Currently, these prices are not available to the public or competing providers and insurers.
The rule would require hospitals to disclose the negotiated rates with specific insurers for at least 300 medical services considered shoppable.
The plan, announced on July 29 as a proposed federal rule, will take effect in January 2020 if approved.
The administration is basing its authority on an Affordable Care Act provision that requires hospitals to make public a list of standard charges for services provided.
The rule is based on the assumption transparency will provide patients more control over health care decisions. In a phone call with reporters on the day the rule was announced, CMS Administrator Seema Verma explained, “Patients have the right to know the price of health care services so they can shop around for the best deal.”
Whether the rule can accomplish that goal is debatable, says John Goodman, president of the Goodman Institute for Public Policy Research and a policy advisor to The Heartland Institute, which publishes Health Care News.
“Transparency may backfire,” said Goodman. “The reason is almost every patient in a hospital is going to exceed his [insurance] deductible. So, patients are unaffected financially by the information.”
In addition, consumers may not be the best judges of published prices, Goodman says.
“There is a tendency across all markets to associate higher cost with higher quality,” said Goodman. “So, patients may choose the higher-priced facility because they assume the care will be better.”
For transparency to achieve real value, consumers have to be in the driver’s seat, says Goodman.
“Transparency without patient empowerment gets the cart before the horse,” said Goodman. “Transparency is never a problem for Canadians who come to this country for hip and knee replacements. That’s because they control the marginal dollars.
“If employers would give their employees the money and let them shop for surgery the way Canadians do, transparency would never be a problem,” said Goodman.
Better Than Nothing?
Price disclosure can have some benefit in a market otherwise stripped of normal forces, as is the case with health care, says Dr. Chad Savage, founder of Your Choice Direct Care and a policy advisor to The Heartland Institute.
“Knowledge of these rates merely acts as a guard against exploitation of low information health care consumers who, without this information, would have no knowledge that they were being fleeced,” said Savage.
Concerns About Bidding Wars
Hospitals and insurance companies oppose mandated price disclosure and could mount a legal challenge to the federal rule if it goes into effect. They express concern that disclosure of privately agreed-upon rates would create bidding wars that drive prices below unsustainable levels.
Savage says that belief has little basis.
“The argument goes that the negotiated prices are so low that the person selling the service could not provide them at this rate to the other buyers and, with them now public, would be less likely to offer them at all to any buyer,” said Savage. That idea, said Savage, “suggests that sellers of services are pricing their services below the cost of providing them. If they are doing that, it would indicate that there is substantial price-shifting to other customers—which those customers would have a right to know—to prop up the inappropriately low negotiated prices.
“Alternatively, the provider of the service, pricing below cost, would be in an untenable financial situation and go out of business,” said Savage. “Assuming neither of these is true, it would mean that other people could likely access the negotiated prices without harm to the seller, because they are selling at a profit.”
Compliance will be discretionary, but failure to participate could be costly, says Goodman.
“The way most health regulations are enforced is by tying them to participation in Medicare,” said Goodman. “So, if a hospital refuses to go along, it can lose its right to treat Medicare patients. Regulations can also be tied to Medicaid and other entitlement spending.”
Kelsey E. Hackem ([email protected]) writes from Washington state.