This one proposed regulation has the potential to do more for healthcare price containment and transparency than the 40,000 pages of statues and regulations spawned by the Patient Protection and Affordable Care Act ("PPACA" or "Obamacare"). The Trump Administration is considering a regulation to compel doctors, hospitals and other healthcare providers to make the "secret" agreements on pricing they have in place with the insurance industry publicly available. For the first time in the history of modern insured healthcare in America, the public would actually know the real prices and the free market would be unleashed.
The U.S. Department of Health and Human Services (HHS) is seeking public comment on this proposed regulation. Absolutely everyone should take the time to make their views known here. As the Wall Street Journal Reports, "[t]he request for public comment has been largely overlooked because it was tucked into a 700-page draft regulation released last month on improving patients’ access to their electronic health records. Many insurers and hospital groups declined to discuss the government’s request for comment, saying they were still studying the idea."
The Journal also reports:
'It’s an effort by the president to help put Americans back in control of price ata,' said Dr. Don Rucker, national coordinator for health information technology at the Department of Health and Human Services. 'Our interest is on how can we empower the American public to shop for their care and control it.' Industry officials say the administration faces many hurdles before implementing such price transparency. The move is likely to be met by fierce opposition, including possible legal challenges, from hospitals, doctors groups and insurers since it could have far-reaching impact.
I couldn't agree more. Insurers and providers alike will have a bullseye on the Trump Administration and the officials responsible for implementing this rulemaking. And that is no small lobby, with pockets as deep as one-fifth of the entire U.S. economy. The cash cow of obfuscation, secret discounts, unknown prices and third-party payment would begin a rather strict diet very soon if this information were permitted to flow into the light of day.
I can already imagine insurance plans with very large deductibles paired with massive HSA or HRA accounts and online shopping tools. This will allow patients to spend their own pre-tax healthcare dollars shopping on robust online comparison platforms telling you exactly what your shoulder MRI will cost at the 15 nearest providers. This can lead to the sort of consumerism in healthcare that we've only been partially able to achieve around the edges so far for procedures like Lasik eye surgery, vasectomies or cosmetic surgeries - areas where providers advertise pricing and patients regularly spend their own money.
What kind of arguments are made against this type of transparency and consumerism? Well, as it turns out, embarrassingly weak ones. Consider this one from the Journal's article, "[t]he American Hospital Association said it opposes the move. 'Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market,' said Tom Nickels, an executive vice president of the trade group. 'While we support transparency, this approach misses the mark.'
I actually laughed out loud at this assertion. Yes, it certainly could "undermine choice," particularly in the short run as the most bloated, inefficient and overpriced providers are driven out of business for failing to be competitive. But when has true competition, price transparency and a free-market ever actually hurt the consumer, El Presidente Nicolás Maduro? This assertion isn't ground in reality. Consumer choice will explode as providers begin to compete on price, expensive providers become more efficient, and lower cost options spring up at your local drug or box stores. Then, Healthcare Guru's (like yours truly, thanks Armstrong & Getty) will get busy designing coverage that rewards consumers who shop for price by loading up pre-tax accounts and making online price comparison tools readily available.
The Journal further notes that:
Hospital groups also said the rule is unnecessary because they already publicly release their list prices. Hospitals had to comply with that new Trump administration requirement this year. But the steep discounts that insurers negotiate from the list prices remain kept from public view.
The only thing that matters in that quote is the last sentence. The prior sentences represent another anemic assertion by providers to try and keep their pricing scheme in the dark. No, we don't have to tell you the real prices because we've already published hard to find, unintelligible lists of completely fake prices that nobody ever pays!
In fact, insurers and providers regularly engage in contractual agreements not to disclose the prices they've negotiated as those prices are "proprietary." Yes, that's right, the price is proprietary. I cannot fathom a more un-American, anti-capitalistic circumstance than secret proprietary pricing. First, American workers pay these premiums with mostly hidden dollars as wages are suppressed to pay for year over year double-digit premium escalation. Then when they visit a doctor where they will be expected to pay 20% of the bill, patients are often not permitted to see the price until afterwards. What sort of insanity have we all signed up for here? How have we allowed to let this go on this long?
As the Journal story states:
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.
That last sentence is the understatement of 2019. I realize the year is young, but I cannot comprehend any healthcare economist that would argue that secrecy in pricing is not contributing to our astronomically high healthcare costs.
