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Transcript

Ben Markland: Well, thanks everyone for joining us. Today, we're joined with Katie Talento. She is the CEO of AllBetter Health and former White House Health Policy Advisor and Special Assistant to the President, so a big background in healthcare and I believe reform as well. She's left Washington. She was there, what, a couple of decades? Quite some time, and now she's helping employers and people kinda navigate the healthcare maze. So thanks for joining us, Katie. And if you don't mind, tell us a little bit of, of, of your journey and kinda how, what brought you into to healthcare and, and to Washington in general.

Katy Talento: Yeah, so I was actually, I was born in Texas, but I mostly grew up outside of the DC swamp, if you will. So I was kind of around the suburbs my whole childhood, and I could not wait to get away, um, 'cause I thought it was [00:01:00] lame. And, uh, here I am back again. But, so I went to school to like... I, I wanted to be this epidemiologist that quarantined towns and, like, wore spacesuits and stuff. I went off to Africa in my youth and, like, you know, tried to negotiate with warlords and do human rights stuff.

And then I came back and said, "Okay, I'm just gonna work on AIDS and malaria and tuberculosis and things that are not war zones here in America." And I was living on Capitol Hill. I had kinda moved. I thought it was a big move from the boring old suburbs to the inner city DC, and I was, you know, living on Capitol Hill.

I was going to church on Capitol Hill, which became relevant because there were a lot of Hill staffers in my church. And what happened was, you know, I was instantly minding my own business working on AIDS, and I didn't really have any thoughts about ever being in government. I kinda thought government was stupid.

I still think government is stupid, I guess. But what happened was there was this Republican senator, and he switched [00:02:00] parties, and what that did at the time, based on the composition of the Senate, is it flipped the entire party ownership of the Senate. And so then this new guy became the head of the ranking Republican on this committee that oversaw health, and little Republican children don't grow up wanting to be public health experts, so they couldn't find any public health experts to staff this new Republican senator on this committee.

And so my friends at church were like, "Hey, don't you do public health?" And, you know, "Are you a Republican?" I'm like, "I guess. I kinda hate them all." And so that's how I got sucked in, and I s- that was my first Hill job. It was kind of a mid-level job, and I oversaw Public Health Service Act, which was my portfolio.

So that's like CDC, NIH, little bit of FDA, you know, all the disease bills, things like that. And it was my job to kill disease bills, actually, just to make sure they didn't go anywhere. And then I found that I really loved it, and it was kind of this combative, adversarial environment. I loved it, and it was fun.

And so I stayed there on and off for about 15 years on Capitol Hill. I, I tried to escape a couple times. I went off to run malaria programs for ExxonMobil, and then I went off and joined a convent for two years. I was like- Wow, okay ... uh, yeah, so I was constantly trying to escape. Eventually, you know, they suck you back in.

And so- The last senator I worked for, who was the fifth senator, and my friend who was the chief of staff for that guy, um, ran off to... It was 2016, and he ran off to join the Trump campaign to run policy for him. And the next time I saw him, like six weeks later, he was disheveled, chain-smoking, sleep-deprived.

And I was like, "Dude, do you need help? My gosh, like, ugh." And so, um, he's like, "Yes." He, like, kind of grabbed me like a drowning man. He was pulling me under. And that was the beginning of sort of my executive branch adventure. Um, so I worked on the campaign for that summer as a volunteer, then they paid us in the fall right before the election.

Um, we were all up in Trump Tower in New York. And, um, and then into the White House after that. So I was there for about three years until 2019, right before COVID, so thank God I got out before that. But when I got out, I said, "Well, people with my resume basically just go shill for industry. That's what they do.

Like, they're not qualified to do anything else." And so I looked out across the landscape of the opportunities for me, and it was all just apocalyptic, things I couldn't do. Either morally apocalyptic or, like, just in other ways corrupt and gross. So I saw... I had met this little organization called Health Rosetta while I was in the White House, and they were building insurgent interesting health plans for employers, and it just seemed like the one and only bright spot in healthcare, and I just went there.

I just gravitated toward it. And they helped... They kind of took me under their wing and helped teach me how to do this, and I glommed onto other benefits advisors to help learn this. And, um, now I have a good book of business, and I'm building those plans for employers. Um, that's kind of one hat I wear. I also ran the trade group for healthcare sharing ministries for six years.

