Volume 59, Number 2

Policy Essay

Articles

Note

Volume 59, Issue 1

Policy Essay

Representative Andy Levin & Colton Puckett
1

Articles

Kimberly Jenkins Robinson
35
Kristen Underhill & Ian Ayres
101
Jaime S. King, Katherine L. Gudiksen, & Erin C. Fuse Brown
145

Note

Christopher Cruz
223

The State of Gun Law and Policy: Symposium Make-Up Panel This Thursday

Join JOL this Thursday, April 16 from 12-1 for a discussion on the state of gun law and policy with expert panelists: Elizabeth Burke from the Brady Center to Prevent Gun Violence, New Hampshire State Representative, John Burt, and Rob Luther, an attorney, author, and law clerk on the U.S. Court of Appeals for the Seventh Circuit. Panera lunch served!

Firearms in America

A Clear Solution for Health Care Costs

A Clear Solution for Health Care Costs

Nino Monea[*]

 

The market for health care is an economist’s nightmare. Many of the market forces that would militate against rising prices in other industries simply do not exist for the health care market in the United States. Sudden injuries and illnesses create demand uncertainty by preventing consumers from planning in advance when they will purchase care. Third-party payers distort incentives to reduce costs.[2] But perhaps most vexing of all, the true cost of most medical services are obscured, leading to dramatic markups in prices.[3] Anecdotes of overpriced products are widely available. $50 disposable gloves.[4] $500 IV bags.[5] $1,000 toothbrushes.[6] The list goes on and on. All of them are examples of patients, ignorant of the price of a good or service until after it has been charged, who are unable to discern the actual value of their care.

Of course, these are just isolated examples; we may also look to more systematic variations in costs caused by pricing failures. Costs vary widely not just between products, but also between regions. The average cost of a Medicare enrollee in Miami, the most expensive city, verses Honolulu, the least expensive, was $16,000 and $5,300. One might assume that this was simply the result of aging populations, but even spending in the last two years of life showed a dramatic difference between the two cities: $72,000 and $43,000 respectively.[7]

Taken together, pricing failures are estimated to add anywhere from $84-131 billion in unnecessary spending.[8] Greater transparency in health care prices could alleviate these huge disparities in prices. This would take the form of making health care information assessable to consumers online. By allowing consumers to make more informed choices, providers will be forced to compete to lower prices to attract more business. Price transparency has been successful at reducing spending in other industries, such as toll roads and electricity.[9] For example, by making consumers aware of real time prices of the electricity they were using, they chose to shift usage to lower priced, off-peak hours. Additionally, transparency could indirectly lower prices by giving insurance companies more information, and therefore, more bargaining power with care providers. This could allow them to negotiate better prices with hospitals.[10]

It must be noted that the policy solution is not as simple as posting the prices online and leaving market forces to work. The Centers for Medicare and Medicaid Services (CMS) has already posted the raw data for hundreds of hospitals, but it is in a form that is not readily accessible to the average patient. There are three specific principles that must be incorporated into a price transparency policy in order for it to achieve maximum potential effectiveness. First, the disclosure website should be user friendly, and actively promoted. Second, disclosure should include not only sticker price, but also negotiated prices, as well as quality of care information. Third, disclosure must be done with an eye towards preventing collusion among health care providers.

On the first point, as the CMS data release showed, simply putting out raw data does not necessarily provide average consumers with usable information. Some states, by contrast, have turned raw data into helpful information for consumers. After New Hampshire passed a price transparency law, the state’s Insurance Department compiled and published comprehensive information on physician services, out-of-pocket costs, and total prices. In California, visits to the state transparency website spiked after the commencement of a publicity campaign.[11] Making raw price data into something that is useable to consumers—and promoting the use of that information—is essential to controlling health care costs. Closely related to this point, patients should also be provided with information on quality of care, such as mortality rates for procedures, complication rates, and average length of stay, so that they can make informed decision about what procedures they want. A comprehensive price transparency law makes sure that data is translated into useable information and that consumers are aware that the information is available to them.

