House Subcommittee Hearing on Health Costs Reveals Sharp Divide

A House of Representatives panel examining ways to lower healthcare costs on Wednesday found rare agreement that the nation’s medical system is unsustainably expensive, but lawmakers quickly divided on the rest of the agenda.

They disagreed on what—and who—is driving costs higher, with Republicans promoting direct contracting between employers and healthcare providers, and Democrats arguing that recent cuts to Medicaid and Affordable Care Act coverage threaten to make the problem worse.

The hearing before the House Committee on Education and the Workforce’s Subcommittee on Health, Employment, Labor and Pensions centered on whether employers can reduce their healthcare spending by bypassing traditional insurance companies and negotiating directly with physicians, hospitals and clinics. Witnesses from employer groups and direct primary care organizations argued that doing so reduces administrative costs, improves patient access and allows more healthcare dollars to reach providers.

But the policy discussion repeatedly veered into a broader political debate over H.R. 1, the Republican-backed reconciliation law enacted last year, which scaled back safety net programs like Medicare. The debate culminated in a contentious procedural fight after Representative Randy Fine, R-Florida, accused one witness of lying to Congress.

Competing Visions

Republican lawmakers framed direct contracting as a market-driven alternative to what they described as an increasingly inefficient health insurance system.

Mark Newman, CEO and co-founder of Utah-based Nomi Health Inc., testified that employers currently finance nearly half of all healthcare spending in the U.S. but often have little control over pricing or visibility as to where their money goes. Direct contracting, he said, gives employers the ability to negotiate prices directly with providers while paying claims almost immediately instead of routing payments through multiple intermediaries.

“There is a real price of healthcare that exists,” Newman told lawmakers. “If you simplify the system down to its core, where a provider can deliver care and get paid for it … that’s the nugget that unlocks everything in employer health.”

He pointed to employer clients in Michigan that reduced medical spending by as much as 29% despite statewide commercial healthcare costs continuing to climb. He attributed the savings to lower negotiated rates paid for services, fewer administrative fees and greater pricing transparency.

Chad Savage, founder of Michigan-based YourChoice Direct Care and president of nonprofit DPC Action, argued that direct primary care improves both patient outcomes and employer costs by emphasizing preventive care and easier access to physicians.

“Primary care is the cheapest place to access care,” Savage said. “By freeing up space within the primary care arena, we will actually have lower [emergency room] utilization, which helps everyone.”

Earlier in the hearing, Savage cited studies showing direct primary care arrangements reduced emergency room visits and hospitalizations, including data from one Arizona employer that reported a 14% reduction in emergency department utilization.

Democrats Focus on Coverage Losses

Democrats acknowledged that direct contracting may have merit, but argued that any savings would be overshadowed by millions of Americans losing health insurance.

Brad Woodhouse, president of the D.C.-based Protect Our Care advocacy organization, told lawmakers that H.R. 1’s Medicaid reductions and Affordable Care Act subsidy changes could leave approximately 15 million people without coverage.

“There is no doubt that all these millions of people are losing coverage,” Woodhouse testified. “People show up at the emergency room. They have to be cared for. Those costs move on through the healthcare system. It makes everyone’s premiums go up across the board.”

Representative Bobby Scott, D-Virginia, echoed those concerns, questioning whether employer negotiations alone could solve the problems of a system in which hospitals still must absorb the cost of uncompensated care.

“What the American people are really focused on in terms of their healthcare costs,” Scott said, “is people losing coverage.”

James Gelfand, president and CEO of the ERISA Industry Committee, said employers have successfully negotiated comprehensive direct contracts in some markets, but acknowledged the strategy depends on employers’ ability to negotiate favorable agreements with providers.

Hearing Erupts

The sharpest exchange came near the end of the hearing, when Fine challenged Woodhouse’s repeated reference to Congressional Budget Office estimates that millions would lose health coverage under H.R. 1.

“You lied to Congress,” Fine told the witness after asserting the figures improperly included non-Americans.

Democrats immediately objected, arguing that accusing a witness of criminal conduct violated House decorum rules. Chairman Rick Allen, R-Georgia, briefly recessed the hearing while members debated whether Fine’s remarks should be stricken from the record.

When the hearing resumed, Republicans voted to allow Fine’s comments to stand.

Woodhouse later clarified that he was citing Congressional Budget Office estimates of approximately 10 million people losing Medicaid coverage and another 5 million losing Affordable Care Act coverage.

Despite the partisan clashes, lawmakers from both parties expressed support for increasing the transparency of the healthcare system.

Gelfand argued that employers need greater access to claims data to help them compare prices and eliminate unnecessary spending.

“Nearly one in four healthcare dollars today … is spent on waste,” he testified, adding that better access to pricing information would allow employers to identify fraud, inappropriate facility fees and higher-value providers.