Hospitals and insurers will howl, but the Trump administration today took a big step toward consumer empowerment with administrative actions designed to increase price transparency for hospital and other medical charges.
Galen Senior Fellow Brian Blase, who was instrumental in developing the executive order on price transparency issued in June, congratulated the administration for its proposed and final rules today. “Transparent prices, particularly linked with incentives for consumers to search for value, will put downward pressure on health care costs and should reduce inefficient spending.”
While skeptics argue that health insurance insulates patients from prices so they have little incentive to seek out the cheapest provider, studies show that when do consumers shop, they can save a lot. For example, people who used a price website in New Hampshire prior to medical imaging visits saved 36%.
Price transparency is a key part of the landmark Choice and Competition report released earlier by the Trump administration (which Brian also was instrumental in creating). And Brian’s latest paper for the Galen Institute on price transparency provides a detailed overview of the successes transparency brings to increasing choices and reducing health costs.
With consumers paying larger and larger shares of their medical bills out of pocket, price transparency helps them to negotiate lower prices. A patient in Georgia was quoted a price of $40,000 for a surgical procedure, but she checked with the Surgery Center of Oklahoma that would do it for $3,500. The patient went back to the Georgia hospital for a better price, and they agreed to do it for $3,500.
Brian explains: “If enough people become shoppers, higher-priced facilities will begin to lower prices. This happened in California when the state adopted a reference pricing model for state employees. The result: a 9 to 14 percentage point increase in the use of low-price facilities and a 17 to 21 percent reduction in prices.”
Transparency also is a key element in addressing surprise billing, as Galen Senior Fellow Doug Badger explains in “How Congress Should Deal with Surprise Medical Bills for Patients.”
Even when they have coverage, patients are often in the dark about the cost of their health care until after they receive the services and get the bill.
Rather than using the sledge hammers of government-set prices or costly and time-consuming arbitration, Doug recommends, for example, requiring hospitals to give patients timely, good-faith estimates in advance of elective procedures so they don’t face huge and unexpected bills afterward from out-of-network providers.
“The best way to protect patients is to let them protect themselves through greater transparency, more information, and more freedom and control over their own health care spending,” Doug says.
The administration’s proposed “Transparency in Coverage” rule would require most employer-based group health plans and health insurance issuers to disclose, in advance, price and cost-sharing information to participants, beneficiaries, and enrollees.
“With this information, patients will have accurate estimates of any out-of-pocket costs they must pay to meet their plan’s deductible, co-pay, or co-insurance requirements,” CMS Administrator Seema Verma says.
“Today’s transparency announcement may be a more significant change to American healthcare markets than any other single thing we’ve done, by shining light on the costs of our shadowy system and finally putting the American patient in control,” HHS Sec. Alex Azar said in making the announcement.
President Trump will feature the announcement in a White House event at 2 p.m. EST today.
Expect a brouhaha from hospitals and insurers. The Federation of American Hospitals said earlier it will “explore its potential legal options.” They can be expected to argue the hospital transparency rule will constrain private contract negotiation and could fuel anti-competitive behavior.
Cynthia Fisher, a strong supporter of the administration’s transparency policies and founder of Patient Rights Advocate, counters: “When armed with the knowledge and information about the negotiated rates and cash prices that providers, insurers, and third-party administrators currently keep shrouded in secrecy, employers and patients can shop for price and quality.”