But regulators must be wary about the dangers of collusion if comprehensive price transparency is enacted. Although collusion is usually associated with secrecy, in markets with high concentration and low competition (such as health care), care providers might take advantage of transparency by raising, rather than lowering, prices to match their rivals. At the same time, firms may have less incentives to cut prices if they know that the move would be matched by other providers, eroding any competitive advantage they would have had.

The Federal Trade Commission (FTC), working with the Department of Justice, is already active in policing anti-competitive behavior. And cases have already been filed against medical device suppliers, pharmaceutical companies, and hospitals for monopolistic practices. Thus, there may be no need for new enforcement laws, so long as current ones are adequately enforced.

So what would be the potential costs and benefits of a disclosure website of the type I am advocating? To account for my lack of methodical rigor, I will be generous when estimating costs, and conservative on benefits. A study from the University of Chicago found that price transparency could be responsible for a 6.5% reduction in the cost of an angioplasty. On a broader scale, a white paper from Thomson Reuters calculated that price transparency could shave off $36 billion in health care spending per year.[12] Costs are a little more difficult to estimate. First, there is the cost of building the actual website. To use a timely comparison, the federal government recently built and rolled out Healthcare.gov. Cost estimates for Healthcare.gov vary, but its staunchest critics claim $350 million.[13] Second, there would be costs of fighting any increase in collusion. The total budget of the Antitrust Division of the Department of Justice is $163 million, and the FTC spends roughly $25 million on “promoting competition” through stopping collusion. Taken together, that’s about $200 million to prevent collusion in all industries. Add the costs together can you get $550 million. Even if you double the costs and halve the benefits, the result is still $1.1 billion in costs for $18 billion in benefits.

Given all this, it appears that in terms of health care, price transparency offers a rare chance to reduce costs without cutting benefits to patients. The challenge now is finding the political will to make it happen.


[*] J.D. Candidate, Harvard Law School, Class of 2017; B.A., Eastern Michigan University.

[2] See Hans B. Christensen, Eric Floyd & Mark Maffett, The Effects of Price Transparency Regulation on Prices in the Healthcare Industry (2013), https://www.bakerinstitute.org/media/files/event/01ce2e80/HPF-paper-AHEC-Floyd.pdf [https://perma.cc/6SH7-QS5T].

[3] See Donald Berwick & Andrew Hackbarth, Eliminating Waste in US Health Care, 307(14) J. Am. Med. Assoc. 1513–16, available at https://jamanetwork.com/journals/jama/fullarticle/1148376 [https://perma.cc/WAB6-EBFZ].

[4] See Lisa Rosenbaum, The Problem with Knowing How Much Your Health Care Costs, The New Yorker (Dec. 20, 2013), http://www.newyorker.com/online/blogs/elements/2013/12/price-transparency-health-care-costs.html [https://perma.cc/5XRC-DAZG].

[5] See Nina Bernstein, How to Charge $546 for Six Liters of Saltwater, N.Y. Times (Aug. 25, 2013), http://www.nytimes.com/2013/08/27/health/exploring-salines-secret-costs.html [

[6] Tina Rosenberg, The Cure for the $1,000 Toothbrush, N.Y. Times (Aug. 13, 2013), https://opinionator.blogs.nytimes.com/2013/08/13/the-cure-for-the-1000-toothbrush [https://perma.cc/JJ9Q-49HH].

[7] The Unsustainable Cost of Health Care, Social Security Advisory Bd. (2009), at 1–37.

[8] See supra note 2.

[9] Increasing Transparency in the Pricing of Health Care Services and Pharmaceuticals, Cong. Budget Office, at 4–5 (June 5, 2008), available at https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/92xx/doc9284/06-05-pricetransparency.pdf [https://perma.cc/V2V2-49R5].

[10] Morgan Muir, Stephanie Alessi & Jaime King, Clarifying Costs: Can Increase Price Transparency Reduce Health Spending, 4 Wm. & Mary Pol’y Rev. 319 (2013).

