⚡️ NIMITZ HEALTH NEWS FLASH ⚡️ 

“Modernizing Health Care: How Shoppable Services Improve Outcomes and Lower Costs”

Senate Aging Committee

October 22nd, 2025 (recording linked here)

WITNESS & TESTIMONY

• Mark Cuban: Co-Founder & Entrepreneur, Cost Plus Drugs

• G. Keith Smith, M.D.: Co-Founder, Surgery Center of Oklahoma and the Free Market Medical Association

• Don Moulds, PhD: Chief Health Director, CalPERS

• Jeanne Lambrew, PhD: Director of Health Care Reform and Senior Fellow, The Century Foundation

HEARING HIGHLIGHTS

MEMBER OPENING STATEMENTS

• Chair Scott (R-FL) opened by arguing that free-market competition and price transparency had lowered costs in most sectors but had been missing in health care, leaving consumers without the information needed to make informed choices. He emphasized that “shoppable services” such as elective surgeries, labs, and prescriptions represented roughly 40% of spending and were ripe for transparent, consumer-driven reforms. He criticized opaque contracting and site-of-service price disparities that were often unrelated to quality, and he contended that publishing prices and focusing on outcomes would reduce inflated costs. He concluded by framing the hearing as a push to empower patients, especially older Americans, through transparency and competition.

• Ranking Member Gillibrand (D-NY) stated that health care costs remained unacceptably high, noting that one in three adults skipped care or did not take medications as prescribed due to price. She highlighted the ACA Marketplace as a successful “shoppable” platform but warned that expiring enhanced premium tax credits would more than double premiums for many in 2026 and could cause nearly five million people, disproportionately ages 50–64, to lose coverage. She relayed constituent stories about choosing between premiums and necessities and cautioned that older adults might delay care and enter Medicare in worse health. She urged a bipartisan extension of the tax credits to keep coverage affordable while broader cost issues were addressed.

WITNESS OPENING STATEMENTS

• Mr. Cuban compared PBMs to a dominant marketplace that controlled “shelves” via formularies and profited from higher list prices through rebates and fees pegged to the wholesale acquisition cost. He argued that the list-price-based system misaligned incentives across manufacturers, wholesalers, insurers, and PBMs, squeezed pharmacies, and forced patients, especially pre-deductible, to pay inflated amounts. He said employers and governments kept signing contracts that entrenched the problem and asserted that shifting to transparent net pricing could cut patient out-of-pocket costs roughly in half. He proposed counting cash payments toward deductibles, basing cost-sharing on net (not list) price, separating formulary control from PBMs, and eliminating specialty tiers.

• Dr. Smith described founding the Surgery Center of Oklahoma to bundle and post all-inclusive surgical prices, which he said routinely ran one-sixth to one-tenth of nearby hospital charges while maintaining high quality. He cited examples such as a $3,875 tonsillectomy versus a $72,000 hospital quote and said public price posting spurred a broader “price war” that deflated costs and attracted patients from out of state. He argued that opaque hospital and insurer practices formed a “cartel” that enriched intermediaries, whereas transparent competition rewarded efficient, high-outcome surgeons. He predicted shoppable services would become increasingly critical for older Americans as more physicians limited participation in Medicare.

• Dr. Moulds explained that CalPERS used reference-based pricing for shoppable procedures like hip and knee replacements, setting a $30,000 benchmark that shifted members to qualified facilities and pressured others to lower prices, dropping averages from about $35,000 to $25,000. He said CalPERS expanded similar approaches to colonoscopies, cataracts, arthroscopies, additional ASC procedures, and independent labs, generating multi-million-dollar annual savings. He cautioned that reference pricing had limits. He noted significant regional price variation, paying roughly one-third more in Northern California due to weaker provider competition.

• Dr. Lambrew argued that while competition and transparency could help, most people could not self-finance health care, so the ACA Marketplaces and premium tax credits were essential to making plan shopping work, particularly for older adults. She warned that expiring enhanced credits would trigger unprecedented premium increases starting in January, with those above 400% of poverty and ages 50–64 hit hardest. She said coverage losses would raise unmet needs, worsen health, and ultimately increase Medicare and community costs through more uncompensated emergency care. She urged Congress to extend the tax breaks so Americans could continue to shop among affordable plan options.

QUESTION AND ANSWER SUMMARY

• Sen. Tuberville (R-AL) asked how direct to patient programs like Trump RX could lower costs and why Cost Plus pursued this model. Mr. Cuban said sharing Cost Plus pricing data and using MFN style arrangements let manufacturers bypass PBMs and reduce prices for seniors and others. He said public daily prices and a simple 15 percent markup built trust and enabled comparisons, citing GLP-1 examples near 499 versus PBM routes near 1,300.

  Sen. Tuberville asked about a different model and whether patients would shop. Dr. Smith said he left opaque hospital systems, posted bundled prices, and saw patients and employers travel or force local hospitals to match lower prices.

• Ranking Member Gillibrand (D-NY) asked why adults ages 50 to 64 relied on enhanced Marketplace credits and what happened if they expired. Dr. Lambrew said many worked part time or retired early, faced higher needs, and would see premiums that often exceeded 20,000 which risked coverage loss and skipped care.

  Ranking Member Gillibrand asked about unaffordable deductibles, and Mr. Cuban said people who could not meet deductibles effectively lacked insurance and often deferred care or paid list prices for months.

  Ranking Member Gillibrand asked why physicians limited Medicare participation, and Dr. Smith cited low payments, heavy regulation, and risk that pushed independents out.

