look at what is happening with sponsors, they are being charged $1300. If you look at the direct to consumer programs being put out there by novo and lilly, it is probably falling. There is already a significant difference, and the crazy part is that difference of $800 typically goes right into the pocket of the ppm, who then decides how much they will give to the employer. It is a huge amount as of right now.
▶ 0:48:58Sen. Tuberville: Thank you. Dr. smith, the surgery center of all, has proved that real price transparency can lower costs and improve access, something we often hear discussed in the context of ppm's and prescription drugs. What inspired you to create this transparent surgical model, and what parts of the traditional health care system, much like pbm's and the drug space, where you trying to get around?
▶ 0:49:24Dr. Smith: Well, we started the surgery center of oklahoma because practicing in a big hospital as an anesthesiologist, I served as an accessory to the financial crime. Surgeons were also being denied the tools many of them required to appropriately treat patients, and due to the cost cutting measures, hospitals trying to maximize revenues. I didn't grow up in a home like that.
▶ 0:49:52Dr. Smith: I grew up, there was a golden rule, mutually beneficial exchange. As a hospital-based physician, the only way I could escape that is to only control my own facility, and where I was responsible to the patients not just for medical treatment, but also financially the way we dealt with them. The patient asks, what can you do about this bill. My answer was everything, including not charge them.
▶ 0:50:20Dr. Smith: We are in a good position to be charitable on an individual basis, and that is really the answer. We started it because we wanted to be in control of the medical and the financial journey the patient had in their health care experience.
▶ 0:50:33Sen. Tuberville: Some patients -- some people argue that patients won't shop for care, or that it is too complicated to understand. Do you think that is true? And what savings have you seen for patients when prices are available?
▶ 0:50:48Dr. Smith: Well, patients will not only shop for care, but they will vote with their feet. Half the patients we see at surgery center of oklahoma do not live in oklahoma. We see patients from europe, africa, all over the united states for safe funded employers see such an insane difference between our hospital and where they are doing business.
▶ 0:51:12Dr. Smith: They waive all out-of-pocket for those employees to fly and have the procedure, and not just as, for who copied us. People will shop and the travel, and furthermore they hold our price up in front of the local hospital and tell them to match this or I'm going to oklahoma city. We had a patient from georgia who was going to be charged $40,000 for a neurologic procedure, and our line price was $4000.
▶ 0:51:41Dr. Smith: The hospital matched our price because that would have been the second patient that month that came to oklahoma city, and they didn't want to see that. The patient reached out to me later and said "you saved me $36,000 and you didn't even perform the surgery." so there is a market that is developing, it is a competitive market, it is driving prices down. It has driven prices down in oklahoma city. Quality goes up at the same time.
▶ 0:52:09Sen. Tuberville: Thank you for what you're doing. Thank you, Mr. chairman.
▶ 0:52:15Chair Scott: Senator tuberville. Ranking number gillibrand.
▶ 0:52:19Sen. Gillibrand: Thank you very much. Ms. lambrew, why do so many adults between the ages of 50 and 64 rely on the enhanced premium tax credits? How do you anticipate adults between the ages of 50 and 64 will be impacted if these credits are not renewed? How will they be able to save for retirement and what will the impacts be?
▶ 0:52:42Dr. Lambrew: We know that as people approach ages 65, they retire early, summer force to retire -- some are forced to retire early. Working a physical job, they cannot make it to age 65 when they can enroll in medicare. Which is why we see 23% of our enrollees in that age group, vs. 15% of the rest of the population. It definitely is a more important source of coverage for that group. It is important for rural areas.
▶ 0:53:13Dr. Lambrew: Farmers typically don't get employer-based insurance, they are protected by coverage of their own. These demographics make it more important for them. And the numbers are pretty stark, that the cost of health insurance across the board is high, too high. We should look at all available options, employer coverage, medicare, medicaid, and marketplace coverage.
▶ 0:53:35Dr. Lambrew: But for these people right out to be facing these kinds of numbers, averaging over $20,000 for a couple and 60, that is impossible for a lot of these families to deal with. Choices are if you are chronically ill, do I pay that amount to maintain my coverage , or do I become uninsured, and what does that mean? I wish these programs we're talking about today would be a solution for those people. I have no doubt that these will help.
▶ 0:54:03Dr. Lambrew: But I think there is more that will be needed for people who are older, chronically ill, who are about to face these large out-of-pocket premium increases.
▶ 0:54:12Sen. Gillibrand: Thank you, doctor. Mr. cuban, can you speak to this conversation about unaffordable deductibles? Can you talk a little bit about what this will result in, whether it is increased hospital visits, emergency room visits? What does this vicious cycle of unaffordable health care costs lead to, and how does it stress the health care system?
▶ 0:54:37Mr. Cuban: No matter what your premiums are and you pay them, if you cannot afford your deductible, you don't have insurance. What ends up happening is you go to the emergency room, you do nothing at all, or you are at the mercy of the provider hoping they can provide some sort of financing for you. Either way, it creates very difficult situations for seniors, for entrepreneurs, for anybody in that situation.
▶ 0:55:04Mr. Cuban: As I alluded to in my comments, we don't do anything to help people who are unable to afford their deductibles. In fact, we make it more difficult. Dr. smith alluded to the fact that the cost of surgery can be extremely high, and if you can't afford your deductible, you can't get it.
▶ 0:55:22Mr. Cuban: In the case of pharmacy benefits, if you have a drug where the list price is $600 and you have a $4500 deductible under naca silver plan, you are going seven-month having to pay full list price, and if you can afford to do that, you are out of luck-- can't afford to do that, you are out of luck.
▶ 0:55:40Sen. Gillibrand: Right. Dr. smith, you mentioned how increasing the number of physicians are opting out or severely limiting exposure to medicare patients. Why are physicians increasingly cutting medicare, and how are these patient --dropping medicare, and how are these patients going to get the care they need? What factors are driving up the care for older adults and what can be done at the federal level to provide greater stability for these practices to treat older adults?
▶ 0:56:10Dr. Smith: Medicare is a burdensome quagmire. It is heavily regulated. I probably get 10 emails a day asking me to pay somebody to attend a course to figure out how to navigate this new regulation that has come out. It's very burdensome. Also, the payments to individual physicians, independents, have not really kept up.
▶ 0:56:40Dr. Smith: And frankly, they've been wrong. Top-down pricing seems to always be wrong. It is either too high or too low. That's what happened when he got into place in 1992. True pricing comes from market activity, and that is absent in the medicare program.
▶ 0:57:01Sen. Gillibrand: That's right.
▶ 0:57:02Dr. Smith: When an anesthesiologist like me is paid $70 for the anesthesia required for a surgeon to do the knee replacement, that's a message, message sent, message received. The last open heart surgery for which I received an aesthetic, medicare paid $200. I know it wasn't personal, prices are just signals. That wasn't personal.
▶ 0:57:30Dr. Smith: That was an idea of what micon was worth. And I walked away -- my time was worth. And I walked away and I have not accepted a medicare payment since. It's payments and regulatory burden, and frankly, risk.
▶ 0:57:45Sen. Gillibrand: Yep, thank you.
▶ 0:57:47Chair Scott: Senator johnson.
▶ 0:57:50Sen. Johnson: Excellent hearing. It is notable when you have a hearing on how to improve outcomes and lower costs, most republican show up and we have one, the ranking member on the democratic side for the pretty interesting. -- ranking member on the democratic side. Pretty interesting. To fix the problem, you have to figure out the problem.
▶ 0:58:14Sen. Johnson: I don't want to go too much on the past, but there was talk of extending the enhanced temporary subsidies put in place to help people through the pandemic. Talked a little bit about obamacare, and Ms. lambrew, you were in the administration leading up to the illumination of it, correct? You are there when president obama will sing obamacare would lower the average premium for a family for $2500 family, correct?
▶ 0:58:40Dr. Lambrew: I was there when we extended the growth of health care, yes. Sen. tuberville president obama
▶ 0:58:49Sen. Johnson: President obama made that claim.
▶ 0:58:51Dr. Lambrew: Overtime.
▶ 0:58:54Sen. Johnson: That is not pan out.
▶ 0:58:57Dr. Lambrew: It has.
▶ 0:58:59Sen. Johnson: I've seen -- it's very difficult because there is a whole range of premiums, but benchmark premiums of 118%. That is three times the rate of inflation. So no, that did not occur. Premiums have skyrocketed because of the faulty design of obamacare. President obama said you could keep your doctor, you can keep your health care plan. That was politifact's lie of the year, correct?
