HB711 is the single most effective action that the Texas legislature can take to restrain rising healthcare costs in Texas. Numerous research studies have documented the massive consolidation of healthcare systems within and across regional markets in the past 25 years, which has enabled hospitals to raise their commercial prices 42% just within the 7-year period 2007 to 2014 (most recent peer-reviewed study). Hospital spending comprises the largest single component of healthcare spending, so that these price increases are the main reason that family insurance premiums rose 288% between 1999 and 2022, while workers’ earnings rose by only 103%.
The most prestigious healthcare systems have used their market dominance to dictate the structure of the contracts that they negotiate with insurers and large self-insured employers. Insurers and employers would be better off if they could direct workers to the lowest cost, high-quality providers in their provider networks. However, the most powerful healthcare systems insist on contracts that designate all of their facilities in network to patients (even when lower cost alternatives are geographically available), and forbid insurers from specifying higher copays or other financial incentives to encourage patients to select cost-effective care. This absence of price sensitivity hurts all workers in the long run. Hospitals have engineered a price inelastic (vertical) demand curve for their services at the expense of hard working, middle class Texans, whose hard-earned wages are feeding the cash reserves of our largest healthcare systems rather than their own families.
Data from the National Academy for State Health Policy Hospital Cost Tool clearly refutes claims by the Texas Hospital Association that the high prices being charged by Texas’ most prestigious hospital systems are justified. The absence of reasonable contract restrictions enables our largest healthcare systems to charge prices that are often 3 to 5 times Medicare prices, despite the fact that they are earning high single-digit or double-digit profit margins. In turn, these healthcare systems use their profits to out-compete rural and smaller urban community hospitals for healthcare workers and supplies, tipping the market even more in their favor. Given the opportunity, the average Texas worker would embrace the opportunity to shop for lower cost, high quality healthcare that would put a stop to escalating health insurance premiums. Please pass HB 711 allow true consumer demand to impose rationality in Texas’ healthcare market.