by Jordan Roberts
Director of Government Affairs, John Locke Foundation
The Trump administration is weighing whether to require hospitals, doctors and other healthcare providers to disclose negotiated rates with insurers. According to the Wall Street Journal:
Mandating public disclosure of the rates would upend a longstanding industry practice and put more decision-making power in the hands of patients. Hospitals and insurers typically treat specific prices for medical services as closely held secrets, with contracts between the insurers and hospital systems generally bound by confidentiality agreements.
The U.S. Department of Health and Human Services is seeking public comment on whether patients have a right to see the discounted prices in advance of obtaining care, federal officials said. The invitation for comment—outlined in a little noticed passage of a broader patient-data proposal released last month—is a major step toward a possible rule that could require providers to release such information, they said.
To require this information to be public would be a massive shake-up to the longstanding practice of keeping these contracted rates private. The Trump administration has already required hospitals to publicly post their chargemasters, their listed price for a service. However, the list price and the price an insurer can negotiate are usually very different. If price information were made public, it could shed light on who or what services are driving healthcare spending:
Insurers might demand the same hospital discounts won by competitors, while some hospital systems might push for payment rates that match their crosstown rivals’. If doctors’ negotiated rates become public, other doctors could lower their prices to try to lure away patients..
..The prices charged for health care vary widely depending on whether a provider is in or out of the patient’s insurance network and on the insurer’s undisclosed price agreements with hospitals.
Employers and patients are often unable to see which hospital systems and doctor’s offices are driving prices upward. Some health-care economists argue that the secrecy is a factor in why the U.S. spends more per resident on health care than any other developed nation.
Fully forcing the rates into the open could change the dynamics of the health market. Employers and patients, given clearer comparisons, might change their habits—though consumers often show limited inclination to shop for health-care services, even when they face significant costs under high-deductible health plans.
This proposal certainly would face legal hurdles. However, price transparency and the actual cost of care are two significant aspects of the healthcare debate in the U.S. Very few people know the actual cost of care. The price the patient or insurer ends up with is usually the result of many rebates and discounts which are privately negotiated. This phenomenon is why the NC Treasurer has proposed changing how the State Health Plan pays for claims from a commercial based model where BCBSNC negotiates rates to a reference-based model which indexes reimbursement to Medicare rates. While it remains to be seen if the admininstration will implement this proposal, it does raise some important questions. Namely, how can the industry and policymakers create a more usable and transparent system for patients?