by Jordan Roberts
Director of Government Affairs, John Locke Foundation
Due to the on-going government shutdown and myriad of other national news stories, you probably missed a significant policy change aimed at hospital prices. The Trump Administration created a new federal rule that hospitals must post their prices to all of the procedures they perform, known as a “chargemaster.”
Price transparency has long been an issue in the healthcare sector because of the convoluted way we pay for healthcare services. Most prices we pay are negotiated prices between hospitals and insurers, which usually have very little to do with actual cost. This new rule would give patients greater access to see what the hospital charges for procedures. Making this information public would give consumers the ability to determine how much their insurance will cover and therefore ultimately a final bill.
However, the chargemasters are difficult to decipher, even for some medical professionals. This lead to the conclusion by many that the new Trump rule would do little to help with the lack of transparency in hospital pricing and surprise medical bills.
Despite criticism, this policy is a step in the right direction. And incremental policy change is all those of us who want to see the healthcare system financed and function very differently, can hope for.
An Op-Ed in the NY Times written by Elisabeth Rosenthal, a former ER doctor turned journalist brilliantly lays out why this new policy, despite much criticism, has the potential to make meaningful, however, incremental, change:
But don’t dismiss the lists as useless. Think of them as raw material to be mined for billing transparency and patient rights. For years, these prices have been a tightly guarded industrial secret. When advocates have tried to wrest them free, hospitals have argued that they are proprietary information. And, hospitals claim, these rates are irrelevant, since — after insurers whittle them down — no one actually pays them.
Of course, the argument is false, and our wallets know it.
First of all, hospitals routinely go after patients without insurance or whose insurer is not in their network. When Wanda Wickizer had a brain hemorrhage in 2013, a Virginia hospital billed her $286,000 after a 20 percent “uninsured” discount on a hospital bill of $357,000 — the list price, according to chargemaster charges. Medicare would have paid less than $100,000 for her treatment.
Second, those list prices form the starting point for negotiations, allowing hospitals and insurers to take credit for beneficence, when there is none.
I recently received an insurance statement for blood tests that were priced at $788.04; my insurer negotiated a “discount” of $725.35, for an agreed-upon price of $62.69 “to help save you money.” My insurer’s price was around 8 percent of the charge. Since my 10 percent co-payment amounted to $6.27, my insurer happily informed me, “you saved 99 percent.”
If a supposedly $1,000 TV is “on sale” for $80, it’s not really a discount. It’s an absurd list price.
Just as airlines have been shown to exaggerate flight times so they can boast about on-time arrivals, hospitals set prices crazy high so they can tout their generous discounts (while insurers tout their negotiating prowess).
It’s going to take public knowledge and outrage to garner the support for major public policy changes in the healthcare system. The federal government spends about one out of every two dollars on healthcare in this country and therefore special interests lobby the government extensively to keep the system in place. Consumers are the ones that are made worse off by bad policy that is entrenched by those who benefit from it. As Ms. Rosenthal accurately concludes:
Although making chargemaster pricing public will not, by itself, reform our high-priced medical system, it is an important first step. Maybe, just maybe, a hospital will think twice before charging a $6,000 “operating room fee” for a routine colonoscopy if its competitor down the street is listing its price at $1,000. Making this information public should bring list prices more in line with what is actually paid by an insurer, a far better measure of value…
..Patients can help, too: Check out your hospital’s price list. If it’s not detailed or complete enough, demand more. For discrete items, like an M.R.I. of the brain or a vitamin D blood test, take the trouble to scan the chargemaster for the item. Reject an overpriced procedure (even if your insurer is paying the bulk of the bill) and take your business elsewhere.