I just left that. Right. Um, but I sit on the board of healthcare sharing ministry. And, uh, last fall, I started my Substack, AllBetter With Katy Talento, and you can find that at katytalento.com. But that's where I really write about all these things. I write about policy. I write about some natural health issues.

While... During COVID, I kind of got radicalized and became a naturopathic doctor, so, um, I do that as well, and a birth coach, so I do that as well. So I write about kind of natural health and all the systems out there that are, that are trying to control our health and how to hack those systems and take the good where you can get it and gravitate toward the light, you know, in all these areas and, um, really take agency and ownership, whether you're an employer trying to run a health plan or whether you're, uh, a patient in the system, um, or whether you're not a patient and you wanna not be one.

So all those areas are areas I work on. I, I can't really decide for sure what I wanna be when I grow up, so I do a lot of things.

Ben Markland: You do. You do. Very interesting. Well, look, one thing you said that kinda caught my attention, so I, I'm curious when you were working with these senators, um, because I think a lot of people have the perception that, you know, you elect a politician or someone's appointed, and how do they know about everything that's going on in the world?

Did, did you find that, that... Was there a, a, a base knowledge of healthcare in the delivery system at all, or is that, is that where you came in? And I know you mentioned the, the guy went from a normal person to a, a degenerate chain smoker. I mean, he just... You know, they probably get in over their heads pretty quickly, which is why they surround themselves with all these advisors.

I mean, I'm curious, what did you see was the, the level of competence in Washington as far as, you know, healthcare delivery and insurance a- and, and how that all works? 'Cause these are ultimately the guys that are, that are killing the bills or signing them, right?

Katy Talento: Yeah, and I, I wish I could say something inspiring here, but I cannot.

Now, to be fair, I actually worked for pretty good people, and some- Yeah ... of them were, like, exceptionally good people. They were morally good. They had great knowledge about things that they had done in their lives. Um, so you know, they weren't all, like, career politicians, although a couple of them were. But, um, they were smart.

I... There was not one senator I worked for who was a dummy. They were all very smart, very engaged people. None of them, including probably my favorite boss, r- my favorite boss is the president, but my second favorite was the senator who, um, Dr. Tom Coburn from Oklahoma. He was a physician. He delivered babies on the weekend.

Okay. And of course, the physicians most of all think that they know healthcare. Right. But even he, like, they, they do not understand healthcare financing or delivery at all. Not any of them. Now, the physicians, if they've been in practice, in independent practice, they, they do understand sort of the physician side of the experience, which is in no way the only side.

But at least they have that. You know, there's a little bit of a structural flaw in Washington as to why Washington is so terrible at solving problems faced by employers, which of course insure more than half the country, right? 160 million people. So, um- And yet it's, it's like all we ever argue about is the ACA, the 20 million on the ACA Right, right.

Like, why does that suck all the oxygen out of the room when everyone else is getting raped and pillaged as well and, or worse? And so the reason for that is the structural flaw, and the structural flaw is this: [00:09:00] little health policy stars don't grow up wanting to work on the labor subcommittee of the Health Education Labor and Pension Committee in the Senate.

They don't wanna grow up wanting to work on the Education and Workforce Committee in the House. Those are the committees that oversee ERISA. They wanna work on the committees that are known as the health committees, like the Health Subcommittee i- in the Senate, or the, um, Finance Committee, which oversees CMS, so Medicare, Medicaid.

Ben Markland: Right.

And similarly in the House side, Energy and Commerce and the Ways and Means Committees, those two committees oversee CMS and FDA and like, you know. So then all the, like, really smartest, most engaged, most interested people in health policy gravitate towards the, those other committees that really focus on government subsidized care, right?

ACA, Medicaid, Medicare. And meanwhile, the people who work on the committees that oversee ERISA are like pension experts or labor wage union type experts, you know, that are focused on that. So that's like a huge, huge problem. Then we get into the executive branch. Where do we get all our political appointees from to run these agencies?

From these committees-

Ben Markland: Right

Katy Talento: ... on the Capitol Hill, right? So you get a new Republican president, he's gonna like scrape up all the committee staff from Ways and Means and Energy and Commerce and Finance and Health Subcommittee, and he's gonna staff HHS with all those people Who does he staff Department of Labor with?

No one, right? It's pension people. It's, like, w- union busters, right? It's not gonna be, it's not gonna be anyone who knows anything about ERISA and healthcare.

Ben Markland: So they're just on the wrong teams is what it boils down to, right?

Katy Talento: Yeah, and so, and this is true for Democrats too.