[11] Health Care Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain Prior to Receiving Care, U.S. Gov’t Accountability Office (Sept. 2011), available at https://www.gao.gov/assets/590/585400.pdf [https://perma.cc/3553-9LQK].

[12] Bobbi Coluni, White Paper, Save $36 Billion in U.S. Healthcare Spending through Price Transparency, Thomson Reuters (Feb. 2012), available at http://64.64.16.103/wp-content/uploads/sites/17/2012/09/thomsonreuters_savings_from_price_transparency.pdf [https://perma.cc/MNK6-GVGD].

[13] See Glenn Kessler, How much did HealthCare.gov cost?, Wash. Post: Fact Checker (Oct. 24, 2013), https://www.washingtonpost.com/news/fact-checker/wp/2013/10/24/how-much-did-healthcare-gov-cost [https://perma.cc/P266-8GME].

Liar, Liar…Possible Changes Ahead for Lie Detection Legislation

Liar, Liar…Possible Changes Ahead for Lie Detection Legislation

Jenna Tynan[*]

 

Most of us experience the distinct pleasure of completing a job application at some point in our lives. One can expect standard questions including name, address, and employment history. Depending on the state, employers may or may not ask questions related to an applicant’s gender orientation, marital status,[2] or criminal history.[3] But how does an employer know if you lie? Recently, I discovered the most curious statement on a Massachusetts-based application: It is unlawful to administer lie detector tests to job applicants. Interestingly enough, Massachusetts law requires that all employment applications display these notifications.[4] An employer who administers an illegal lie detector test faces fines up to $1,000 for initial violations and even imprisonment for subsequent violations. These penalties also apply to employers that fail to provide notice statements on their applications.

Many states actually have similar “lie detector” laws limiting employers’ use of polygraphs and other examinations to test current and prospective employee honesty. These state laws are extensions of the federal Employee Polygraph Protection Act (EPPA),[5] which also prohibits private employers from administering lie detector tests. But state laws can differ drastically from the EPPA. First, the EPPA prohibits only physiological-based lie detecting tests. The Massachusetts Act prohibits using any lie-detecting instrument including written tests. And the EPPA exempts public employees from its provisions, whereas the Massachusetts Act does not. Finally, and most notably, the Massachusetts Act and a similar Maryland statute[6] require that employment applications contain notices that administering lie detector tests constitute illegal employment practices. The EPPA, however, only requires employers to post a description of the Act in the workplace.[7]

Both the EPPA and state lie-detector statutes leave certain employment practices untouched. Employers may still use polygraphs during misconduct investigations. Further, employers may still utilize behavioral interviewing methods.[8] Finally, these laws do not prohibit using Myers-Brigg Type Indicator (MBTI) tests, although using the MBTI as a pre-employment test, however, is generally disfavored.[9] Thus, prospective employers are free to use the STAR (Situation, Task, Action, Result) method of behavioral interviewing. Employers can even discover whether its workforce consists of E-J-S-T’s or I-N-F-P’s, using the Myers-Briggs test. They just can’t use tests to determine if applicants are L-I-A-R’s.

The EPPA and similar statutes have some meaningful benefits for applicants—they prevent employers from using inconsistent or inaccurate diagnostic tools to assess employee honesty.[10] In extreme circumstances, employers could use lie detecting examination results to hide discriminatory employment practices. For example, an employer’s firing decision may be driven by race-based, age-based, or gender-based motives. Yet, the employer could point to a failed lie detecting examination to support its decision, thereby concealing its discriminatory motive. Arguably, the EPPA and similar statutes also benefit employers by forcing them to utilize more probing and reliable reference checks than uncertain lie detection diagnostics. Moreover, if polygraph examinations were common employment practices, those employers forgoing the costly tests would potentially face greater liability under negligent hiring or negligent retention claims.[11]