▶ 0:59:28Dr. Lambrew: There is no lower base of people with employer-base coverage --
▶ 0:59:33Sen. Johnson: For example, obamacare outlawed high-risk pools, which worked beautifully and states, worked beautifully in wisconsin. We use them all the time. That was politifact's 2013 light of the year. Let's click and in roman history. Obamacare impacted -- let's look at employment history. Obamacare impacted medicaid expansion.
▶ 1:00:00Sen. Johnson: Another thing that obamacare -- fix all of these -- marketplace for individuals. About 12 men people prior to obamacare taking 12 million people prior to obamacare taking advantage of individual markets. Completely got rid of that. Before the pandemic there were 14 million people on the obamacare exchanges. 2 million more people on these individual policies. Then all of a sudden with the enhanced premiums, all of a sudden up to 24 million people.
▶ 1:00:30Sen. Johnson: Now, are you aware of the problem you're having with the no premium policies, phantom policies, or you have unscrupulous agents and brokers signing people up without their knowledge, they get a commission, the premium task goes directly to the insurance companies -- we have seen estimates of $20 billion to $30 billion per year of premiums going to entrance comedies on phantom policies, people make no claims on them.
▶ 1:00:59Dr. Lambrew: I am aware that there are agents and brokers falsely sending people last your action was taken -- last year action was taken. This year hr 1 included policies to address that, but the reality is that those people are the victims and we are trying to make sure that we keep --
▶ 1:01:18Sen. Johnson: Again, my point being we went from 12 million to 14 million. It's not 24 million real people -- again, you are saying this is going to be huge problem. Is it true that the original design of obamacare, there are no subsidies for people making more than 400% of poverty level, correct?
▶ 1:01:41Dr. Lambrew: There are currently --
▶ 1:01:43Sen. Johnson: Just answer the -- the original design of obamacare, nobody making 400% over the poverty line got a subsidy?
▶ 1:01:51Dr. Lambrew: People on medicaid get a subsidy. People before the affordable care act --
▶ 1:01:57Sen. Johnson: So the enhanced subsidies -- enhanced subsidies started providing subsidies for people above 400% poverty. May 6, this is talking about people, higher out-of-pockets, who didn't qualify for subsidies in the original obamacare. The subsidies aren't going away when the enhanced premiums go away.
▶ 1:02:25Sen. Johnson: Obama -- the original design of obamacare stays in place, correct?? Correct?
▶ 1:02:32Dr. Lambrew: We know that people have been significant helped by the improvements --
▶ 1:02:37Sen. Johnson: That was --
▶ 1:02:39Dr. Lambrew: So were many pandemic policies --
▶ 1:02:42Sen. Johnson: Those were temporary enhanced subsidies, and the democrats in their law, they scheduled them to expire this year, right? Republicans had no part of that at all. That was designed by democrats to expire.
▶ 1:02:58Dr. Lambrew: Policies that ended got extended without being paid for.
▶ 1:03:02Sen. Johnson: You are claiming people that never qualified for the subsidy under the original obamacare and now you are saying, because you are quoting people, hospitals, the enhanced subsidies expire, as they are meant to do by democrats, it's going to be a calamity for the hospital industry. All that is happening is we are going back to the original obamacare. What you're saying is going back to the original design of obamacare is going to be a calamity for hospitals?
▶ 1:03:29Dr. Lambrew: Going back to 1965 practices for medicine are also a calamity. We figured out something that worked, it should be extended, people have been helped by it, because have been growing slower than private employer-based coverage. Could be improved? Without a doubt. What I think it is a fact that the uninsured went down and cost growth have not been expensive -- excessive and we have more choices and deductibles have gone down.
▶ 1:03:57Dr. Lambrew: We have seen over the past few years people able to choose deductibles that are on average $400.
▶ 1:04:03Sen. Johnson: My point -- my point -- my point is that these enhanced subsidies expire, all that happens is we go back to the original design of obamacare, which didn't work, didn't lower premiums, people can keep couldn't keep their health care plan, it's been a disaster.
▶ 1:04:30Sen. Johnson: The reason we have these subsidies is to mask the fact that obamacare drove premiums sky high, and what this hearing is about is how we can bring those actual premiums down, deliver better outcomes, and we have got some great examples here. Doctor from oklahoma is doing marvelous things, bringing consumerism and free-market principles back into health care. Republicans were injured and that, democrats aren't--interested in that, democrats aren't.
▶ 1:04:57Chair Scott: Thank you, senator johnson. >> thank you, Mr. chairman. I appreciate you hosting this hearing today. I want to start with health care inflation is a problem for everybody in the american economy. It is the number one driver of inflation in the 21st century. What we have now doesn't work. Hopefully we can constructively have conversations of how we make it work.
▶ 1:05:21Chair Scott: One of the ways that we have driven down some costs are over-the-counter drugs, prescription drugs and over-the-counter drugs. It saves american consumers $170 billion annually, and working with senator hassan, we have a streamlining marketplace access reform for therapeutics, call smart otc act, which will help the fda identified drugs that can be candidates for
▶ 1:05:51Chair Scott: Over-the-counter and help companies move those two over-the-counter more quickly through the fda. I would encourage all of us to look at that as we move forward. As to cuban, thank you -- Mr. cuban, thank you for the example you use with monopoly and amazon. That is in consumer products, which we know is troublesome. Monopolies create higher prices and lower quality in general. But that is in the consumer marketplace.
▶ 1:06:20Chair Scott: Health care, oh, my gosh, people don't have choices at all. They have no choice for most people but where they go consume health care, and I think you make a great point. The health care system seems to be conspiring to create a monopoly, marketplace monopolies, across all aspects of what it does for a service that everybody must have, which
▶ 1:06:53Chair Scott: Makes the pressure of cost and quality even more stark. I do have -- Mr. mould, I want to ask you a question about anticompetitive contracting for health care. Because we know it creates a monopoly environment, it increases costs. I will give you four examples.
▶ 1:07:17Chair Scott: Although nothing causes --although nothing causes, anti-steering causes, most favored nation causes, gag causes, which create anti-transparency. All of those carved up marketplaces, don't allow for competition. I want your thoughts on what eliminating them might do to improve patient benefits, quality, and lower costs.
▶ 1:07:45Dr. Mould: So we've actually been involved in litigation on some of these in california. The all or nothing clauses in particular among the subject of a lawsuit. And in general some of the challenges. But by no means the only challenges.
▶ 1:08:07Dr. Mould: We are seeing in california increasing consolidation not just in that I mentioned that the costs are 35% higher. In the south where we have historically seen pretty good -- comparatively good --
▶ 1:08:22Sen. Husted: You have consolidation in contracts that restrict. The combination, isn't that lethal?
▶ 1:08:29Dr. Mould: Potentially, absolutely, yes. But some of these provisions we don't see as common in contracts in california anymore. But we still have consolidation.
▶ 1:08:40Sen. Husted: Mr. cuban, you understand markets pretty well. You have a reaction to this?
▶ 1:08:47Mr. Cuban: As an example, we wanted to build on calpers, and they told us we could carry certain brands. We just asked, why not just add cost plus drugs to your network? If we are cheaper, buy from us, and if we are not, don't buy from us. We just stand by the fact that we think we will be better for patients because we are less expensive.
▶ 1:09:11Mr. Cuban: We were told -- this isn't just calpers -- any of the big pbm's, when I speak to a ceo, I give them the test. The test is just ask your pbm if you can add cost plus drugs to your network, and only use us if we are less expensive. 100% of the time they have been told no.
▶ 1:09:30Sen. Husted: Mr. mould, you have something you would add to that?
▶ 1:09:35Dr. Mould: I want to start by saying that Mr. cuban's work in this space has been anonymously helpful to us. Having his prices -- enormously helpful to us. Having his prices out there have helped us negotiate contract. We are grateful for that. We did negotiate in the most recent contract that starts in january a provision that allows us to carve out. We continue to look at --
▶ 1:09:59Mr. Cuban: Is that a yes? [laughter]
▶ 1:10:03Dr. Mould: That is always open to the conversation, not a yes.
▶ 1:10:08Sen. Husted: I will close with this. You talk about consolidation. You have these tools used inside the marketplaces where people want to consolidate, they want to limit others competing in, which allows them to basically command whatever price they want. No market would work well like that.
▶ 1:10:32Sen. Husted: But in the health care marketplace where people don't have choices, I can decide if I'm buying water, I might decide to buy something else. But in health care I don't have a choice. I know that is what Mr. smith is trying to create, choices. I'm hopeful that we can eliminate some of these tools that are being used to carve up markets and drive up prices. Thank you, Mr. chairman.
