by Jordan Roberts
Director of Government Affairs, John Locke Foundation
Yesterday the President signed an executive order to direct his cabinet agencies to create rules which would increase price transparency in the healthcare sector. The final rules will require hospitals and insurers to disclose their negotiated rates to the public.
Didn’t the Trump Administration already require hospitals to make prices public? Sort of. They required that hospitals make their chargemasters public, which provides the listed price for procedures. The list price and the negotiated price usually vary widely between providers in the same region and sometimes even in the same hospital.
Kaiser Health News has more information on what exactly the Trump Administration hopes to accomplish with the new rules:
It may expand on price information consumers receive.
The order directs agencies to develop rules to require hospitals and insurers to provide information “based on negotiated rates” to the public.
Currently, such rates are hard to get, even for patients, until after medical care is provided. That’s when insured patients get an “explanation of benefits (EOBs),” which shows how much the hospital charged, how much of a discount their insurer received and the amount a patient may owe.
In addition to consumers being unable to get price information upfront in many cases, hospital list prices and negotiated discount rates vary widely by hospital and insurer, even in a region. Uninsured patients often are charged the full amounts.
“People are sick and tired of hospitals playing these games with prices,” said George Nation, a business professor at Lehigh University who studies hospital contract law. “That’s what’s driving all of this.”
Some insurers and hospitals do provide online tools or apps that can help individual patients estimate out-of-pocket costs for a service or procedure ahead of time, but research shows few patients use such tools. Also, many medical services are needed without much notice — think of a heart attack or a broken leg — so shopping simply isn’t possible.
Administration officials say they want patients to have access to more information, including “advance EOBs” outlining anticipated costs before patients get nonemergency medical care. In theory, that would allow consumers to shop around for lower cost care.
There isn’t much agreement in the health policy world as to whether this EO will have the desired effect. In principle, more transparency in health care pricing will benefit patients from unsuspecting surprise and balance bills. However, as was stated in a blog on the Locker Room this morning, there may be unintended consequences of a government mandate to require this. The competition among insurers and providers when negotiating prices for procedures is what sometimes causes prices to fall. Making this information public could have the effect of setting a floor for which prices won’t go below if insurers and providers know what other negotiated rates are. Also, as always, when regulations require additional costs for private entities, those compliance costs will likely be passed on to consumers.
Of course, the devil will be in the details of the final rule proposed by the administration. The healthcare industry will have plenty of time to fight this proposal, so we will have to wait to find out what will be in the rule. Check back for more blogs about this topic in the future. One thing is for sure: by signing this EO, the Trump administration will elevate the topic price transparency in the national discussion.