Mandates, Malpractice, and Monopolies--Controlling Counterproductive Cost Drivers 


The Problem: For all their world-class capabilities, our hospitals, physicians, and other providers operate in an environment unlike that of any other professional business, offering services mandated by state legislatures rather than medical professionals, providing care often dictated by liability concerns more than patient needs, and with limited or ineffective price competition.  

The BETTER WAY: Regulatory changes will be made to three features of the present healthcare system that lead to unnecessary higher costs: state benefit mandates, malpractice liability, and provider monopolies.

State benefit mandates--of which there are now more than 2,000--will be controlled by limiting inclusion in basic coverage requirements to those benefits mandated by at least two-thirds of the states. No other state-mandated benefits will be included in the services covered by federally-funded premium support. However, states will be allowed to mandate and fund their own additional benefits.

Malpractice liability cases--currently leading to more than 50,000 claims filed and 10,000 payments made per year--will be controlled through federal tort reform legislation, including caps on non-economic and punitive damages, a statute of limitations, and the replacement of joint-and-several liability by a fair share rule. The projected 0.5 percent savings will yield $15 billion a year in lower costs.

Provider monopolies--which typically increase healthcare costs by several percentage points--will be discouraged through three mechanisms. First, new clarified regulations for FTC action will be established, particularly for cases where hospitals acquire primary care physician groups. Second, new standards for charity care will be imposed on hospitals controlling more than fifty percent of a geographical market. Third, Medicare FFS payments will be adjusted to reduce the gaps between primary care and specialist physicians and between inpatient and non-hospital treatments, in order to make hospital acquisitions of physician groups--and the resultant increased market power--less attractive.


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