Ben Markland: Yeah.

Katy Talento: Like, Democrats don't know anything about n- nothing, I mean, even less potentially about, um...

And we don't even get lobbied on this issue, 'cause a lot of times you learn an issue because you have groups coming to you demanding things or wanting things or wanting to kill things or stop things, wanting help. And so you get all the swampian interests in the healthcare system, whether it's hospitals or drug manufacturers, PBMs, but you never, ever get the businesses coming in to lobby you on healthcare.

They're too busy running their car company. They wanna talk to the government about, like, tariffs or regulations about their car business. They don't ever... They, they don't even understand healthcare. They don't know what's going on with their healthcare plan. They have no idea why it's a disaster, right?

So they don't even know what to ask for from Washington. And so we do not get lobbied by those, by those, like, trade groups for businesses or whatever. Never. Almost never. And I can only think of really one group that is effective at lobbying for employer-sponsored healthcare, and they're kind of a recent addition to the, to DC.

So that is why nobody in Washington is coming to save you employers. You're gonna have to save yourself.

Ben Markland: Right. Well, and, and l- that's what brokers are for, right? Which I know you are a broker as well, and, and I have read some of your stuff, and I know you're one that's doing a lot of creative things that, you know, we here at Morgan White work with a lot of brokers, and there are a lot of things you're doing that a lot of brokers don't have the stomach to do.

I know you deal a little bit with reference-based pricing. Um, so, you know, we've seen that be s- very successful, but you might also have to have the stomach to take your provider to court, right? And so some hospitals, I mean, you know. So I, I'm, I'm curious a little bit of your experience with that a- and, and actually to kind of jump on the back of that- We're starting to see a lot of brokers going towards ICRA, which, you know, now you are talking about individual plans even though they're employer sponsored.

So, you know, I know in this last, the, the, the one big beautiful bill, there was wording in ICRA around there that ended up getting struck out kinda at the, at the last minute. But back to your point, where the, the, the policymakers are focused on this small group of subsidized people on individual insurance when, you know, maybe the benefit to that, maybe the silver lining is that employers start putting people into that bucket too.

And that, that may be a win-win for everyone. I don't know. Um, it- I guess time will tell, but we are seeing more brokers getting interested in this, and I think it's admirable because it's difficult, right? You're taking a, a employer, a group of 50 people, and turning it into 50 individuals that could buy 150 different plans, and somebody has to be the administrator for that, which is where we see all these tech companies starting to come into the space too, 'cause somebody's gotta put together all the pieces.

So I know that's kinda long-winded, but I am curious your experience with reference-based pricing, and I'm curious if, if you're doing anything with ICRA or what your thoughts are on that as well.

Katy Talento: Yes. It's funny you should ask me this, because I'm, I'm literally writing ... My next paid article is gonna be, like, a deep dive into RBP and its many travails-

Ben Markland: Mm-hmm

Katy Talento: um, and some other sort of solutions that we look at too, and there are many trade-offs. Um, so this is v- top of mind for me.

Ben Markland: Um- Okay ...

Katy Talento: I have only run one, and it will be my last reference-based pricing plan.

Ben Markland: Okay.

Katy Talento: I still run it. It, and it was my very first client, a little group of nuns, and those are the nuns that I had been with for two years.

Ben Markland: Okay.

Katy Talento: And I had been one of them. And when I ... You know, I, I ... They were so lovely. I, I'm still obviously very close to them today. And, um, they basically sang me down the aisle, like, Sound of Music style when I got married. They were, like, so wonderful. They were literally the choir at my wedding. Um, so they are the sweetest, and they

But they were desperate, right? They were absolutely getting completely raped and pillaged by Blue Cross, and they had been getting double-digit increases year over year. It's just, like, 120 of them, right? There, this is not a lot of people. Mm-hmm. And you know, I finally ... So I kinda, like, dip my toe in Health Rosetta, and I'm like, "All right.

I, I think I have a solution for y'all." And so I, you know, go to them and I explain this, and I'm really excited about it 'cause I don't know better. Anyway, so we s- we launched this thing, and I think I've probably replaced every single vendor on the plan, like, within the past six years of when we started.

Every single vendor. I'm trying to think if there's one that has not been fired. Um, a couple of those have been mid-year firings, uh, two of them actually. So, uh, we fired repricers twice. I fired a DPC vendor mid-year. We fire... Like, uh, it's been- Horrible, um, in that way. But it's also, for them, cost is the most important thing.