▶ 1:10:54Chair Scott: Thank you. Mr. warnock.
▶ 1:10:58Sen. Warnock: Thank you, chair scott, and ranking member gillibrand for organizing this meeting -- this hearing, I should say. Nine months ago I wondered that seniors in georgia would see a $20,000 annual increase in health care premiums should congressional republicans let enhanced affordable care act tax credits expire.
▶ 1:11:21Sen. Warnock: And here we are, just over a week before the start of open enrollment, and we are in an even worse place then we were nine months ago. Mr. cuban, most americans probably know you as an investor in startups an innovative small businesses. I am a fan of "shark tank."
▶ 1:11:44Mr. Cuban: Thanks.
▶ 1:11:46Sen. Warnock: In that role and as an entrepreneur yourself, is it fair that you know a little bit about how small business owners think about the money?
▶ 1:11:55Mr. Cuban: I would say so, yes.
▶ 1:11:58Sen. Warnock: Would you say among those considerations and expenses, that includes health care expenses?
▶ 1:12:04Mr. Cuban: Yes.
▶ 1:12:08Sen. Warnock: And how those costs factor into sustainability?
▶ 1:12:10Mr. Cuban: Yes, sir.
▶ 1:12:12Sen. Warnock: Let me show you something. This is the cost of the premium for seniors, 2025. This person is 62 years old. Small business owner in georgia, taking just $65,000 in 2025. The other side chose the cheapest option for the same georgian, $228,000.17 a month.
▶ 1:12:44Sen. Warnock: With the expiration of these tax premiums, that is quite a job. -- jump. How with this monthly jump affected that georgian's ability to grow her small business or make ends meet?
▶ 1:12:59Mr. Cuban: It makes her make a lot of hard choices, either to find the money, pay for the premiums, or go without insurance. I think the greatest challenge has been in all of this is that small business owners, americans on the aca, haven't had enough time to plan for it. It is one thing to know that your premiums will go up. It is another thing not to know how much and how soon.
▶ 1:13:23Mr. Cuban: Now in texas people are just now starting to see open enrollment, and more will see it in a couple weeks. As a small business looking to the aca for their employees, it is going to be terrifying for them.
▶ 1:13:34Sen. Warnock: And they forgo insurance. Is it fair to say -- well, that would drive up agreement for everybody.
▶ 1:13:43Mr. Cuban: Of course, because healthy people are most likely not to take up insurance.
▶ 1:13:49Sen. Warnock: And his gut punch for small businesses impacts the overall economy because small businesses are such a big part of the economy.
▶ 1:13:56Mr. Cuban: Well, of course, 33 million companies in this country, many are sole entrepreneurs. If you're taking $800 give or take a month out of their pocketbooks, they can't invest in inventory, etc., etc. It makes it much more difficult to run your company.
▶ 1:14:14Sen. Warnock: I would imagine that come november 1, more of my colleagues on the other set of the aisle will start hearing from folks in their own states who won't be able to afford health care next year. In fact, millions of people across the country are starting to log on today to see their plan premiums for next year double. That is not the exception, that is quite prevalent.
▶ 1:14:39Sen. Warnock: C1 triple, quadruple, all because my friends on the other side of the aisle refused to fund the government and health care. Dr. lambrew, why are older americans especially harmed? Older americans especially harmed by the expiring premium tax credits?
▶ 1:14:57Dr. Lambrew: In addition to there being more of them in the marketplace than in the general population, we also know older people have greater health care needs. We look at the average health care cost for a 55 to 64-year-old, it is three times the average health care cost for an 18-year-old. Their needs are greater. That also means if and when these price increases hit them, it will probably force those harder choices.
▶ 1:15:29Dr. Lambrew: Do I follow the advice of my Dr., do I take a medication as needed or skip pills, or forgo them? Do I choose between my retirement savings, my groceries? There was a woman from georgia who said, this amount may not seem much to the government or insurance companies, but for me, it would most likely mean sacrificing essentials, groceries, gas, basic necessities that I rely on.
▶ 1:15:56Sen. Warnock: You think it is a good idea for congress to wait until december 31?
▶ 1:16:00Dr. Lambrew: I do not. People are shopping in idaho already, they are looking in 12 or 13 states at the actual prices they will pay. And a week from saturday, they will go in. We know from last year's experience, 3 million people came in in the first two weeks. If they come in and their prices are going to be much higher than they expect, they may never come back.
▶ 1:16:23Sen. Warnock: This is a crisis and needs to be addressed right now. I would urge my colleagues to join us in funding the government, and extending these health care premiums for the health care of millions of americans.
▶ 1:16:34Chair Scott: Thank you, senator moody.
▶ 1:16:37Sen. Moody: Appreciate you calling this hearing. I am one of the newest U.S. senators and it pains me to say about every hearing I'm in, we hear more and more ways government can throw money at a problem to fix it. It's so great we are having a hearing on outside of government throwing more money at a problem, ways that we might actually bring down prices.
▶ 1:17:05Sen. Moody: I appreciate all of you being here today, taking time to be here. Many of you have experiences in this area and have great suggestions and experiences on this topic. I think the next step is our chairman might hold a shark tank for health care ideas on how to bring -- just be ready, that is the next invitation I'm sure. Most every other industry, we expect a fair and free market.
▶ 1:17:32Sen. Moody: And it is always expected you would know the prices as consumers when you are shopping. It seems to be the only area where we don't have transparent pricing, especially -- we especially need to focus on it when chapel services represent 40% of U.S. health care spending.
▶ 1:17:53Sen. Moody: If the data is right and we spend $14,570 per person, per year, on health care, that is more per capita than any other country on earth. That just is insane to me. Thankfully, we have leadership that is digging in and trying to figure out how we can come up with new ideas to tackle prices.
▶ 1:18:17Sen. Moody: What was shocking to me, and when I look over the course of my own medical history, it is so clear, and it has been there all along. You never find out how much things cost until much later when bills start showing up. Only 17% of americans know how much their health care products or services cost before they receive them. That is insane. No wonder no one is shopping. It's a captive market of consumers.
▶ 1:18:48Sen. Moody: I was so appreciated hearing your testimony, Mr. smith, about the surgery center of oklahoma and how you challenged other facilities to offer competitive pricing. The one example you gave was one family was put at 72,000 for a procedure and they found their way to you, they only paid $3875. Since you opened your facility, how many other facilities started like yours?
▶ 1:19:19Sen. Moody: Either in your state or nationally that you know of?
▶ 1:19:21Mr. Smith: If you include all of those on the continuing who are either posting prices or agreeing to enter into single case agreements for a single case for a price to those who will quote a price over the phone but will not write it down, it is in the hundreds. It is not any thousands.
▶ 1:19:49Mr. Smith: It is such a dynamic situation, because every time a big hospital or surgery center that is not inclined to reveal prices is faced with losing a patient to me, to indianapolis, to texas free market in austin, and anyone that is a member of the food market medical association, they have to step up and match those prices or they lose those patients.
▶ 1:20:19Mr. Smith: It is about half the people in the country that have sticker shock, either directly or indirectly through their proxy buyer and self-funded employer.
▶ 1:20:29Sen. Moody: When you started, where there any federal regulatory or statutory hurdles to you starting this clinic up? Have you faced -- have you been faced with those since he started? Is there anything we can do to make it easier for places like yours to start?
▶ 1:20:45Mr. Smith: The two hurdles that I think this movement faces are, one is the overpayment that is sent to hospital owned doctors and facilities by medicare. Because they use that extra money to consolidate the industry, and to run independent physicians and facilities out of business. That site neutrality is what I think people are doing.
▶ 1:21:16Mr. Smith: I don't advocate paying the independence more. I advocate paying the hospitals less.
▶ 1:21:20Sen. Moody: How quickly after you started did you start seeing the market adjust? After you started your first surgery center, how quickly did you see the market adjust, trying to be competitive? Or did you not see that?
▶ 1:21:34Mr. Smith: We did not see that until I posted the prices online in 2009. We opened in 1987, the response of the industry was to try to crush us through the straight legislator. In 2009, when we posted the prices, that is when we began to see price matching not just in oklahoma, but all over the country. Because patients will travel to have surgery be performed.
▶ 1:22:03Sen. Moody: Thank you, chairman.
▶ 1:22:05Chair Scott: Thank you. Senator warren.
▶ 1:22:09Sen. Moran: . Thank you for holding this hearing. Military families keep us safe and dod's tricare program is supposed to keep those military families healthy. Since 2009, tricare pharmacy benefit has been administered by express scripts, the nation's largest pharmacy benefit manager or pbm. Express scripts decides which pharmacies are in network or out.
