Fair Health Costs Initiative

The Fair Health Costs Initiative is an Arnold Ventures-backed effort by the Purchaser Business Group on Health and National Alliance of Healthcare Purchaser Coalitions (National Alliance) to mobilize employer purchasers, educate policymakers and advocate for public policies to reduce health care prices.

The Problem

The cost of health care in the U.S. is unaffordable for families and employers, and health outcomes are poor. High health benefit costs come at the expense of core business investments and hold down wages, dampen business growth and squeeze family budgets.

Increasingly high health care costs for private purchasers in the U.S. are driven primarily by high prices in the commercial sector. Hospital prices in commercial plans across the U.S. in 2018 averaged 247% of Medicare payments and the gap has been increasing. This trend is largely the result of industry consolidation and use of anti-competitive contracting practices and pricing strategies by hospitals, health systems and provider groups to gain market power. In the wake of the COVID-19 the pandemic, many providers are pursuing further consolidation and acquisitions.

The Opportunity

Although the problem of high prices in the commercial sector has been apparent for at least a decade, there is growing recognition among policymakers and purchasers that this problem must be addressed. Voters consistently name high health care costs as their top issue and government leaders feel strong pressure to respond.

We have to get at the root of the problem – the lack of functional markets in the private U.S. health care system. Effective markets require healthy competition among providers, health plans, drug manufacturers and suppliers; transparent information on quality, patient experience, health equity and prices; and meaningful choices for consumers. Unfortunately, these conditions are not met in all markets, and entrenched interests – particularly large, consolidated, health care systems – feed off of these market failures and use their political muscle to keep the broken status quo in place. This requires direct intervention.

• Regulatory and Legislative Actions to Strengthen Competition: In some market segments and geographic areas, the potential for healthy competition exists, but has been thwarted by dominant industry players. In these situations, government needs to strengthen antitrust enforcement and explicitly prohibit anti-competitive practices that have been the driver of high prices.
• Direct Government Intervention in Pricing: In other areas, the market is fundamentally broken, and it is nearly impossible to address costs through competition.  In these situations, government needs to step in to limit prices.