They raise money from donors and benefactors to pay their medical bills, and so for them, cost was the most important, at least at first, right? Until they experience friction and the noise that comes with RBP.

Ben Markland: Somebody gets the balance bill for $10,000 and-

Katy Talento: Yeah. And you know, I'll tell you, though, reference-based pricing has two main problems.

So the, there's the back end problem, like after you get care, the doctor never agreed to that price. They're not gonna take it. They balance bill the patient. The balance bill problem, I think can, I, I have experienced, can be solved for with a good vendor. And so we have had good vendors that do that very well, um, and we've had vendors that I had fired that do it terribly.

Once I replaced that sort of balance bill out of network negotiating vendor, um, with a good one, we never really had a balance bill again. I mean, I, I can count on one hand. And, um, so that is very important. But before that, I mean, it was awful, awful, awful. Like, just you have to get a good vendor, but it, you can, and that can be solved The real problem, the real, uh, friction point for RBP, which at this point cannot be solved very easily, but I'm gonna write about how we're sort of doing it and how I hope it'll be done in the future, is, um, the access friction.

So you don't have a carrier logo on the ID card. You walk into the doctor. "We don't take that card. We don't know this plan." What do you mean? They don't know what self-funding means. They don't know what reference pricing means. It's like these front desk people, or even the practice manager, like they've never heard of any of this.

"You're not in our dropdown menu. Y- we can't take your plan. Y- you're not gonna have an appointment," or, "We'll only see you if you are self-pay." And so that is a huge problem. You have to have a navigation vendor on your plan either... And I know some, a lot of advisors like us will just in-house that. They'll, they've burned through navigation vendors that were subpar that would not actually solve for this, which is what I just, I finally fired our navigation vendor 'cause they were so terrible.

It was just me doing all the navigation. Um, and so yes, you can have good navigation. But still, lots of like people, lots of members, they know where they wanna go, or that they need to go, and they come to you with like, "I wanna go to this doctor," or, "This is the only doctor that's doing this thing." And if that's a no from that provider, like you just have friction.

Or God forbid, like they need to go to this hospital specialist, and they need to right now 'cause it's very acute. It's not an emergency room acute, but it's very acute. And you can't get them in in three days, or you know. This is a major, major problem. And what lots of RBP plans just end up doing is just say, "Okay, just self-pay and we'll reimburse you.

The plan will reimburse you." But then you're paying like whatever they say the cash price is, which often is lower than a carrier-negotiated rate, but sometimes it's just bill charge, right?

Ben Markland: Mm-hmm.

Katy Talento: Um, so sometimes you're overpaying if you do that. But also- For me, these are nuns. They have no income. They have no bank account.

They have like... So to, for them to cash pay is a big deal, and it's a big pain. And, um, we have tried to figure out, well, how can our third-party administrator, who's administering the plan, how can they cash pay on their behalf? And I think, you know, what I'm writing about this week at katytalento.com is actually, like, how do we scale cash pay?

Because no provider is competing on the basis of that cash price right now because-

Ben Markland: Right

Katy Talento: ... very few people are paying that cash price, right? It's just, like, uninsured moguls or people with an extremely high deductible, like $10,000, who have an HSA. Um, so maybe they're cash pay, but not really because even if you've got a plan, if you're using your HSA, then you're using your plan's negotiated rate, not some cash pay rate.

So, um, very few, there's very little market out there for the cash price, and so providers aren't actually competing on that basis, and they won't until cash pay is scaled. Mm-hmm. And I will say, I think we're starting to see signs of that. I know it 'cause we're starting to do it. I think...

Ben Markland: Yeah, I think so as well.

We- we're- we're talking to some people that, that, that, that is their model moving forward.

Katy Talento: That's right. And there are vendors out there that are higher and higher quality vendors are starting to look at this, and TPAs themselves. So I know of two TPAs right now that are, one has already built the cash pay system, and, you know, they'll just pay, their navigators will pay cash, and they'll key in a claim, and now there's a claim for it, and everything's cool.

And then there's another TPA that's working on this, that's building it as we speak. Um, and it's best when it's your TPA that can do it, right? Yeah. 'Cause then you have no, like, integration, you don't have to pay an extra vendor and all that. But, um, I, I do think there are some quality vendors out there that are really useful that do other things as well that you might want to pay for, and therefore, the fact that they do this cash pay thing too is awesome.

