If Prices Are a Problem, ERISA is Not the Solution
Yesterday, the internet caught fire with a new study drawing attention on the prices that we pay for health-care services. Contrary to expectations in some quarters, low Medicare spending doesn’t correlate at all with low spending in the private market. Instead, variations in private spending are driven mainly by variations in prices—and prices, in turn, are a function of the power that hospital systems wield in their particular markets.
The study is arresting because the data upon which it rests are really hard to get. In contrast to Medicare, which pays on a fee schedule and shares its claims data with researchers (most of them, anyhow), the prices that health plans negotiate with providers are typically treated as trade secrets. Even this study—the authors are Zack Cooper, Stuart Craig, Marty Gaynor, and John Van Reenen—is based on data covering just one-quarter of the privately insured population.
It’s thus perverse that the Supreme Court is poised to rule in a case that could thwart efforts to get good data about health-care prices. In Gobeille v. Liberty Mutual , the Court will decide whether the Employee Retirement Income Security Act of 1974 (ERISA) supersedes laws, on the books in 18 states, requiring self-insured employers to report data about the prices they pay to “ all payer claims databases.”
Because about two-thirds of all employees receive coverage through self-insured firms, exempting those firms from the reporting obligation would blow a giant hole in the new databases. If you’re persuaded that we’re paying too little attention to the problem of market power— and I think we are —then ruling against the states would be especially boneheaded.
I’ve written before that ERISA need not and should not be read to preempt these state laws. At oral argument two weeks ago, however, a majority of the justices suggested that the reporting obligations might well be so burdensome that they ran afoul of ERISA. I might be making too much of the questions that they asked; indeed, it’s treacherous to make guesses based on oral argument. But this latest study is one more reason the Court should think twice before sidelining the states.