▶ 1:22:39Sen. Moran: So when one of those 9 million military families needs to pick up a prescription, express scripts decides where they can go to have it filled, and then they pay the pharmacy. Express scripts is owned by the multibillion-dollar health insurance company, cigna. Cigna also owns a mail order pharmacy called a credo that participates in tricare.
▶ 1:23:05Sen. Moran: In other words, cigna owns the company that pays the pharmacies, and also owns the pharmacy chain that is getting paid. The result? Express scripts can under reimburse the other pharmacies, and get inflated payments to its corporate cousin. Express scripts has been caught doing exactly that kind of self-dealing and other government programs.
▶ 1:23:33Sen. Moran: But right now, the department of defense refuses to check how much it is costing taxpayers in tricare. Mr. cuban, you understand this business. Let me ask you, would requiring express scripts to disclose the difference between what it pays its affiliated pharmacies, and the unaffiliated pharmacies help save taxpayers money, or cost taxpayers money?
▶ 1:24:01Mr. Cuban: It would save a lot of money and keep smaller pharmacies in business.
▶ 1:24:06Sen. Warren: Ok. That makes sense to me. It seems common sense. More transparency would save taxpayer money. . The congressional budget office disagrees with you and me on this. According to cbo, price transparency would cost taxpayer's money because other pharmacies would allegedly ban together to demand higher reimbursements. That is their argument. Mr.
▶ 1:24:36Sen. Warren: Cuban, you talk with pharmacists a lot. Do you think that independent pharmacists don't know that a credo right now is getting a sweetheart deal, and that the independents are just waiting for information to be told so they can demand more money?
▶ 1:24:54Mr. Cuban: I can't speak for all the independents but I can speak for cost plus drugs.com. I went to tricare and I have done this in the past many times, and looked up the price of common low-cost drugs. I looked up one drug and our price is lower, whether it is 30 or 90 pills, then the tricare prices. For anybody who is in network but off-base. If they are out-of-network, we are dramatically lower.
▶ 1:25:24Mr. Cuban: We don't need to band together to know we can be cheaper. All we have to do is look at some of the prices and it is obvious we are cheaper.
▶ 1:25:31Sen. Warren: So this information is actually already out there.
▶ 1:25:34Mr. Cuban: Yeah, just -- and I'm just talking about the co-pays. We are not even talking about what the taxpayers still have to pay to express scripts. Which is more appear they are not doing this for nothing. Taxpayers are getting ripped off.
▶ 1:25:50Sen. Warren: And this is where I want to see more transparency.
▶ 1:25:53Mr. Cuban: That's a great thing.
▶ 1:25:55Sen. Warren: Good. I will settle for that answer. Dod claims that this has an effect -- has not affected military families, but that is based on data from -- has not this is not affected million military families based on data from, you guessed it, express scripts.
▶ 1:26:19Sen. Warren: When the government accountability office reviewed just a little slice of this data, they discovered " persistent inaccuracies, including misreporting the number of people who lost access to their local pharmacies" because the pharmacies were pushed out of the tricare network. They left for the very reasons you describe. That was just a one time review. So I'm pushing dod to audit this information every single year.
▶ 1:26:49Sen. Warren: Dr. lambrew, you served as commissioner of the maine department of health and human services. So you understand the importance of program integrity. Do you think that auditing this program would help save taxpayers money or cost taxpayer's money?
▶ 1:27:07Dr. Lambrew: It would save money.
▶ 1:27:09Sen. Warren: I just want to point out here, Mr. chairman, self-dealing by the pharmacy benefit managers keeps the cost of prescription drugs hi, both for the taxpayers and for consumers. I'm going to keep pressing cbo to update their analysis of the pbm's.
▶ 1:27:31Sen. Warren: I hope to work with all of my colleagues to pass proposals to reign in self-dealing by the pbm's in tricare and beyond, including my bill with senator hawley that would make -- make the same company cannot own a pbm and insurance company at the same time. We need to stop these giant corporations from ripping off american taxpayers and get more competition in the drug market. Thank you, Mr. chairman.
▶ 1:27:58Chair Scott: Senator justice.
▶ 1:28:01Sen. Justice: Thank you to all the witnesses. Better turn the thing on. First and foremost, I mean this from the bottom of my heart. This discussion needs to happen on and on and on. We know we are dealing with a train wreck here. A runaway train wreck. And something has got to be done.
▶ 1:28:31Sen. Justice: I don't have a clue in the world why on earth transparency is bad. But let me just say this before I go any further, I just have to tell you this story real quick. We are in a government shutdown right now. And really and truly from my standpoint, I'm not very happy with the democrats. But at the same time, I was just going down the hall a little while ago, there was a lady standing there.
▶ 1:29:00Sen. Justice: She was talking to a friend of hers, and the friend does not know what to do. In the friend -- because the friend is so upset, the friend is crying, and she is crying. I would tell is all one simple thing, because I'm not here for anything. When it boils down to it, at the end of everything we do, there is a name, and there is a family. And we should all take that to heart.
▶ 1:29:29Sen. Justice: With all that being said, I would say to you justice. I go back to when I was governor. And I've got to read to you one thing. I had even halfway forgotten about this. I signed a bill when I was governor not long ago, house bill 2263 into law. The first of its kind legislation to crack down on the pbm's.
▶ 1:29:54Sen. Justice: It requires insurers and pbm's to pass a law negotiated drug savings directly to the patients, that would lower cost and -- with commercial insurance. Let me tell you, I speak in really common terms. I just have got a quick couple of questions. In a state like ours, Mr. cuban, many people rely on independent pharmacies.
▶ 1:30:27Sen. Justice: What kind of pressures are the pbm's putting on these pharmacies?
▶ 1:30:31Mr. Cuban: It's horrific. I mentioned in my testimony that the wholesalers buy drugs at the list price. And then they sell to the pharmacies at just under the list price, which means those independent pharmacies and small businesses are out a lot of money. For instance, on a $600 point price, they are out $570. They need to collect that money back as soon as possible.
▶ 1:30:57Mr. Cuban: Pbm's do weight to get the value of the float, and they also under reimburse them. Instead of paying them at least a $570 so they can break even, they pay them less. Knowing there is only so much they can take where they will either go out of business or send the prescription to one of their captive pharmacies. And that means they are not supporting their patients. Let me tell you something a lot of people don't appreciate.
▶ 1:31:30Mr. Cuban: The last five feet between the patients and the pharmacists is some of the most important time any patient will ever spend. If they are getting medications that conflict with each other, some really bad things can happen. We under appreciate pharmacies. The big pbm's are literally purposefully, as far as I can tell, putting them out of business.
▶ 1:31:52Sen. Justice: I could not agree more. Let me just end by saying simply this. All of us, all of us realize the problem. All of us have got to have enough guts to do something about the problem. That is what it all boils down to. I did not come here for anything, I've got white hair, ride around on the scooter. For crying out loud.
▶ 1:32:24Sen. Justice: I speak the truth, and I asked people to help. With all that being said, the last thing I would say is just this, on a lighter note, mark, when is kai reed going to be able to play?
▶ 1:32:38Mr. Cuban: Hopefully november.
▶ 1:32:41Sen. Justice: The last thing I would say is simply this, my prediction from a basketball coach, who has coached 1350 games, the mavericks will win it all this year. Thank you so much.
▶ 1:32:58Chair Scott: Senator kelly.
▶ 1:33:01Sen. Kelly: Thank you, Mr. chairman and our witnesses for being here today. I'm going to start with Dr. lambrew. Thank you for your work on implementing the affordable care act, which made coverage more affordable for millions of folks across the country, including in arizona. A state that I represent.
▶ 1:33:25Sen. Kelly: Now with the expiration of the enhanced aca premium tax credits, and some new federal enrollment restrictions taking effect, the progress, I think it is fair to say that the part -- the progress we have made is at risk. Many older adults and working families in arizona rely on marketplace coverage for insurance before they are eligible for medicare. I have spoken to many of them.
▶ 1:33:52Sen. Kelly: When senator justice talks about names and families, these are real people. I have talked to many of them over the last couple weeks. Looking beyond next year's enrollment, the combination of the tax credit expirations in the administration's new rules and medicaid funding cuts that are coming, this could leave americans with higher premiums without a lot of options. In arizona, these are not abstract numbers. They are real families. Real people.
