Who’s afraid of price transparency?
Americans have become accustomed to a health care system that deprives them the most basic information related to the cost of their medical care. Think about the last time you shopped for health insurance. You probably considered the differences between PPOs and HMOs, the network, the deductibles, and the ancillary costs like imaging or lab work. Maybe you considered a plan with a flexible spending account or health savings account. But it’s almost guaranteed that you were unable to actually compare prices of basic services and preventative medicine across insurance plans; as a rule, hospitals and doctors’ offices don’t share them.
Even after the fact, when patients receive an Explanation of Benefits (EOB), the real price is not clear to anyone. For example, one recent procedure had a list price of nearly $10,000, but the covered price for in-network care, based on my insurance company’s pre-negotiated rate for that service, was less than $1,000. For a small business paying for the exact same procedure for an employee, the price may have been $5,000. For a large employer, maybe $1,500. For someone paying cash, they’ve unwittingly entered into a negotiation based on their ability to pay. All of these scenarios are possible, but at no point can a patient discover the actual cash amount the hospital accepted for payment.
President Trump identified part of the problem when he issued his executive order requiring hospitals to publish prices for “shoppable” medical procedures. This move drew immediate outcry from the health care industrial complex. But we should ask ourselves why hospitals and health insurers regard price transparency as such a threat.
Making the cost of medical procedures transparent restores a feature of consumer markets to health care by reinstating price signals and leveling the playing field for new market participants. To start adding market functionality to Americans’ health care, I introduced the Health Care Price Transparency Act. This legislation, which was also introduced in the Senate by Sen. Mike Braun (R-Ind.), will take a page from President Trump’s book and require hospitals to publish prices for some 300 medical procedures online.
While it’s possible that patients might use this information to make informed decisions about where to have a joint replacement surgery, publishing prices puts pressure on the market for health insurance by making the cost of entry clear to newcomers.
Health insurers and medical providers enjoy a cozy relationship. They negotiate prices behind closed doors, and instead of charging consistent prices, patients pay different rates for the same services, depending on their insurance plan and deductible. Not only is this an unfair practice in any other consumer market, it creates distrust of doctors and health insurers. It ends up incentivizing people to avoid seeking medical attention altogether, possibly delaying lifesaving treatment — all because they are afraid of being hit with large and unpredictable bills.
Regulators too, have made it very difficult to enter the market to provide alternatives to the status quo. This is evidenced by the fact that earlier this year three of America’s most visible companies — JP Morgan Chase, Amazon, and Berkshire Hathaway — walked away from their joint venture, Haven, to disrupt the health care system. Despite the size and success of the companies involved, after three years, the collaboration produced some small-scale experiments, but not the large disruption that health insurers feared — and that Americans have longed for.
At the end of the day, American patients are least heard by insurers and most affected by the broken status quo. Unlike other reform proposals, this price discovery requirement offers a light-touch approach to reforming health care that will make it easier for new insurers or businesses to enter the market by enabling competitive price negotiations that are currently not possible.
Our health care system needs price competitiveness to give patients the best quality care at the lowest prices — or to at least allow us all to assess how price and quality are related. Price discovery works in every other sector of the economy and there’s no reason why we can’t embrace the power of the market to improve health care for Americans. I hope that my bill can serve as a starting point to unite Democrats and Republicans to force hospitals and health insurers to move away from “business as usual” and start making changes that restores Americans’ trust that their health care providers are prioritizing affordability and transparency for patients.
Davidson represents the 8th District of Ohio.