Despite these potential benefits, the EPPA and state lie detector statutes have serious drawbacks. First, what “employers” are covered? This question may be especially tricky for volunteer organizations when the line between employee and volunteer begins to blur. Next, small businesses and those using online application systems bear a substantial risk of violating the notice provision of lie detector laws. Small businesses may be unaware of the law’s notice requirements. Moreover, online application systems may not effectively display notice statements on applications. Massachusetts’ businesses face minimum fines of $300 for initial violations, and senior officials may be imprisoned up to ninety days for repeat violations.[12]

A more serious concern, however, is what “employees” are covered. In this respect, the scope of these laws may go too far. For example, these laws prohibit polygraph tests for employees who are entrusted to care for loved ones. With harrowing stories of child abuse at home and at care facilities, it may be time for another carve out. Notably, the EPPA and other state statutes do exempt certain employees from polygraph protection.[13] Nevada, for example, allows polygraph tests to be given to manufacturers of controlled substances. Rep. Dennis Ross (R-FL) likely had these exemptions in mind when he recently introduced the “Protecting Our Children Act.”[14] The proposed law would exempt applicants who provide childcare from the protections of the EPPA. But the proposed law would prevent employers from subjecting current caregivers to polygraph analysis except for investigatory purposes.

Rep. Ross’ bill would restrict the EPPA’s application. And if the bill does pass into a law, some states may be inspired to add similar exemptions to allow for testing of child caregivers. State legislators may even find that more intensive statutory revisions are required. For now, Massachusetts-based job applications will still don curious lie detector notices. But no lie detector test can tell for how long.


[*] J.D. Candidate, Harvard Law School, 2016.

[2] Federal Laws Prohibiting Job Discrimination Questions And Answers, U.S. Equal Employment Opportunity Comm’n (Nov. 21, 2009), http://www.eeoc.gov/facts/qanda.html [https://perma.cc/8DGW-8NGW].

[3] FAQ, Ban the Box Campaign, http://bantheboxcampaign.org/faq/ [https://perma.cc/CGG9-5DZR].

[4] Mass. Gen. Laws Ann. ch. 149, § 19B (West 2014).

[5] Employee Polygraph Protection Act of 1988 (“EPPA”), Pub. L. 100-347, 102 Stat. 646.

[6] Md. Code Ann. Lab. & Empl. § 3-702 (West 2014).

[7] EPPA § 2003, supra note 4.

[8] Kathy Gurchiek, Behavioral Interviewing Popular, but Training in Use Urged, Soc. For Human Resource Mgmt. (Jan. 28, 2008), https://www.shrm.org/hr-today/news/hr-news/Pages/behavioralinterviewingpopular.aspx [https://perma.cc/HR64-CZ83].

[9] Pre-Employment Tests: What About the Myers-Briggs?, EmployTest (Mar. 16, 2011), https://www.employtest.com/employment-testing-blog/bid/58574/Pre-Employment-Tests-What-About-the-Myers-Briggs [https://perma.cc/ZHQ2-4C5S] (“The MBTI results do not translate well to the aggregate level. In effect, it does not create a “type” that can aptly describe a group of individuals, such as a work team within a company.”).

[10] The Truth About Lie Detectors (aka Polygraph Tests), Am. Psych. Assoc. (Aug. 5, 2004), https://www.apa.org/research/action/polygraph.aspx [https://perma.cc/S5CZ-GM3C] (“Most psychologists agree that there is little evidence that polygraph tests can accurately detect lies.”).

[11] See generally Nesheba M. Kittling, Negligent Hiring and Negligent Retention: A State by State Analysis, Am. Bar. Assoc. (Nov. 6, 2010), https://www.americanbar.org/content/dam/aba/administrative/labor_law/meetings/2010/annualconference/087.authcheckdam.pdf [https://perma.cc/AGW4-GZMD].

[12] See supra note 3.

[13] See supra note 4 (exempting, e.g., federal, state, and local governments, private individuals engaged in national security-related activities, and private employees of companies in the security and pharmaceutical sectors).

[14] H.R. 4954, 113th Cong. (2014).