▶ 1:34:24Sen. Kelly: A guy I spoke to a couple days ago named dennis, 66 years old, he is on medicare, his wife is not, he worked in ship repair for over 33 years, never went to college, just went to high school. But became a project manager. His wife is 62. She depends on aca coverage. Until she is 65 p they have three years of trying to deal with this.
▶ 1:34:53Sen. Kelly: They pay $440 a month for her insurance through the aca. They get a $720 tax credit. When the tax credit slaps, or premium will go from 444 to $1100 a month. This threatens their retirement plans. This guy has worked really hard, they have six kids that are nieces and nephews that they raised.
▶ 1:35:20Sen. Kelly: They are not going to be able to live out there dreams now because their excess income they had will go for insurance. But it gets worse for other people. Robin, a 60-year-old woman from sedona, she says the expiration of aca subsidies could lead to significant increases in her health care cost, because she also gets a premium tax credit. She said it is going to make her have to decide between rent and health care.
▶ 1:35:50Sen. Kelly: It's that simple. For millions of people across the country. Having a place to live or having health care insurance. She told me she is not looking for a handout. She is looking for a hand up. Can you speak to the broader economic health the system affects we could see if these policies lead to large coverage losses? How is it going to affect states like arizona and west virginia and florida and new york?
▶ 1:36:23Sen. Kelly: And kansas? Places that have rural areas. What should we expect?
▶ 1:36:30Dr. Lambrew: Thank you for that question. To talk first about the uninsured and then reducing it, we had hit a record low percentage of americans who are uninsured in 2022 and 2023 and 2024. We had never done better. The congressional budget office projects a few years out, the number of uninsured in this country will increase by 50% as a result of these changes, plus medicaid changes on the horizon.
▶ 1:37:01Dr. Lambrew: We know from our hospitals and health systems and other providers who try to provide to people who may not be able to pay, may not be able to afford it, it will strain the health care system which could mean more clinics really struggle to keep their hours coming keep their nurses, to really survive.
▶ 1:37:23Dr. Lambrew: There will be health system affects, not just for those directly affected but anybody in that rural community who may not be able to get the services that can no longer be sustained. There is a broader economic impact. Mr. cuban talked about small businesses needing the support for their workers to stay healthy.
▶ 1:37:43Dr. Lambrew: We have an estimate that 339,000 jobs could be lost just because the expiration of these premium tax credits, because it affects hospitals and communities that are around those hospitals. That translates into 2.5 billion lost revenue every year for state and local governments. Those are just two examples of the health system and economic effects of not continuing these tax credits.
▶ 1:38:08Sen. Kelly: I have other questions. I know I'm out of time. This is obviously a complicated issue, health care in the united states, incredibly calm gated. I've got some questions I want to submit for the record to Mr. cuban and to Mr. smith. But thank you, again, all of you, for being here.
▶ 1:38:30Chair Scott: Thank you. Welcome to our committee hearing. You are up.
▶ 1:38:38Sen. Marshall: I appreciate the invite to come. Welcome to our guests as well. Can you imagine going into a restaurant and you look at the menu, have your choice between a good kansas city strip, or some day-old chicken with gravy and cream on it to make it taste good and not knowing what the price tags are can you imagine, you need a good pickup truck to pull the fishing boat with and you go online, you look at ford and chevy and dodge. The dodge is the best.
▶ 1:39:09Sen. Marshall: But you want to look at the price to help figure out which is the best deal. For some reason, and health care, it is the only industry in the world, in america, that does not have a price tag. Consumers have no idea. When a patient would come to me and I say, you need an infertility surgery, they would say, what does it cost -- they wouldn't say, how much does it cost, they would ask if my insurance covers it. We have been working on a price tags bill.
▶ 1:39:38Sen. Marshall: I want to describe it to you all if you don't mind. I want to sure I get this right. It requires public reporting of negotiated rates, cost, and cash prices for services at hospitals, surgery centers, imaging centers, and clinical labs. It price tags for the hospital. Number to come in ensures group health plans have access to claims data, and prevents third-party administrators from restricting data access.
▶ 1:40:10Sen. Marshall: Isn't it frustrating, we are trying to convert from a traditional insurance to a self-funded model, and insurance won't give us our own data. We fix that. Number three, it requires patients to be provided an itemized bill for each service as well. I will start with Dr. smith. What impact would that have on health care cost specifically across the country in your guess timation?
▶ 1:40:38Dr. Smith: It would have a good -- so funded companies essentially are proxy buyers for individuals. They have the same sticker shock that an individual does. If a company has their own data and they can look at claims, they can compare what they pay, paid $75,000 for --
▶ 1:41:03Sen. Marshall: The only one whose health insurance costs are not going up our self-funded plans that have a primary care doctor running the folks in there as well. Do you think it would bring down the prices at the hospitals you are competing with? With a bring their prices down?
▶ 1:41:18Dr. Smith: Absolutely. Self-funded to with sticker shock would patronize facilities like mine, in the hospitals would have to match that or they would lose that business.
▶ 1:41:29Sen. Marshall: Mr. cuban, you can talk about the pharmacy industry or talk about health care, what the impact of a price tag's bill would do.
▶ 1:41:37Mr. Cuban: It would be great. For my companies, we are starting to process a direct contracting. Clearly way you can direct contract is if you know the prices. By knowing the prices, we can make our own determination about what our cost of care would be. Once we have our planes, we can look at our historical claims and extrapolate to see where they are going.
▶ 1:42:00Mr. Cuban: It would crush the big insurance companies, because it allows us, and this is what we are doing, to age the contract with providers and work with a third-party administrator to handle the services, and figure out the care navigation with a third party as well. It is rare insurance companies take all of the insurance risk these days.
▶ 1:42:21Mr. Cuban: This is just one more way to accelerate the move from that toward people and companies in particular who -- from taking response ability for their own care.
▶ 1:42:30Sen. Marshall: You have anything to add to what the impact of the price bill?
▶ 1:42:34Dr. Mould: Anything that can be done to increase price transparency will be a good thing. We have a much better site line into prices because of our size. We require a lot of through our contracts. There is still capacity out there but for folks who are smaller employers, for example, they often don't. And they don't have the same kind of site line. It's incredibly important for them as well.
▶ 1:43:04Sen. Marshall: Whatever we can do to turn patients into consumers again is going to help bring the cost of health care down. If you want to be a consumer, you have to know the prices as well. Mr. cuban, do you want to talk about the opaqueness of pbm's, the traditional pbm's and how they hiding the cost from my mom and dad when they go to their local pharmacist?
▶ 1:43:24Sen. Marshall: Cost plus -- Mr.
▶ 1:43:26Cuban: Cost plus has been in business for three years and we are the only company that prints our price list. When the ftc investigated the pbm's, they used cost plus drugs price list as a reference. Area doing all they can to prevent transparency. They also do the same thing with contracts. Particular, or state or federal government, they always put in that there may be other fees we charge you.
▶ 1:43:56Cuban: Then they will play games like with the rebate gpo. You would think a pbm is big enough to just negotiate with the brand manufacturers and get the best rebates they can. That's not what they do. They create these intermediaries called rebate gpo's that go and negotiate with the brand manufacturers, take 60% in rebates, giveback 40% to the actual pbm, who in turn goes to
▶ 1:44:27Cuban: The plan sponsor and says, here is the whole 40%, not disclosing that they kept 20% from their rebate gbl. There is a long list of more. The one thing for every employer is if you are paying any fees as a percentage of price of a drug, you are getting ripped off.
▶ 1:44:45Sen. Marshall: Our bill takes care of that as well. They are moving these gpo's offshore so they don't have to pay. Thank you so much. Thank you for holding this hearing.
▶ 1:44:55Chair Scott: Thank you.
▶ 1:44:58Sen. Gillibrand: .
▶ 1:45:01Sen. Gillibrand: For Dr. mould, calpers has implemented rough gerd-based pricing for hip replacement surgery or colonoscopies. Calpers incentivizes its members to go to shovel lab services. You emphasizing your testimony there is no one-size-fits-all solution for rising health care costs.
▶ 1:45:25Sen. Gillibrand: What factors does calpers consider when deciding to adopt reference-based pricing for certain procedures or services? What are the limitations in using reference-based pricing more broadly? Are there certain procedures or services for which this does not work or creates a problem?
▶ 1:45:42Dr. Mould: Thank you for the question. There are some things that are better fitted for shop a bowl -- shoppable responses. We are essentially eliminating cost-sharing for our members who forgo the hospital loan lab and they go to independent labs that we have pre-negotiated a much lower price.