That this decades-long scam may now begin to crumble because we have a President in place who is so unconventional, bold and outside the norm of traditional party ties is both fitting and ironic. Yes, he is a billionaire businessman widely lauded by many in the business community for the country's current economic growth. But he's clearly not beholden to the $4 trillion dollar healthcare industry the way so many in both parties are. After sharing this story with my friends Jack and Joe of The Armstrong and Getty Radio Show, one of the first questions they asked me was which political party, if any, will support this? Maybe neither.
It will be captivating to see how this rolls forward politically. My suspicion is that the far left third of the Democrat Party will generally support this as a way to stick it to big insurance and giant hospital conglomerates; not because of any affinity for consumer-driven free-markets. I also think that the more libertarian leaning 20 to 30 percent of the Republican Party may support it as a warm embrace of cleaner capitalism and a strong shot across the bow of the crony capitalism that dominates the industry now.
One thing we can be sure of is that any of our elected officials who receive substantial donations from the healthcare industry will come out against this as this threatens the very core of that system. And there are plenty in both parties in that camp. Maybe they won't actually come out against the regulation, as being out publicly loud and proud against telling someone the price before they buy something isn't a particularly good look; even for the most Marxian amongst us. But they will work vehemently during the regulatory sausage making to water down the strength of the rule and do all they can to render it impotent. For more on that, see my discussion as to how the Obama Administration wholly neutered PPACA's individual mandate once it realized it was going to start costing them votes to penalize those who didn't want to buy insurance.
One thing we can be sure of is that any of our elected officials who receive substantial donations from the healthcare industry will come out against this as this threatens the very core of that system. And there are plenty in both parties in that camp. Maybe they won't actually come out against the regulation, as being out publicly loud and proud against telling someone the price before they buy something isn't a particularly good look; even for the most Marxian amongst us. But they will work vehemently during the regulatory sausage making to water down the strength of the rule and do all they can to render it impotent. For more on that, see my discussion as to how the Obama Administration wholly neutered PPACA's individual mandate once it realized it was going to start costing them votes to penalize those who didn't want to buy insurance.
The full article from Stephanie Armour and Anna Wilde Mathews writing at the Wall Street Journal is worth your time to read. In the meantime, here are some other outstanding sections from their story:
... 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.
Commercial health-care markets are rife with complex systems of hidden charges and secret discounts. Policy makers, employers and patients are often unable to see clearly which hospital systems and doctor practices are driving high costs.
The administration’s vision—which would possibly include fines for noncompliance—is to arm patients with information needed to make health-care decisions much like shopping for other consumer services. Rates potentially could be posted on public websites, where consumers would check the negotiated price of a service before they pick a provider. That, in turn, could lead to lower copays or deductibles. ...
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. ...
A group that advocates for patients praised the proposed rule.
“If this rule goes forward, it will be a huge step towards true pricing transparency and will finally allow patients to really see what their costs will be before a service—something that has rarely been possible before,” said Caitlin Donovan, director of outreach and public affairs at the National Patient Advocate Foundation, which advocates for quality health care for people with chronic, debilitating or life-threatening illnesses. ...
Administration officials could move to issue a final rule mandating the disclosure of negotiated rates after the comment period closes May 3.
The move follows a report on health-care markets issued in December by the Trump administration, which called for greater pricing transparency and cited reporting in The Wall Street Journal on the complexity of health costs, among other sources.
Regulators said the authority for requiring price disclosure stems from the 21st Century Cures Act enacted in 2016, which makes blocking of health information illegal under penalty of up to $1 million, and from regulations stemming from federal privacy law. ...
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.
“You can’t shop for care if you don’t know what the prices are,” said HHS’s Mr. Rucker.
Once publicly available, patients may have the benefit of third-party technology companies aggregating the price data and building shopping tools that show the negotiated costs for services charged by various hospitals and providers.
Out-of-network doctors could try to compete with in-network negotiated rates. Health systems that charge higher negotiated rates could lose business if they don’t match competitors’ rates or justify the reasons for their steeper costs. Employers could press their insurers to include hospitals with lower negotiated rates in their networks.
Hospitals are likely to push for insurers to be under the same transparency rules and be required to release the negotiated discounts they pay for patient care.
“They’d need to bring insurers and payers into the equation because they have the data to determine for patients what their costs should be,” said Chip Kahn, president of the Federation of American Hospitals, which represents investor-owned community hospitals and health systems.
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