So- I am hopeful that this actually is the future. And to speak to your ICRA question, like, this is the path to the post-network world that I'm looking for. I'm, I dream of a post-network world. [00:21:00] And, um, but we're not gonna just get there overnight. There's gonna be this transition period where either you have, like, a bunch of direct contracts or, you know...

Like, nobody's gonna have enough direct contracts to utterly replace a network unless your entire book of business is in one geographical location, and you really have buttoned up a sort of custom network that you offer to all your clients, and you have enough volume to support that network, and now you just have a network that's, like, on your plan that's, like, a wrap for outside your market.

Or, you know. So really, m- most of us cannot actually get away with not having a network. Most clients, employers, are not my nuns. They will not put up with the access friction, period. And so, um, we are in this weird limbo where we all kinda wanna get to this place where we're able to pay cash quickly at scale, that cash price is competitive, and we don't need stupid networks, but we can't get there yet.

And one of the reasons we can't get there, and this is really where I think government may have to come in, either as enforcers, like with Department of Justice and DOL, or, um, Congress will pass a law. But there's openness to all of this at those, uh, legislative and executive branch agencies. Um, the reason why we can't do this, the reason why I call it the Underground Railroad, the Cash Pay Underground Railroad, is because everyone's contracts with their networks, the providers have their contract with the network, the employer has a contract with the network, the TPA has a contract with the network, um, and the employer often just has a access agreement to use that TPA's contract with their network All those contracts have what I would argue is an illegal anti-competitive provision that says, "Carrier logo on the ID card, that's the rate you're paying.

You submit that claim to the carrier, we will reprice that claim, and if they're not in-network, we'll let you know, and you can bring your out-of-network vendor in onboard, but, um, we're gonna pay what we say we're gonna pay. And by the way, that's higher than the cash price." Which remember insurance's value proposition was supposed to get us rates and discounts that we couldn't get ourselves?

Like, remember that? That is the plantation they have put us all on, and that is what, why I think there may be need for government intervention to come in and say, "Those are anti-competitive contract provisions," or so that's like DOJ antitrust enforcement, or DOL could come in and say, "Those are prohibited transactions because they're conflicts of interest, and as fiduciaries, you can't have that on your plan, so either fire the network or the network has to cha- take those provisions out."

And when that happens, either... And DOJ is running around the country right now suing, um, hospitals for anti-competitive network contract provisions. And so they, they launched one in Ohio. They did the biggest bond villain of them all, New York Pres, just last, last week. And so they're starting to apply the Sherman Antitrust Act to hospitals and network contracts.

And so I'm like, that's great. They're, uh, s- they're taking on some anti-provis- anti-competitive contract provisions. I want them to take on these that I'm talking about. The, like, you can't bypass us. You can't bypass our network. You can't cut a deal with each other, employers and providers, um, a better deal than you can get with us.

Like, you can't come together directly and cut us out. Those provisions are anti-competitive When DOJ starts taking that on, and so either the courts rule them in- anti-competitive or DOL outlaws them, or Congress outlaws them, which I have written legislation should any member of Congress be watching this and want to like, take, do that bill.

When that happens, networks won't be able to say, "You can't use your own price, you can't cut your own deal. You ha- you have to use our crappy price." And so when they do that, we'll all be able to have a network on board as the plan B, and as like, kind of the wrap, and then we can go out and do direct contracts, we can do cash pay if we have the cash pay capability at our TPA or a vendor, and, you know, we can go wild and then use the network as a backup.

But what's gonna happen when that happens, okay? Well then, when it comes time for hospitals to negotiate with carriers their rates, they're gonna say, "You pay me more", I'm the hospital, "You pay me more, Blue Cross, than you've been paying me, or else I'm just gonna go out to my entire town here and I'm gonna offer them a direct contract.

And those employers then aren't gonna need you anymore." And that's great. They'll get a good temporary contract that pays them a ton, and then the employers will be like, "Why did my insurance rates just go up?" Right? 'Cause now, like, okay, so because now they're, they, insurance, insurance isn't keeping those costs down, I don't need this network, I'm gonna fire Blue Cross and I'm gonna build my custom network in town.

This is the path to the post-network world.

Ben Markland: Okay.

Katy Talento: And so that is where I'm trying to lead to the promised land of that. There are some transitions, but I think government will have to help. And then I'm happy to talk about ICRAs, 'cause I think government has a, a, potentially an, a upcoming, uh, improvements on that front.