▶ 1:46:10Dr. Mould: The reason we are structuring that, is it is entirely a carrot base intervention rather than a stick and carrot intervention like some of our other programs. But one thing we don't want to have happen is have our members go down to get their labs, find out what their cholesterol numbers look like, etc., find out that it is prohibitively expensive and never get it done.
▶ 1:46:38Dr. Mould: We have to be thoughtful about when we do it, about the implications of forgone care. Calpers's members either work for the state of california or the public sector entity like a city or county or school district, or a fire district. They stay with their employers for a very long time. Their long-term health is incredibly important to us. One, because it is what we are in the business of doing, making sure they stay as healthy as possible.
▶ 1:47:10Dr. Mould: Also if they are forgoing care, particularly preventative services, we are going to see those costs later on down the line in the form of worse conditions that are far more expensive to treat.
▶ 1:47:24Sen. Gillibrand: Dr. smith, can you talk a little bit about the improving medicare physician fee schedule? We have talked a lot about the problems. Can you talk about how to fix those problems and what your best recommendations would be for this committee?
▶ 1:47:39Dr. Smith: I'm no good at policy. I will take a swipe at it. I think one of the first things that maybe should be considered is eliminating provisions on balance billing.
▶ 1:47:59Dr. Smith: If a physician thinks their service is worth $500, and a medicare beneficiary agrees, but the fee schedule only pays them $100, there should be no prohibition on an arrangement between that physician and that medicare beneficiary for what they consider without any interference a mutually beneficial exchange. Right now, there is a hard limit on fee schedule and what you can charge beyond that.
▶ 1:48:31Dr. Smith: So, I would probably start their. And that will make the medicare beneficiary pretty intense shopper. That tends to drive prices down as well.
▶ 1:48:42Sen. Gillibrand: I feel like this hearing has been very useful. We've gotten a lot of good ideas about how we reduce cost from each of you. Some studies show that health care consolidation also leads to increased health care costs. To any of you who want to talk about this, to what extent do you agree with these findings? Could you please describe your experiences with health care consolidation, and health-care care costs starting with Mr. cuban.
▶ 1:49:10Mr. Cuban: I don't have anything specific to add to that, other than our own experiences that when a pbm owns a pharmacy, when an insurance company has an investment in 10% of the doctors out there, they are going to optimize further topline. I can tell you, when you look at the biggest insurance companies, they have 2500 plus subsidiaries. The intercompany transfers one of them alone is equal to .3% of the usa gdp.
▶ 1:49:41Mr. Cuban: So you know they are gaining the system in any way they can. If you decide to remediate them so -- you will see prices fall.
▶ 1:49:50Sen. Gillibrand: And I have seen it where even different funds require whole sets of health care practices. They do it because they know they can make money. What I've noticed is -- and what my constituents have noticed is services are declined, you're not getting the quality of care that you had before. Can you talk about that as well? And what does this do to rural areas?
▶ 1:50:21Sen. Gillibrand: I think one of the biggest hard-hit areas is going to be in rural areas. When you are a provider in a rural area, you don't have the economies of scale, you don't have the ability to do cost-cutting. Need health care to survive. Part of my conclusions about this is if we look at health care as much more of a human right as opposed to a business model, you have a different approach. Some of the things that you have offered are consistent with that.
▶ 1:50:52Sen. Gillibrand: Like let the customer know how much things cost, publish it in advance, let the market work better. Giving that information to consumers, to the patient, is vital to get costs down. And also in your last recommendation, Dr. smith, you are saying give patients more control. Because they may be willing to pay a little more than medicare will cover to get the benefit of that Dr., and that is also interesting. Anyone can answer that question.
▶ 1:51:22Dr. Mould: We, elaborating on the earlier figures I was citing about the differences between the north and south in california, we see a more than two to one difference when we compare our least competitive counties to our most competitive counties. On hospital prices, the most efficient, 10%, are at about 62% of medicare.
▶ 1:51:51Dr. Mould: The least efficient 10% are above 350% of medicare. Tremendous price variation. Mostly, you can tie it back to a lack of competition. Generally speaking, anything that can be done to oversee consolidation is going to be of critical importance for us.
▶ 1:52:16Dr. Mould: Absent that, having other tools to get at those differences in areas where when we talk about shoppable services, we provide a travel benefit for our members who are getting hips and knees if they need to go out of county. Without that, we would not be able to do reference pricing in counties that uniformly are above 300% of medicare. It is a tremendous problem.
▶ 1:52:43Mr. Cuban: Dr. lambrew: and I will quickly add --
▶ 1:52:46Dr. Lambrew: I will quickly add that I think this consolidation is of great concern to state policymakers, as well as federal policymakers. They are on the front line right now of some of these negotiations between large health systems and insurance companies, and how do they manage this cost growth that they cannot totally control, because self-funded plans are outside of state review. We will see a lot of bills next year at the state level on this topic.
▶ 1:53:15Dr. Lambrew: I will go back to rural because I think many states are thinking hard about whether some of the funds from the rural health program rolling out this fall can be used for different types of payment models for those rural hospitals and may be critical access hospitals. Some of these hospitals don't have enough volume. You paid him 300% of medicare to support the day in and day out services.
▶ 1:53:42Dr. Lambrew: Thinking differently about how we support access to rural services will be on the horizon as well.
▶ 1:53:54Dr. Mould: If I can add one point on the rural issue. Rural areas are not driving health care costs in california. We understand that in some rural areas, it's more challenging to provide health care services. , them are still more expensive than they should be. That is not what is going on. It is the populated areas where you still have very high prices that are driving health care cost in california.
▶ 1:54:18Sen. Gillibrand: Thank you, Mr. chairman.
▶ 1:54:20Chair Scott: Esther cuban, how does the level -- Mr. cuban, you are cost plus, you know your prices and you add 15%. And you just tell everybody so everybody knows. How does that change behavior? What have you watched of how it changes behavior?
▶ 1:54:40Mr. Cuban: People start shopping more, to answer your question directly. Because now they know when they go to the pharmacy counter and they are shocked by a price, and we get emails and calls all the time, I thought this medication was going to cost me $900. I went to cost plus and it was $21. They tell people, cost plus is growing and we don't spend a penny on advertising. When you save somebody money on their health care and their medications, they will tell everybody.
▶ 1:55:08Chair Scott: How many employees do you have?
▶ 1:55:12Mr. Cuban: 70, and that includes manufacturing.
▶ 1:55:15Chair Scott: How do you structure your health plan?
▶ 1:55:20Mr. Cuban: Our own health plan? We created something called cost-plus wellness. We are doing direct contracting with providers around texas and where we have employees. I have met with a lot of ceos and cfos of hospitals and found out where the insurance companies were to advantage of the. They underpay their rate with high deductibles, turn the hospital into a subprime lender.
▶ 1:55:48Mr. Cuban: With the delays from the preauthorization. We said we will do none of those things. If you give us a better reference price, we will pay you cash up front, no deductibles, and no preauthorization. We are able to get a much better price. What we are going to do that is different, we will have costwellness.com where we will post our contracts. It is one thing to talk about prices but most companies don't have to sophistication to understand contractual details.
▶ 1:56:18Mr. Cuban: We will publish them for anybody to copy. For our employees, they have no out of pocket when we work within a system. For our employees for any drugs, they have no out of pocket as well.
▶ 1:56:30Chair Scott: If they go outside the system, what happens?
▶ 1:56:31Mr. Cuban: If it is for health care, if someone is in a car accident, we have a health care navigator, what we call our health care ceo, that will call the hospital and say, we would like the cash price. Part of the craziness of this health care industry is the biggest insurance companies will negotiate a $25,000 rate for a replacement, and anyone walking in off the street can probably get it for 15. We will negotiate directly to get them better prices.
▶ 1:56:59Chair Scott: Do your employees have any cost at all in health care?
▶ 1:57:02Mr. Cuban: Pending on which of the companies they are in, they do. For the marquee companies, they do not.
▶ 1:57:09Chair Scott: Why do you have them have any skin in the game? Do they have any charge at all, why do the employees have any charge at all?
▶ 1:57:21Mr. Cuban: On the side that does have -- it is really just because as a startup, we are progressing through all of this. The goal is to get them so they don't have any responsibility. We want to use it to retain them. I get where you are going with your question. You want smart shoppers to make the best decisions. We will have a health care ceo who goes out there and does the negotiating for them.
▶ 1:57:46Chair Scott: So they won't have a choice?
▶ 1:57:53Mr. Cuban: They will have the opportunity but if it is not going to cost them anything, nobody complained. If you have a favored Dr. you have always used, and we are switching for whatever reason, we will go to that doctor and say, we want to do a direct contract with you.
