Indiana’s soaring health care costs linked to market concentration

A high concentration of hospital, physician and insurance markets in Indiana have likely contributed to health-care costs soaring 48% here in a recent nine-year period, according to a new study commissioned by state lawmakers.

That was a sharper climb than the 35% average increase in Illinois, Michigan, Ohio and Wisconsin between 2011 and 2020, the study said.

But other factors have played a part in Indiana’s steep cost of health care, including a high prevalence of chronic diseases in Indiana, which causes patients to visit their doctors frequently and get more hospital care, according to the study, prepared by researchers at the Petris Center on Health Care Markets and Consumer Welfare at the School of Public Health at University of California, Berkeley.

“This is a big part of what drives health care expenditures, the underlying population health across (regions), household income, provider network breadth, travel time and so forth,” said Brent Fulton, associate research professor of health economics and policy at UC-Berkeley, the lead researcher.

The study found that the health care sector in Indiana “is not monolithic,” either in the various industries or across its metropolitan areas. In the South Bend-Mishawaka region, for example, the top three hospitals controlled 100% of the market, while in the Indianapolis-Carmel-Anderson region, the top three hospitals controlled just 55% of the market.

The report was presented Thursday to a study committee of the Indiana General Assembly, which was set up as a result of a 2021 law directing a study to be conducted on market concentration in the state’s health care sector.

A separate report on the pharmaceutical industry found that Hoosiers spend an average of $1,365 a year on prescription drugs, higher than the national average of $1,228. The number of pharmacies per 10,000 Hoosiers varied widely, from 2.3 pharmacies in Kokomo to 1.5 pharmacies in Columbus.

That study, by researchers at O’Neill School of Public and Environmental Affairs at Indiana University, Bloomington, ran into some problems getting enough information to draw conclusions, notably in the secretive pharmacy-benefits manager sector, the group that acts as a middleman between drug companies, health insurers and pharmacies.

The study committee’s hearing on Thursday stretched for more than four years, and included testimony from 18 people, many of them representing large health associations, such as hospitals, physicians and insurers.

The Employers Forum of Indiana said health care insurance premiums have been rising every year since 1999 and now cost, on average, more than $22,000 a year for a family plan. Hoosiers pay more than people in any surrounding state, and the 15th highest amount in the nation.

Some physicians said that the price of some specialty drugs have risen sharply, although patients are living longer.

“These drugs are going to break the bank,” said Dr. Lakshmi Aggarwal, a Fort Wayne oncologist. “… Oncology drugs can blow your socks off, how expensive they are.”

The Indiana Hospital Association said it recognized that health care is expensive and that its members need to address affordability. Already, some hospitals and insurers have reached deals to lower prices.

Hospital system Parkview Health in northeast Indiana, for example, agreed to reduce prices in a deal with insurer Anthem Blue Cross, resulting in $600 million in savings, said Brian Tabor, the hospital association’s president.

“Those negotiations, those significant price reductions, are not incorporated into the data that you see,” he said. “These pricing studies lag quite a bit, so you have not seen in data sets these results, the fruit of these negotiations.”

Representatives of pharmacy benefits managers, drugmakers, community pharmacies, health insurers, physicians, and others staked out their cases that they are doing the best they can in a difficult, unpredictable system.

That caused some lawmakers to wonder whether the various sectors will be able to compromise over their differences.

“One thing I am convinced of after hearing the testimony is that everybody has the same objective, that is to save their industry,” said Sen. Greg Taylor, D-Indianapolis. “It’s unfortunate, but it’s the truth. … I didn’t hear any one person compliment another organization that we’re dealing with.”

But the committee chair, Rep. Brad Barrett, R-Richmond, said the discussion was more cordial than in previous hearings he has attended or chaired.

“We didn’t hear any yelling and screaming today,” he said. “The finger-pointing is getting a little bit better. …I have an optimistic outlook that we’re gaining ground.”