Ben Markland: Well, you know, to me the irony of the whole thing is if they're ex- they're accepting a Medicare price that's lower than e- everything we just talked about, right? I mean, if you're accepting Medicare, I mean, your reference-based pricing's higher than that, your cash price is higher than that, and they're gonna say no to those, but it's because they want the, the 5X of the insurance pay, right?

And I mean, I don't know.

Katy Talento: Yeah, the only, the only reason that they're gonna take, you know, an RBP price or a lower pri- like a direct contract pri- a lower price than Blue Cross is, the... Or Blue Cross is a bad example 'cause theirs is usually lower, but like, Uniteds or Cignas. The only reason they're gonna take that- is if they're gonna get all the volume, right?

So, and, and that makes sense, but you're right that, like, today you're living on Medicare and Medicaid. So what's the big deal? I, I was lobbied by these guys, and they would come in and they would say, you know, their trade groups would come, the hospital association would come in and, and they would say, "We're gonna die.

We're losing money on every Medicare patient. We're gonna have to close our doors, me, me, me, me, me." You know, like, cry me a river. And then I would go to the National Association of State Health Plans dot org, NASHP.org, where Marilyn Bartlett rolled out her algorithm to show... Marilyn Bartlett, who, like, beat back all the hospitals in Minnesota for the state health employees plan there, and put them all on RBP, which was, like, a, a Christmas miracle that that ever happened.

And, and then she saved the state, like, a gajillion dollars. And she took that model and she took it to the National Association of State Employee Health Plans, right, NASHP.org, and she created this cost inter- interactive tool, and you can go on that, that tool, and you can search up any hospital, and it will go through, it will take all the public cost reports that they've filed to the government.

Because remember, they're claiming they're losing money on all these Medicare rates, that they're taking all these Medicare patients and Medicaid patients, and all their costs, you know, their, their, their costs exceed their, um, payments, and they're gonna die. They actually have to file reports to the government every year saying, "Actually, this is what our costs really are."

They also have their, like... Uh, this tool incorporates their payer mix, so if they truly are, like, rural or community or critical access hospitals and they're seeing a bunch of indigent patients, which none of them really are, they all pretend they are, but if that's happening, then, you know, they've got a ton of Medicaid patients and they really are losing on each of those patients probably.

Then that, the tool takes that into account. It takes into account labor cost. Like, a nurse in California, when we hire nurse navigators and it costs like 50% more to do it in California than it, to do it in Ohio or wherever. So their labor costs are factored in there. All their debts are factored in there.

Bad debt, community, um, assessment where they do the charity care, all of that is factored in. And at the end of that process, the tool will show you What is the break even rate? What is the rate they have to charge commercial insurers just to break even? And you can see, oh look, it's 140% of Medicare.

That's weird because you're complaining that you're not gonna, you're gonna go under and die if you get paid 170 that I'm offering you.

Ben Markland: Right.

Katy Talento: Right? And so you can know, like actually what it is that the rate that you can offer them with that is fair. And, and I think that's appropriate because it's not the same for every hospital.

And some hospitals are actually above 150, but very few.

Ben Markland: But and you're saying all the hospitals in Minnesota adhered to this and they're all playing nice? Wow. Uh, that's, that's quite the accomplishment.

Katy Talento: Yes. Well, they, they did for a few years. Okay. None of them liked it. They did for a f- And one of the reasons is because she went to the unions and she educated them, and she, she was hired by the state to like save them from their costs.

Gotcha. And she's a CPA, and she was like, "You can fire me, I don't care. I'm over 65. I'm packing a Medicare card." "Like I don't care if you fire me." But she was basically played chicken with all the hospitals in Montana. And, um- And they, I mean, it was bad. They were like really, really, really... They were lobbying the state legislature.

They were crying, th- threatening to shut the, their doors, threatening to keep all the state employees out of the systems. And so she was like, ugh, in this horrible game of chicken. And then she peeled off the unions, and she started educating them and showing them how they were getting totally screwed, and how if they had these savings, what better benefits they could have.

Mm-hmm. And so, um, she won them over. And so she won the state legislatures over, and, and it was really impressive. But literally, like, the government changed five years later, and they went back to Blue Cross.

Ben Markland: Yeah.

Katy Talento: So it's shocking. You, like- ... the price of vigilance, you must always be vigilant every-

Ben Markland: Right

Katy Talento: year.

