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President Takes Aim at Health Care Costs by Promoting Transparency

July 24, 2019

In a far-reaching executive order, President Trump directed the U.S. Department of Health and Human Services (HHS) to spearhead a multiagency effort to assist patients in making informed decisions when addressing their health care needs.

The initiative calls for the drafting of a rule requiring hospitals, clinics, doctors, and insurance companies to disclose hitherto closely guarded pricing information and to inform patients of out-of-pocket expenses in advance.

“Opaque pricing structures may benefit powerful special groups, such as large hospital systems and insurance companies, but they generally leave patients and taxpayers worse off than would a more transparent system,” Trump said in the June 24 order.

In addition to HHS, the White House plan will involve the departments of Treasury, Labor, Defense, and Veterans’ Affairs in a series of rulemakings over the next two to six months.

Disclosing Negotiated Rates

The centerpiece of the Trump initiative is a provision in the executive order directingthe secretary of HHS, within 60 days of the issuance of the order, to propose a regulation to “require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and common or shoppable items and services, in an easy-to-understand, consumer-friendly, and machine readable format using consensus-based data standards that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals.”

The regulation would also require the posting of standard charge information for services, supplies, and fees billed by the hospital or by employees of the hospital. Also, within 90 days of the issuance of the executive order, agencies must propose a regulation requiring “health care providers, health insurance insurers, and self-insured group health plans to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.” Providers and insurers would be required to give patients good-faith estimates of their expected out-of-pocket expenses for health services within 48 hours of the request.

Another key provision of the order directs the Department of the Treasury to enhance consumers’ use of health savings accounts (HSA) by expanding the range of services for which HSA dollars can be used.

Room for Adjustment

At a media briefing before Trump’s Oval Office announcement, administration officials readily acknowledged many details have yet to be worked out, thus adding importance to the public comments that will be submitted on the proposals.

Asked during the briefing what level of detail on pricing hospitals would have to disclose, and whether the required disclosures would include rates insurers have negotiated with hospitals, an unnamed senior administration official said determining such matters would be part of the rulemaking process. The order’s language “leaves room for us to … work with industry to determine the level of detail that will have to be made public,” the official said.

Industry groups are already mobilizing against the order’s provisions for disclosing negotiated rates.

Matt Eyles, president of America’s Health Insurance Plans, the industry’s leading trade group, told the Washington Post(June 24) his association supports giving patients accurate, real-time information about costs so they can make informed decisions, “But publicly disclosing negotiated, proprietary rates will reduce competition and push prices higher—not lower—for consumers, patients, and taxpayers,” Eyles told thePost.

 

New Hampshire’s Experience

The Trump plan resembles a hospital price-transparency law that has been on the books in New Hampshire since 2007. Under the Granite State law, prices charged by individual hospitals for biopsies, magnetic resonance imaging (MRIs), gall bladder surgery, blood tests, emergency room visits, and other services—around 120 in all—are posted a state website called NH HealthCost.

According to a report in the TheWall Street Journal(June 27), the New Hampshire law has had a modest effect on prices charged by hospitals. An analysis of nine million claims in New Hampshire by University of Michigan economist Zach Brown found prices for MRIs and other imaging services with publicly listed rates fell by 1 percent to 2 percent, suggesting that imaging centers lowered prices to be competitive, the Journalreported.

Establishing Consumer Control

Transparency measures are a good step toward restoring a well-functioning health care market, says Grace-Marie Turner, president of the Galen Institute.

“Having transparent prices is essential to getting health costs under control and to giving consumers more control over their health coverage choices,” said Turner.

Examples abound, says Turner.

“People who shop for MRIs, for example, often find huge price differentials—$500 one place and $2,500 another—for the same test,” said Turner. “If consumers were more engaged in seeking the best value for their health care dollars, the market would respond with more options for more affordable health coverage and more sensible pricing for medical services.”

Devon Herrick, a health economist, former hospital accountant, and policy advisor to The Heartland Institute, which publishes Health Care News, says price transparency is a key element of cost control.

“Policymakers all agree that transparency is the goal, but the devil is always in the details,” said Herrick. “What consumers really need is a way to compare prices between different providers to make informed decisions about whom to patronize. Only when a provider risks losing business will it respond by competing in price and making prices more transparent.”

 

Bonner R. Cohen, Ph. D., (bcohen@nationalcenter.org)is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow (CFACT).

 

Internet Info:

 

Executive Order on Improving Price and Quality Transparency in American Health care to Put Patients First, The White House, June 24, 2019: https://www.whitehouse.gov/presidential-actions/executive-order-improving-price-quality-transparency-american-health care-put-patients-first/

 

Fact Sheet: President Donald J. Trump is Putting American Patients First by Making Health care More Transparent, June 24, 2019: https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-putting-american-patients-first-making-health care-transparent/

Author
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
bcohen@nationalcenter.org