▶ 1:58:08Chair Scott: But if they say no?
▶ 1:58:10Mr. Cuban: We will pay the going rate because we want our employees to be happy.
▶ 1:58:15Chair Scott: Our government policies and regulations helping or hurting you?
▶ 1:58:21Dr. Smith: [laughter] indirectly hurting us, I think. Because we pay tax, unlike the not-for-profit hospitals as he pointed out earlier. We also are alarmed at how aggressively hospital systems are acquiring physician practices and hiring physicians. That has decreased the number of --
▶ 1:58:50Chair Scott: Why would they do that?
▶ 1:58:52Dr. Smith: It's a vertical integration and it is consolidation, it is all of the above. The number of independent practicing physicians is dwindling in the country. This movement is curtailed to the extent that they have no entrepreneurial instinct or vision at all.
▶ 1:59:19Dr. Smith: I operate, for the most part, out of the government regulatory sphere. We accept no government payments. We just accept payments directly.
▶ 1:59:29Chair Scott: You opened up another center right now?
▶ 1:59:31Dr. Smith: Could I?
▶ 1:59:33Chair Scott: Are there any government limitations?
▶ 1:59:35Dr. Smith: The only government limitations on opening up a hospital is if you wish to accept federal payments. That's illegal.
▶ 1:59:43Chair Scott: Why would that be illegal?
▶ 1:59:45Dr. Smith: That was a provision in the affordable care act.
▶ 1:59:49Chair Scott: What is the rationale? What you have said is you are cheaper than medicaid and cheaper than medicare. Shouldn't they want a lot of competition like you?
▶ 2:00:00Dr. Smith: I can only speculate. The prohibition on opening new physician hospitals, it is worse than that. The prohibition expanded -- it included expanding existing physician owned hospitals. I was told that was part of getting the american to the table to enforce the bill. That is just what I was told.
▶ 2:00:25Chair Scott: Mr. cuban, you know who is on your health plan, right?
▶ 2:00:33Mr. Cuban: I have a bunch of different companies that generally.
▶ 2:00:36Chair Scott: The ceo of the company would know who is on the plan.
▶ 2:00:39Mr. Cuban: Not necessarily. Generally, yes. But I have a lot of different companies.
▶ 2:00:46Chair Scott: Ok. Would you be ok if there was an agent that could sign-up somebody and you paid 100% of it?
▶ 2:00:55Mr. Cuban: Of course not.
▶ 2:00:57Chair Scott: Would it surprise you that in the covid -- senator warnock was talking about how the way it works is an agent can sign anybody up, as long as they know their name, address, and birthdate. In the money goes directly to the insurance company. Does that make sense to you?
▶ 2:01:17Mr. Cuban: Of course not.
▶ 2:01:19Chair Scott: You think there might be fraud?
▶ 2:01:21Mr. Cuban: I think sales people will find ways to make money no matter what.
▶ 2:01:26Chair Scott: Dr. mould, how many different reference things are you doing, different procedures?
▶ 2:01:40Dr. Mould: 18 at the moment. 18 different procedures. And they are structured differently but in three pockets essentially.
▶ 2:01:51Chair Scott: And you have said the prices in certain places of the hospitals are higher than others. Why would that be?
▶ 2:01:59Dr. Mould: I think a lot of it has to do with competition. Some of it is independent of the. Certainly there are places where it is harder to run a hospital.
▶ 2:02:08Chair Scott: Let's take sacramento. How many deliveries of hospital delivery systems are there?
▶ 2:02:14Dr. Mould: There are 1, 2, 3, 4.
▶ 2:02:21Chair Scott: How many do you contract with?
▶ 2:02:24Dr. Mould: All of them.
▶ 2:02:25Chair Scott: Is there different pricing?
▶ 2:02:28Dr. Mould: Yes, negotiated through the insurance companies we contract with or through our third-party administrator.
▶ 2:02:38Chair Scott: How big of a customer are you?
▶ 2:02:42Dr. Mould: We are the largest purchaser in california.
▶ 2:02:45Chair Scott: If somebody said they are not going to talk to, would it impact your business much?
▶ 2:02:51Dr. Mould: . Yes. .
▶ 2:02:53Chair Scott: You were talking about rural hospitals. Would you do a hip surgery at a rural hospital?
▶ 2:03:04Dr. Mould: Any hospital --
▶ 2:03:07Chair Scott: They do hip surgeries?
▶ 2:03:10Dr. Mould: Any hospital that is of sufficiently high quality, yes.
▶ 2:03:15Chair Scott: How many surgeries would you want them to have?
▶ 2:03:19Dr. Mould: As I understand it, I am not that kind of doctor, but as I understand it, generally, there are multiple knees or multiple single hips.
▶ 2:03:36Chair Scott: Before you went to a hospital, we do want to go to a physician that did one a year?
▶ 2:03:45Dr. Smith: I would pick the physician and I would say they need to do 100 a year. If the surgeon had confidence in a facility and the crew there, that would be the biggest indicator that they know what they are doing.
▶ 2:03:58Chair Scott: If they were going to -- with they get 100?
▶ 2:04:04Dr. Smith: They would not do 100.
▶ 2:04:07Chair Scott: Mr. cuban, can you apply the same principle to other areas of health care? Could we do it with m.r.I.'s?
▶ 2:04:19Dr. Smith: Mr. cuban: of course. Particularly with those. It is just equipment and technicians and some qualified doctors.
▶ 2:04:27Chair Scott: Have you worked with the department of war?
▶ 2:04:31Mr. Cuban: No, I have no idea. I've not talked directly but when the dod went out for one of their bids, the requirement was that thick. Into just wasn't worth the time.
▶ 2:04:43Chair Scott: And same for the v.a. And tricare?
▶ 2:04:48Mr. Cuban: Same.
▶ 2:04:49Chair Scott: Senator warren said that you were checking the price. How did you find that? You were able to look at the tricare book and see what their priceless.
▶ 2:04:58Mr. Cuban: We were cheaper than their co-pays.
▶ 2:05:02Chair Scott: Why would you be cheaper than their co-pays?
▶ 2:05:06Mr. Cuban: Because they are stealing.
▶ 2:05:10Chair Scott: I mean --
▶ 2:05:14Mr. Cuban: It makes no sense. There is a reason why they don't publish their pricelist. Prices vary by customer to customer to customer. That is how they maximize their margins. That's how they are able to control. Dr. mould was smart enough to get a carveout. Most companies are not big enough or able to do that.
▶ 2:05:37Mr. Cuban: The dvms will require that you buy from their perform is, that you buy -- the fact that there is a specialty tear for generic drugs or any drug, every drug is special in its own way. If you are being offered a specialty tear, you are being ripped off.
▶ 2:05:53Chair Scott: Do you know anyone else who has gotten a carveout? You are just so big that you can get whatever you want?
▶ 2:06:01Dr. Mould: We can't get everything we want. We certainly try to get the things that we think we need. But we do not get everything that we would like to have in our contracts. It would not surprise me if larger purchasers.
▶ 2:06:22Chair Scott: Have you been able to get into any employers that way?
▶ 2:06:28Mr. Cuban: There are more carveouts for gpl ones because they did get access to the formulary and excluded another glp-1. Some of those large customers are able to get carveouts for glp-1 specifically. Typically, we will get those big companies to start working with transparent pbm's that include us in their network.
▶ 2:06:51Chair Scott: What would it take for Mr. cuban to get your business? How can he get in and be -- you did it because of somebody like him. Right?
▶ 2:07:04Dr. Mould: As I said, it was very helpful to have his prices published and be able to use them in our negotiations. We looked expansively, we just renegotiated our pbm contract for january 1, 2026 start. We looked comprehensively at a number of solutions involving multifaceted ones. There are a lot of things that pbm's do, in addition to buying drugs.
▶ 2:07:35Dr. Mould: They distribute drugs, they help manage formularies, etc.. Breaking that up is something that we always have as a vision for our future is enormously complicated thing to take on.
▶ 2:07:54Dr. Mould: We have taken pieces of that and incorporated it in a broader approach I now, but we are not procured looting a future where we do something that breaks apart what they want and contracting independently for those solutions.
▶ 2:08:09Chair Scott: Is there something that pbm's are doing that you can't do?
▶ 2:08:15Mr. Cuban: No. Let me qualify that. We don't have access to all ground drugs. What we are told from the manufacturers is the reason they don't sell to us is because it has made it to them from the big pbm's that if they do work with us, they will see the portfolios diminished on their formularies. Formularies give the big pbm's 100% after power. They did not have control of formularies.
