There is nothing as opaque as price transparency in health policy. Insurance companies and hospitals say there is no place for it in the healthcare sector, as medicine is more complex than a car or groceries.
Other skeptics say the transparency rules are too difficult to enforce. Hospitals have largely violated a two-year-old Trump administration directive that they post their prices online. Parsing the pricing information of compliers appears to be beyond the skill set of most ordinary consumers.
But the real problem is that consumers are still not incentivized to take advantage of the ability to shop around for the best price that price transparency can enable. Policy makers could change this by making some changes to the design of a standard health insurance policy and inviting consumers to share any savings.
It cannot be denied that health care costs are out of control. Total national health spending is projected to increase from $3.8 trillion in 2019 to more than $4.1 trillion in 2020. The cost of hospital services has increased by 200% in the last 20 years.
Health care has become so expensive that four out of 10 Americans tell Gallup they have given up some kind of medical care to save money.
Health care is expensive because prices are skewed by market forces. Insurers negotiate with providers to determine how much they will pay for a service. Patients can be responsible for their first few thousand dollars of healthcare expenses through a deductible. But without access to transparent pricing, comparison-shopping is tough. And they may be limited to a specific network of covered providers, even if those providers are not the lowest-cost or best-quality.
Jonathan Wolfson and Josh Archambault of the Cicero Institute propose to fix this with a model law, which they call the Patient Rights Protection Act. His plan has three phases.
First, it requires hospitals to publish the cash price of their services, not the secret codes or what insurers pay. This will allow patients to truly compare prices and shop to meet their needs, just as they do in every other marketplace.
It may also encourage hospitals with lower prices or higher-than-average quality to advertise their competitive advantage – a move that may prompt their competitors to lower their prices or increase their own quality. Is.
Second, the plan would require insurers to calculate a patient’s deductible payments to out-of-network providers if those payments are less than the lowest in-network rate. This provision will encourage patients to look beyond their provider network for the highest value care.
Finally, the plan would direct insurers to share any savings a patient secures after the deductible is met. Under this provision of the plan, patients can keep half of the difference between the cash cost of care and the lowest in-network rate; His insurer would keep the other half. It is a win win for the patient and the insurer.
Such a plan has many follow-up benefits. As competition drives up the prices of healthcare providers, insurers will be able to lower their own prices – and thus make coverage more affordable. Small businesses may be able to offer more generous plans to their employees without spending much on coverage.
And an army of patients shopping for care could lead to a more efficient allocation of health care resources, as providers and consumers balance their preferences for price, quality and convenience.
Ideas like these could revitalize the free-market healthcare reform conversation. Days after the 2022 midterm elections, axios declared that Republicans were “ready to take power without a health care agenda.”
A plan that finally puts price transparency into practice, and clearly demonstrates the value of market competition, should be seriously considered by the GOP. It could also defy progressive claims that more government—or even Medicare for All—is the only way to fix American health care.
By promoting competition, price transparency has provided higher quality, lower prices and better value in almost every sector of our economy. Health care has been an exception for decades – thanks in large part to government policies that discourage price transparency. Ideas like the Patient’s Rights to Protect Act could inject some much-needed consumerism into health care — to the benefit of patients, insurers, and providers alike.