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Maine Lawmakers Consider Medical Price-Transparency Mandates

May 18, 2017

Free-market experts debate whether the bill would be a win for patients.

A bill under consideration in the Maine Legislature would require health care providers to notify patients of their right to shop for cheaper services and would require health insurers to reward patients who do so.

Under Senate Bill 445, commonly known as a “Right to Shop” bill, insurers would have to develop and implement a program giving patients a financial incentive to shop for less-expensive health care services.

The bill, sponsored by state Sen. Rodney Whittemore (R-Skowhegan) and other Republicans, would require insurers to split savings with program participants. A shopper who obtains a health care service priced at least $50 below the insurer’s average expense for the same service would get at least 50 percent of the savings. If the patient obtains cheaper medical service from an out-of-network provider, the insurer would have to count the expense toward the patient’s deductible.

The Committee on Insurance and Financial Services tabled the bill after a work session on April 20. Maine’s legislature will adjourn on June 14.

One-Stop Shop

Joel Allumbaugh, a senior fellow at the Foundation for Government Accountability, says patients seldom obtain the best dollar-value in health care, typically discovering the costs once it’s too late.

“Patients are spending more and more of their health care dollars with higher deductibles and out-of-pocket spending,” Allumbaugh said. “In almost all cases, there are lower-cost and higher-quality options available that consumers simply don’t know exist. In fact, they rarely know what anything in health care costs until after the fact.”

Widespread failure to compare prices before patients purchase health care services allows providers to charge widely varying prices without regard for quality, Allumbaugh says.

“This lack of transparency contributes to the wild price variation that does exist,” Allumbaugh said. “Can you imagine any other area of our economy where a seller could charge 10 times that of their competitors for a comparable product and thrive, while a high-quality competitor charging a tenth as much struggles to stay in business?”

Potential for Corruption

Dr. Keith Smith, co-founder of the Free Market Medical Association and founder of the Surgery Center of Oklahoma, which posts surgery prices online, says price-transparency mandates would backfire on patients.

“The principles of the market cannot be mandated by government without entertaining all sorts of unintended consequences,” Smith said. “I have said many times that this free-market movement will continue to thrive as long as the government refrains from helping, as they have yet to discover anything that can survive their intervention.”

Maine’s Right to Shop bill could create opportunities for lawmakers to cut deals with special interests and crony suppliers, Smith says.

“The true threat mandates like this represent is an opportunity for legislators to sell exemptions, or worse, redefine ‘transparency’ to suit the price gougers,” Smith said.

Choices, Choices

Patients naturally reject health care providers who fail to deliver services of sufficient value, Smith says.

“The market delivers consequences to those who continuously abuse the buyer, and this natural discipline should be allowed to work undisturbed by mandates like [this],” Smith said.

Allumbaugh, who testified in support of SB 445 on April 13, says patients won’t shop around for better value unless they know competitors exist.

“Health care is one area where we have not typically shopped, nor do many of us know that we can,” Allumbaugh said. “Ninety-eight percent of health insurers offer transparency tools, yet less than 2 percent of policyholders use them. They don’t think of health care as something they have the power to choose and direct.”

Data suggest health care costs would decrease as patients discovered alternative providers, Allumbaugh says.

“A company in New Hampshire called MyMedicalShopper analyzed claims data and determined that, had patients had the information and opportunity to shop just the 100 most common procedures, they could have reduced health care costs for those procedures by more than 70 percent,” Allumbaugh said.

Hurting to Help?

Encouraging patients to shop around will increase their control over their health care decisions, Allumbaugh says.

“This program will drive down health care costs if enough consumers start shopping,” Allumbaugh said. “It is critical that consumers have a seat at the table, and this bill creates that opportunity.”

The mandates in SB 445 would realign incentives for hospitals and insurers to provide better care and lower costs, Allumbaugh says.

“Health care and health insurance are anything but a free market,” Allumbaugh said. “They have both evolved in an environment where consumers are in the dark generally, [about] prices and quality measures. Hospitals and insurance companies have learned to thrive in this environment.”

Smith says inviting lawmakers to meddle in medical pricing exposes patients to unintended consequences.

“‘I’m from the government and here to help’ should send chills down the spine of everyone in the free-market medical care delivery space, just as it should in every other industry,” Smith said.

Emma Vinton (evint7@gmail.com) writes from Troy, Michigan.

Internet Info:

Matthew Glans, “New Right to Shop Health Care Model Could Empower Consumers,” Research & Commentary, The Heartland Institute, April 13, 2017: https://www.heartland.org/publications-resources/publications/research--commentary-new-right-to-shop-health-care-model-could-empower-consumers

Author
Emma Vinton writes from Alexandria, Virginia.