Stethoscope on money

Every day, millions of Americans check into hospitals, visit physicians, or are treated in clinics. During these visits, patients rarely ask:

  • “How much is this going to cost me?”
  • “What do other doctors, hospitals, or clinics charge for the same procedure?”
  • “If the procedure doesn’t work, do I get a refund?”

This may be because patients are not directly responsible for the full cost of their care. Insured Americans pay their share of premiums and any deductibles, co-payments or co-insurance, and their employer or insurance company worries about the rest.

It’s been noted that even under high deductible health plans (HDHPs), patients pay the first dollars for their care, not the last dollars, so incentives to choose the highest value providers are weak even under an HDHP design. In addition, unlike any other good or service offered in America, it is nearly impossible to find accurate, consistently reported, apples-to-apples comparisons of pricing and total cost of healthcare services.

The end result is increased healthcare costs for everyone. Imagine the effects on the cost of care if patients were motivated, and had the information they needed, to negotiate the cost of healthcare in the same way we do for any other large purchase.

The Trump Administration Takes Action

Leaders in Washington are finally noticing and taking action. Most aggressively, Health and Human Services Secretary Alex Azar has publicly promised that he will use powerful incentives available to his agency to bring transparency in healthcare pricing.

Azar went so far as to outline four priority areas through which HHS will transition to value-based healthcare:

  1. Promoting transparency among providers, payers, pharmaceutical companies, and pharmacies on prices and quality;
  2. Granting U.S. consumers more access to health information through interoperable and accessible health technology;
  3. Experimenting with payment models in Medicare and Medicaid that aim to “drive value and quality;”
  4. Reducing regulatory burdens that hinder the transition toward value-based payments, such as reporting requirements.

These ideas don’t require congressional action. As Secretary of Health and Human Services, Azar has the rulemaking authority to change the way the Medicare and Medicaid programs, representing 37% of total healthcare dollars, pay for care, putting these priority items completely within his scope.

In fact, earlier this month, Centers for Medicare and Medicaid Services (CMS) announced they will require hospitals doing business with Medicaid to post their pricing of services online. CMS Director Seema Verna, in announcing the updated rules, stated, “this is only the beginning” of transparency reform.

President Trump Takes Action

Last Friday, President Trump delivered a highly anticipated speech to outline his plan to reduce drug prices and the cost of healthcare in America, promising to “launch the most sweeping action in history to lower the price of prescription drugs for the American people.” While the plan details, outlined in a blueprint entitled American Patients First, may not live up to the hyperbolic promises, there are some commitments that move the ball forward on transparency that will benefit both the government funded and privately insured.

  • The president has called for an end to the “pharmacy gag clause” which prevents pharmacists from telling Medicare patients when they could pay less out-of-pocket by paying cash and not using insurance.
  • The Food and Drug Administration (FDA) has been asked to evaluate the inclusion of list prices in direct-to-consumer advertising.
  • The FDA will work with the Department of Commerce, the U.S. Trade Representative, and the U.S. Intellectual Property Enforcement Coordinator to better understand, and take action, on the disparity between drug prices in the United States and other countries.
  • CMS has been asked to develop an updated drug pricing dashboard to make Medicare and Medicaid prices more transparent and highlight drugs that have not taken price increases.

Congressional Action Is Needed to Reform Private Markets

Last month, a bipartisan group of U.S. senators announced a healthcare transparency initiative and even proactively sought input from healthcare and patient communities.

In doing so, Senator Bill Cassidy (R-LA), who is leading the coalition, pointed out that “In virtually every other industry, consumers are able to price shop, compare quality and then decide what product best fits their needs. In healthcare, the lack of information and the inability to access it hurts patients and prevents normal market forces from driving competition, lowering prices and improving quality.” The goal of the coalition is to make information accessible so consumers can competitively price their healthcare.

While the coalition is collecting input from the industry, there have already been some bills filed in Congress that address transparency issues. HR 2569, Transparency in All Health Care Pricing Act of 2017, would require all providers of healthcare products and services to disclose all prices, including wholesale, retail, and discounted, that are accepted by that provider. Although introduced a year ago (May 2017), that bill has yet to be scheduled for a public hearing, one of the first steps in a long legislative process. In fact, to date, of the 820 bills filed during this congressional session, only 15 have become law.

States Attempt to Address Directly

While we wait for Congress to create federal transparency standards, some states are starting to set standards of their own.

For example, since October 2014, Massachusetts has required hospitals to provide an online cost estimator. Meanwhile, states like Minnesota, Indiana, and Oregon all have pending legislation of their own that would either require or reward transparency from the healthcare industry.

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