Ben Markland: Well, you know, I, I've always been confused, a- a- and correct me if I'm wrong, but if I r- the, the No Surprises Act that passed a few years back, lots of great wording in it, but there was a back door where you could just pay a fine and not have to adhere to the law. And I'm sitting here thinking like, "That doesn't really sound right to me."

A- and, and from what I've heard through the grapevine, lots of major hospitals and providers did the math, and paying the fine was worth more to them than being transparent on their pricing, right? So-

Katy Talento: Yeah, but you're talking about the price transparency regulations ...

Ben Markland: price transparency, right.

Katy Talento: Yes. Right. Yes.

The No Surprises Act is, like, the IDR and out-of-network stuff and-

Ben Markland: That, that's right. Right

Katy Talento: ... al- also kind of a dustup,

Ben Markland: yeah ... you can't have the anesthesiologist not in your network when the hospital-

Katy Talento: Right ... is, right? Okay. Right. Yeah.

Ben Markland: I always... I thought it was odd that you, you can pass a law, but there is a get out of jail free card on the back end of it.

Katy Talento: Well, it's not really. So, um, I, I worked on that regulation-

Ben Markland: Okay ...

Katy Talento: um, spearheaded that regulation for both hospitals and insurers. And we made a calculated choice in that first year, because remember, this was completely radical policy. Like- Right. Right ... and not very Republican policy. I had, I had to fight all the economists and all the free market libertarian, you know, anti-government types inside the government just to get this regulation out the door.

And so regulating, like, showing private contract prices and having a Republican force you to do that, like, was almost impossible.

Ben Marrkland: Right.

Katy Talento: And so we made this, like, calculated, um, decision that- Okay, for the first couple years, like we're not gonna have the penalties be crazy. We're just gonna like see how it goes and, you know, see if we can name and shame them.

Like, 'cause there was a patient organization that was like ready to do so, and they were gonna be- Oh, okay ... like buying billboards and hiring celebrities to do like Super Bowl ads and whatever to like shame hot, which they have done. Um, and so-

Ben Markland: Like, these guys aren't, they're not playing nice. They, they paid the-

Katy Talento: Yeah

Ben Markland: fine.

Katy Talento: Yeah.

Ben Markland: Okay.

Katy Talento: And so we thought, like, let's see how this goes at first, and then we'll see. But then President Trump lost and, um- Mm ... and so I was like terrified that the industries would come in to the Biden administration and get them to back off, which the PBMs did. But, so the net drug pricing transparency has not happened yet.

We had to pass a law just [00:33:00] recently to make that happen. But interestingly, the Biden administration totally doubled down, and they actually like gajillion-tupled the enforcement, so they like 10 times the enforcement penalties.

Ben Markland: Okay.

Katy Talento: Now remember, it's not exactly a get out of jail card because, yes, you have to pay the enforcement penalties, but you also are ruled that like you have to do it.

Ben Markland: Okay.

Katy Talento: So, um, and if you don't, like, yes, you can get civil penalties, but also you can be barred from... Like, if you're a bad actor, you can be barred from participating in Medicare. You can be barred from participating. So there are other levers, eh, but they're not awesome at all. Okay. And so now I think, um, some of the regs that have come out and the laws, actually Congress and DOL basically enacted the same law just like two months ago, that and it was primarily appearing on the surface to be about PBM price transparency and PBM compensation disclosures and conflicts of interest.

But at the end of both of them, [00:34:00] at the end of the law that Congress passed, and at the end of the reg the DOL proposed, um, it's basically like- Yeah, and TPAs too. And so I was like, "Whoa." I had just read, like, 100 pages, and I'm super excited about the PBM stuff, and I'm like, "God, this would be great if it were, like, the carriers, too."

And, and then I saw that and like, oh my gosh. So if you are prohibiting a bunch of conflicts of interest and you're requiring absolute 100% transparency about all revenue streams, all indirect revenue, all business arrangements, like that is major. And, and they put it into ERISA. So this is not just this, like, freestanding price transparency reg.

It's also, like, if you do any of this, it's a prohibited transaction under ERISA, and you as a fiduciary, not just the plan sponsor, they're also saying, any of y'all out there, you PBMs, you vendors, you brokers, any of y'all who are making any decisions about the plan, like what's prior authorized, what... how the appeals process works, what drugs are on the formulary, you know, anything like that, what the plan design is, any decisions that you're making on that plan, you're a fiduciary.