• Sen. Johnson (R-WI) challenged ACA performance and raised broker abuse and phantom enrollments. Dr. Lambrew acknowledged broker removals and policy fixes and said coverage rose, cost growth was slower than in employer plans, and deductibles recently fell on average.

  Sen. Johnson argued the enhanced credits were temporary and expiration returned the law to its original design which he said had failed on premiums and choice. Dr. Lambrew said the improvements had worked and that removing them would reverse gains in affordability and coverage.

• Sen. Husted (R-OH) asked about anti competitive contract terms and consolidation that raised costs. Dr. Moulds said such terms had been litigated in California, consolidation persisted, and Cost Plus transparency helped CalPERS negotiate while new contracts allowed carve outs.

  Sen. Husted asked for a market view and Mr. Cuban said PBMs blocked employers from adding Cost Plus even when cheaper. Dr. Moulds added that flexibility had improved although consolidation remained a core challenge.

• Sen. Warnock (D-GA) presented a Georgia premium jump for a 62 year old small business owner and asked about the impact. Mr. Cuban said sudden increases forced hard choices, reduced investment by millions of sole owners, and risked healthier people leaving the pool which raised premiums.

  Sen. Warnock asked why older adults were hit hardest and Dr. Lambrew said their costs were about triple those of younger adults so spikes drove skipped care or cuts to essentials. She urged action before open enrollment accelerated since early shoppers were already seeing higher prices.

• Sen. Moody (R-FL) praised price transparency and asked how many facilities had followed his model. Dr. Smith said hundreds now posted or quoted bundled prices and that hospitals often matched transparent prices to avoid losing patients.

  Sen. Moody asked about barriers and he pointed to Medicare overpayments to hospital owned facilities that fueled consolidation and said site neutrality would help. Dr. Smith said real market adjustments began after his center posted online prices in 2009 which triggered national price matching.

• Sen. Warren (D-MA) described TRICARE’s PBM structure and asked if requiring Express Scripts to disclose differences between affiliated and unaffiliated pharmacy payments would save taxpayers money. Mr. Cuban said it would save money and keep independents open and he disputed CBO’s view that transparency would raise costs. He said Cost Plus prices already undercut TRICARE patient prices for common generics and that taxpayers were overpaying.

  Sen. Warren asked about auditing and Dr. Lambrew said annual audits would save money

  Sen. Warren said she would pursue reforms to curb PBM self dealing and vertical ownership.

• Sen. Justice (R-WV) called for action on transparency and asked how PBMs affected independent pharmacies. Mr. Cuban said wholesalers sold near list price while PBMs delayed and under reimbursed, pushing independents toward closure or steering prescriptions to captive pharmacies and harming patient safety at the counter.

• Sen. Kelly (D-AZ) warned that expiring Marketplace credits and new rules could raise premiums and shared Arizona cases where older adults faced unaffordable increases that threatened retirement plans and housing. He asked about broader effects, and Dr. Lambrew said the uninsured rate would rise sharply and rural providers could close or cut services which would strain communities and cost jobs and state and local revenue.

• Sen. Marshall (R-KS) outlined a price tags bill requiring public posting of negotiated and cash rates, full employer claims access, and itemized bills and asked about effects. Dr. Smith said it would expand self funding, shift volume to transparent providers, and force hospitals to match lower prices. Mr. Cuban said transparency would enable direct contracting and reduce reliance on large insurers while warning that percentage based fees and rebate GPOs hid costs and overcharged plan sponsors. Dr. Moulds said more transparency would help smaller purchasers who lacked CalPERS scale and that opacity still hindered markets.

• Ranking Member Gillibrand (D-NY) asked how CalPERS chose services for reference pricing and what limits applied. Dr. Moulds said CalPERS used carrot approaches for shoppable care like labs to avoid deterring needed tests and emphasized long-term member health and prevention.

  Ranking Member Gillibrand asked how to fix Medicare physician payments and Dr. Smith recommended allowing voluntary balance billing so beneficiaries and physicians could agree to prices above the fee schedule, which he said would create informed shopping.

  Ranking Member Gillibrand asked about consolidation and witnesses said vertical and financial integration raised prices and hurt quality, with Dr. Lambrew and Dr. Moulds warning about concentrated markets and rural access pressures.

• Chair Scott (R-FL) asked for unique effects of transparency and Mr. Cuban said clear daily prices led patients to shop and that direct contracting without deductibles or prior authorization reduced friction, with contracts to be published.

  Chair Scott asked about policy barriers and Dr. Smith pointed to consolidation by tax advantaged systems and the ACA ban on new or expanded physician owned hospitals.

  Chair Scott asked about TRICARE and VA and Mr. Cuban said Cost Plus often beat TRICARE copays and that PBM opacity and formulary control inflated costs.

  Chair Scott asked about access and Mr. Cuban said some employers obtained GLP 1 carve outs but PBM control of formularies remained the main barrier, and Dr. Moulds said CalPERS gained limited carve out flexibility while evaluating unbundled PBM functions.

  Chair Scott asked about savings and Dr. Smith cited large employer savings from direct contracts while Mr. Cuban said domestic robotic injectables and transparent procurement could further reduce drug spending.

  Chair Scott asked why hospitals had not broadly adopted bundles and Dr. Smith said many now used single case bundles for hospital only care.

  Chair Scott asked about high risk pools and Dr. Lambrew said they delayed care and capped benefits and that integrating people with preexisting conditions worked better.