Health
States target high hospital prices with new price caps and tax-status penalties
A new Indiana law taking effect in September joins efforts in other states to limit what hospitals charge private insurers and employers.
The short version
- A new Indiana law taking full effect on September 1 requires 75 hospitals to offer employers direct contracts capped at 2.6 times Medicare rates.
- By 2029, a second provision of the Indiana law will strip large nonprofit hospitals of their tax-exempt status if they fail to lower prices below a statewide average.
- The reforms reflect a growing national trend as states like Vermont, Delaware, Oregon, Montana, and North Carolina test price limits to control rising commercial healthcare costs.
Key facts
- Indiana's new law requires 75 hospitals to offer direct deals to employers that do not exceed 2.6 times Medicare prices.[NPR]
- Large nonprofit hospitals in Indiana face the loss of their tax-exempt status by 2029 if they fail to bring their prices below a designated statewide average.[NPR]
- A 2017 study by the policy research organization RAND found that some large Indiana hospitals were charging private insurers three to four times Medicare prices.[NPR]
- Oregon saved more than $107 million and cut outpatient prices per procedure by 25% after two years under its own state-employee price cap.[NPR]
- Unlike Indiana's law, Vermont's 2025 price cap law gives state insurance regulators the authority to ensure hospital savings are passed on to patients in the form of lower premiums.[NPR]
What remains uncertain
- It remains uncertain whether Indiana patients will see lower monthly premiums, as the state's law does not mandate insurers to pass along savings from reduced hospital prices.[NPR]
- Economists express concern that price caps do not address underlying competition issues and might incentivize hospitals currently charging below the cap to raise their prices up to it.[NPR]