And so all y'all, you vendors out there, you're fiduciaries too. And by the way, if you have all these, like, conflicts of interest and, you know, crappy business models that are screwing over the plan beneficiaries, you're a bad fiduciary, and all of that are prohibited transactions. And you could go to jail and face criminal and civil penalties.

So, um, it's very interesting that they're getting real serious about this.

Ben Markland: That is very interesting. Well, and, and I know it's probably for another conversation, but that pharmaceutical lobby is probably the biggest one out there, right? So they, they don't want anyone messing with their... what, what they're doing.

Katy Talento: They are the... Yes. Um, so- People will ask me, like, "Who are the biggest bond villains in the whole swamp?" You know? And usually my first answer is not the drug makers. Usually it's PBMs and fake charity hospitals. But that's not to diminish the pharmaceutical industry, because they are the biggest lobbying spenders.

So, you know, you have to report your lobbying spending every year, and they spend, like, they have four to five lobbyists for every member of Congress. So that's 535 members of Congress, and they have four or five lobbyists for each of them, and, um, they don't actually, like, assign them to each one, but it's like that's how many lobbyists they have.

And, um, and they are the number one industry on lobbying spending ab- above and beyond. Like, like, the second, third, and fourth, like, bigger than them combined. And, um, but more important than lobbying spending, 'cause I actually think Congress and the executive branch have really started to, like, not really listen to their lobbyists.

I mean, like, they're actually willing to screw over drug makers in a way that I had not seen growing up as a little Republican staffer in the Senate all those years ago. And, you know, back then, we would just knee-jerk whatever the drug industry wanted because we were fighting against, like, Hillarycare, like, total government takeover.

We don't want to set the prices on drugs. We don't wanna, like, eliminate the private market. And we had this, like, knee-jerk defense of these industries even as, under our watch, those industries were becoming less and less defensible, and we still, like, knee-jerk defended them. So I think that now, like, starting with the, basically the Trump administration, 'cause he was so populist, that changed, and that started to change, and Republicans started voting against the pharma industry interests, um, for the first time, and now they're doing it all the time.

And then the Biden administration came in and, like, outright fixed prices in Medicare for the first time. So things are changing. Like, they actually don't have the influence they used to have, even for all that spending that they invest to try to get that influence. And so I would love to, like, take them off the pedestal as, like, the number one bond villain, but I'll also tell you this.

So I'm friends with the FDA commissioner, and when he was first being considered, um, and was potentially going to be nominated, I said to him, "Buddy, you better get right with God, because you're gonna be taking on, like, the powers and principalities in the spiritual forces of evil. Like, your... Like, they're no joke."

And I say that because when I was in the first Trump administration, we had a guy who we had brought in from the PBM industry to help us develop the president's drug pricing plan, because he was, like, very jacked up about, like, trying to get drug prices lower. Still is, um, God bless him. And we, you know, needed to put together a plan, and the HHS secretary brought this guy in, brilliant, wonderful guy, really committed, developed a very subversive, awesome, like, first of its kind to take on these industries plan.

And it would've, like, if enacted, would've really shook things up and, you know, threatened the revenue and business models of these industries. Well, he plummeted to his death off a high balcony-

Ben Markland: Right

Katy Talento: ... um, in the middle of the administration, and it was ruled a suicide. He had a wife and two, and I think two young kids.

He was happy, as mu- happy as any of us could be, like, in the middle of that, like, stressful jobs and-

Ben Markland: Right

**Katy Talento: ... you know, we were always, like, stressed, but, but he was not, as far as I know, like, depressed or suicidal. Maybe I just didn't know him well enough.

Ben Markland: Yeah.

Katy Talento: Or maybe not. And so I'd like to say that the drug makers are kinda losing their edge, and they're not the biggest Bond villains, but, like, also there's that.

And I see them attacking the FDA commissioner, all his deputies, trying to get them all fired every time they do something that threatens in any way the status quo. So it's really bad.

Ben Markland: I mean, that's a, that's an interesting perspective, for sure. Well, Katy, I appreciate you joining us. I think you gave our audience a, an inside perspective that, that we don't really see a whole lot, and, you know, we're, we're working with a lot of brokers that, you know, th- these are the, the companies and the policies that they have to learn, and the companies they're interacting with.

But, you know, I, I don't know that we've had a guest before that's been able to kinda [00:40:00] take us behind the curtain. So I, I really appreciate that, and thanks for your knowledge, and thanks for joining us today, Katy.

Katy Talento: It's my absolute pleasure. Thank you so much for having me.