▶ 2:08:44Mr. Cuban: There is no specific skills that they have that the state of california could not re-create for reading their own formularies. They go out and negotiate that formulary. And they auction off access to that. If you disaggregated by law formularies from pbm's, companies, patients would have better experiences because they would be more dependent on their doctors, in the entire rebate system would collapse like that.
▶ 2:09:14Mr. Cuban: In the entire rebate fee system collapses, the price of medications would fall, depending on medication, 30% to 80%. Their control of formularies give them every bit of leverage.
▶ 2:09:26Chair Scott: Why do you think pbm's are started?
▶ 2:09:29Mr. Cuban: Back in the day, it was about negotiating pricing. That is what they did. They don't negotiate prices today. If they negotiated prices, they would publish the pricelist. They should be able to buy for a lot less than we can. But they don't negotiate prices. What they negotiate is what they auction off which is access to their formulary. You see that a big part of the problem as a result is going back to when we talked about deductibles.
▶ 2:10:01Mr. Cuban: All this stuff about the aca, you would think a pbm, if they were about negotiating prices to the benefit of patients, they would not make patients pay full list price for a medication until they had their deductible.
▶ 2:10:18Mr. Cuban: But what happens when that insured patient has that when he $500 deductible and it is a $400 medication, out of the 400, lets a 200 of it goes right to the pbm's pocket.
▶ 2:10:32Chair Scott: Dr. smith, have you calculated the surgeries that you do, do you have how much medicare would save or medicaid in your state? Take oklahoma, do you have a feel of what you could save, if everybody got your prices?
▶ 2:10:48Dr. Smith: I think I can answer that in a roundabout way. Oklahoma county, the largest county in oklahoma. They have 1100 employees. In the first year, we were directly contracted with them. Those 1100 employees saved 750,000 out-of-pocket, saved $3.25 million.
▶ 2:11:21Dr. Smith: Those prices we were offering were less than what medicaid pays the hospital, but that's 1100 lives. I think if you extrapolate that out to the number of medicare and medicaid beneficiaries, it could be tens of millions, dozens of millions of dollars easily.
▶ 2:11:37Chair Scott: If medicare-medicaid had complete choice, the people would go wherever they want. And we gave the money to the enrollee, you think they could buy better prices?
▶ 2:11:51Dr. Smith: Oh, yes. You essentially turned medicare into the same cooperative arrangement that they have embraced where the member pays, and then they are reimbursed.
▶ 2:12:11Chair Scott: Mr. cuban, you started to produce sterile injectables. Is that an easy process? Was the government a good partner in getting that done?
▶ 2:12:27Mr. Cuban: It was not an easy process. On the cost for medicare medicaid, there have been multiple studies that showed if medicare bought, I think it was oncology drugs, it would save $6 billion a year paired $1 billion a year for urology drugs. To go back to your question on our manufacturing facility, we had to work with the fda, it was slow and efficient, and we were able to get it done. Now, since the change in administration, we are extending that in they have been very good to work with and much quicker.
▶ 2:12:56Chair Scott: So you are like three times, four times, five times international, same thing? Are your costs higher than if you did this in vietnam?
▶ 2:13:06Mr. Cuban: Know, we are mostly robotic, all robotic. I would say we are close to being as cheap if not cheaper than overseas.
▶ 2:13:15Chair Scott: By the way, do you tell people where drugs are made?
▶ 2:13:21Mr. Cuban: Where the source country is? We don't at this point in time. It is something we are discussing. We have one drug made in china, that might move to two. We have a bunch made in india but we check and do batch checking and all of that, and we are increasing the number that we get done here. Part of the challenge we have is the big wholesalers have these contracts with american manufacturers. I forget the term, but it's either deliver or you are sol.
▶ 2:13:52Mr. Cuban: And that makes things a lot more difficult for us one it comes -- for them to be able to compete with pricing.
▶ 2:13:58Chair Scott: What do you think your prices, especially as you build up more volume, what do you think your prices will be on injectables versus something --
▶ 2:14:06Mr. Cuban: They are already cheaper than anywhere else. Competitive with international, we should be less expensive. We are changing how we do it we have created mobile pods so we will be able to not only make sterile injectables, but make celgene therapy. We can park one of these pods outside of a hospital and when they are doing all kinds of genetic -- my partner, alex, knows this stuff better than I do.
▶ 2:14:36Mr. Cuban: When they are doing analysis, we will be able to convert it to a biologic they can use with a child, and it will cost a 10th of what it currently costs.
▶ 2:14:44Chair Scott: You think you could open up generic drugs that -- drug manufacturing in india and china?
▶ 2:14:50Mr. Cuban: Yes. We might not have the scale initially. We might not have the scale initially.
▶ 2:15:01Chair Scott: But you can get the scale?
▶ 2:15:04Mr. Cuban: Yes. It's robotics. >> I just want to thank you guys for your testimony. I have to leave. I just want to tell you, I appreciate your testimony and this committee is doing some important work on how we can help older americans, and this affordability hearing has been magnificent, so thank you so much.
▶ 2:15:39Mr. Cuban: >> I could go a little bit longer. Dr. smith, why do you think hospitals are not doing this?
▶ 2:15:48Dr. Smith: Well, they are now. Many of the hospitals in the oklahoma city area have tried to put me out of business early on are now the recipients of referrals that I sent them. Patients all over the country now ask for pricing for procedures that can only be performed in a hospital.
▶ 2:16:12Dr. Smith: A ceo or cfo gets a call from me, it is about a patient from florida, arizona, nevada, who needs a brain tumor removed. I call those prices together -- kabul -- I cobble those prices together, and invariably, they were extremely reasonable, and I
▶ 2:16:43Dr. Smith: Pay that hospital, so these hospitals are cutting into this movement. It is spreading, as they are not afraid of the carriers for the single case agreement. >> if the affordable care act did not outlaw what you were doing, you feel like they would be more of these around the country? >> oh, yeah.
▶ 2:17:11Dr. Smith: >> there is a fair amount of research on how they operated back then when I was living in texas, and there was concern that people with conditions would often have to wait months. They were often getting cap payments so they would run out of insurance, which is why I think most people who have cancer or work with people who have some sort of disease much prefer ending those people into mainstream health insurance.
▶ 2:17:42Dr. Smith: Now we really have a situation where anybody can get health insurance and not worry about if their coverage will be there for them. The affordable care act has maximum out-of-pocket limits, makes sure pre-existing conditions are covered, and makes sure that when we need health insurance, it is there. >> with the affordable care act, premiums have skyrocketed.
▶ 2:18:11Dr. Smith: Back then, and catastrophic plan had a $5,000 deductible. Most of these aca plans have unbelievable deductibles. It's what people did not want to get. The aca was going to say everybody will get all this stuff covered, but no what is happening is premiums are 100%, copayments are up, deductibles are. Deductibles are ridiculously high.
▶ 2:18:40Dr. Smith: Here is what has happened with extended coverage. The aca, nothing goes away. Then nobody is losingif you -- u can make up to 100 -- let's see -- 400% would be 128 thousand
▶ 2:19:11Dr. Smith: Dollars for a family of 4. There's almost no change. But you can be worth 2 million bucks and make $225,000, and the federal government is still subsidizing your health care. The only way we will ever get this fixed is have to start going and doing what you guys are doing. Number one, we have to let people by the insurance they want to buy. You want to be told how to cover your employees? No.
▶ 2:19:41Dr. Smith: For my employees, I'm going to do it this way and if I don't like it, I will change it. You cannot do that. Number two is if we are going to help people -- like, if you want to help your employees, you probably should let them shop. We don't do that. And then we wonder why health-care costs are out of control. What I like about what you guys are talking about is we've got to shop for this stuff. Dr.
▶ 2:20:11Dr. Smith: Smith, you set it at lunch today. Is there a correlation between -- in most businesses, the correlation between price and quality. How about health care? What do you think?
▶ 2:20:25Dr. Smith: Well, it's inverse. It is completely upside down. If you have so much uncertainty that you cannot quote a price, you are probably not good at what you are doing. That's the logic I apply to it.
▶ 2:20:42Chair Scott: First, I want to thank you for being here. Thanks for taking all the questions. One thing we are trying to do it here is get everybody more informed about health care so we can make better decisions. The health care system we have created we would never create. It does not work. It costs way too much money. We don't have the outcomes we need. We are spending more than other developed countries with worse outcomes. In business, you would be bankrupt.
▶ 2:21:12Chair Scott: If any senators have additional questions for the witnesses, the hearing will be open until next wednesday at 5:00 p.m. I thank each of you for being here. [gavel bangs]