Office of Affordable Health Care urges limits on hospital prices; committee presses on potential risks to rural hospitals

The Office of Affordable Health Care told the Joint Standing Committee on Health and Human Services on Feb. 19 that higher commercial hospital prices are a primary driver of growing health insurance premiums and that states have policy tools to address those prices.

Meg Garrett Reed, executive director of the office, presented claims‑based analyses showing hospital services are the largest component of health‑care spending in Maine and that increases in payments per unit — rather than utilization alone — have driven much of the spending growth. Reed said the office reviewed options used in other states including price‑growth caps (Rhode Island), reference‑based pricing for state public employee plans (Oregon, Washington) and price caps within public option plans (Washington, Colorado). Reed told the committee the evidence indicates market power among hospital systems is a strong predictor of higher commercial prices, while a hospital’s share of public payers (Medicare/Medicaid) is not a consistent explanation.

Reed proposed a policy framework that combines limits on outlier prices with caps on price growth over time; savings from restrained hospital payments could be used to lower premiums or reinvest in primary care and behavioral health. She said Rhode Island’s affordability standards have produced measurable savings and Oregon’s reference‑based approach produced state employee plan savings without clear evidence of operational disruption, but cautioned that differences between states and program scopes matter.

Committee members asked detailed questions. Representative Annie Graham sought clarity about what is included in hospital spending and whether hospital‑employed physician billing is captured; Reed explained the complexity of institutional vs. professional claims. Representative Michael Lemlin warned that price limits could force hospital closures or major payroll cuts in already fragile systems; Reed said research does not show routine closures tied directly to these state interventions and emphasized that exemptions or graduated designs can protect small or rural hospitals. Lawmakers also asked about the interaction with federal changes under HR1 and how to measure system fragility; Reed said there is no single accepted fragility metric and encouraged a multi‑factor approach.

Reed said the office’s recommendation is a calibrated toolkit that could reduce spending growth for hospital facility services, generate savings for consumers and employers, and create fiscal space to invest in primary and behavioral health without increasing premiums. The presentation concluded with a request that the Legislature consider policy options the office will bring forward in its statutory recommendations.