Health Care Reform Update: Price Transparency Movement Growing

By Dana Beezley-Smith, Ph.D.
September 25, 2017



healthcare services prices As Washington, D.C., struggles to repeal and replace the Affordable Care Act (ACA), a little-known movement has the potential to upend how insurance companies and health care providers do business.

Legislators had hoped the ACA would constrain health expenditures through various pay-for-performance initiatives. However, value-based programs have largely failed thus far, and cost control remains elusive. Annual federal spending for 2016-26 is projected to grow an average 5.6 percent – 1.1 percentage points higher than growth in the gross domestic product – and to represent 19.9 percent of the total economy by 2026.

Experts differ on the reason for escalating health care costs. William Custer, director of the Center for Health Services Research at Georgia State University, told Politifact that “the major driver of the growth in health expenditures has been new care health technology.”

Christopher Conover, research scholar at Duke University’s Center for Health Policy and Inequalities Research, believes runaway medical outlays result from distortions caused by Americans’ reliance on third-party payers. The biggest problem with the health system, he writes, is the “cost-unconscious consumer.”

“We could create cost-unconscious consumers in virtually any industry in the country if we introduced third-party coverage. Imagine what food prices would be if the government or private insurance covered 89 cents of every dollar, the way we do in health care. With someone else paying the bill, you can be sure shoppers would buy a lot more sirloin instead of hamburger and wouldn’t be particularly picky about the prices they paid for whatever they put into their shopping carts.”

The health industry is unique in that the pricing is relatively opaque. While consumers can easily compare the cost of a cell phone, it’s much more difficult to unearth charges for even routine health services and procedures. Consequently, most patients only learn of their financial responsibilities after receiving the bill.

Health reformers suggest that the ACA’s trend toward high-deductible insurance coverage could motivate Americans to be more cost-aware – while also encouraging providers to compete on price.

“Historically, health providers haven’t been motivated to provide detailed cost information upfront because most insured patients don’t care,” says Ken Congdon, editor at Health IT Outcomes. “I’ve been one of these patients,” he admits.

After receiving medical bills in excess of $10,800 for a 10-minute outpatient procedure, Congdon realized that “the comfort in being ‘covered’ often blinds us to much of the waste and outrageous markups that occur in health care.”

The rates for services and procedures are also highly variable. According to Yale University research, the cost of a knee replacement in Dallas varied by more than double among local providers. In the Atlanta area, the most expensive colonoscopy was priced at more than five times the least costly one.

Support for conspicuous pricing has grown among federal and state policymakers. Congress introduced a national transparency bill in 2010, and in 2013 the federal government released searchable datasets detailing Medicare providers’ charges and reimbursements.

Wisconsin now reports quality and efficiency ratings for family medicine, internal medicine and pediatric practice groups. Hospitals and ambulatory surgical centers in Nebraska must provide a written estimate of their average charges for services.

Traditionally, carriers have regarded the payment rates they contract with hospitals and other professionals as “trade secrets.” However, should the transparency movement proliferate, this information will soon be readily available.

Massachusetts already mandates that all providers reveal, within two days of request, the insurer’s contractually “allowed amount” for a health care provider. New Hampshire, which collects pricing information through an “all-payer claims database,” shares this information on NHHealthCost.nh.gov, permitting prospective patients to view their expected out-of-pocket costs, as well as the charges insurers recognize.

Ohio’s 2015 Healthcare Price Transparency Law directs health care providers to furnish patients written estimates of nonemergency charges, the carrier’s predicted reimbursement and the difference payable by the patient.

The law, which was to be enacted on Jan. 1, has been stalled by a lawsuit brought by a coalition of health industry organizations, including the Ohio Psychological Association. The plaintiffs argue that the law they call the “Stop and Paper Act” will delay treatment provision and unfairly place the burden of determining patient expenses on the backs of providers.

The Catalyst for Payment Reform and the Health Care Incentives Improvement Institute – joint authors of several “report cards” on state transparency efforts – favor New Hampshire’s approach. Publishing pricing information on a consumer-friendly website allows patients “real-time access to a good-faith estimate of the expected costs” based on provider and insurance plan.

“Legislation can prohibit clauses in provider-insurer contracts” and assure that trade secret protection “is not used in ways that harm the public interest.”

Louisiana physician and patient advocate Gerard Gianoli, MD, sees another benefit from insurer industry price transparency: Patients can learn what they’re purchasing with their insurance premium dollars.

“Some may think this is unimportant. But these same people may also wonder why their insurance is not accepted by most of the doctors or hospitals in their town.”

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Dana Beezley-Smith, Ph.D., is in private practice serving children, adults and families in Green, Ohio. Her email is: drdana@me.com

 

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