Hospitals Evade Price Transparency Rule
When President Trump signed an executive order for healthcare price transparency in 2019, hospital lobbyists fumed.
“Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market,” American Hospital Association Executive Vice President Tom Nickels groused in anticipation of the order. “While we support transparency, this approach misses the mark.” Insurance-industry mouthpieces also demurred.
More frankly, they lost and consumers won—or should have.
David Balat, himself a former hospital executive, has strongly advocated requiring healthcare providers to disclose the prices they negotiate with insurance companies. The reasons for this are straightforward: American patients shouldn’t be kept waiting until after undergoing a medical procedure to find out its cost; and foreknowledge of cost aids patients financially by letting them comparison shop. This ultimately puts downward pressure on the prices of medical services.
Balat, who now heads the Texas Public Policy Foundation’s Right on Healthcare initiative, has alarmingly observed hospitals ducking the new rule.
They often do so by publishing mere estimates instead of their negotiated rates. Noncompliance results in a maximum $300-per-day (or $109,500-per-year) fine, and Balat says most of the institutions he has examined are choosing to simply pay it and shirk compliance. Hospital systems Balat has taken to task for this include Memorial Hermann, Ascension, Methodist, CHI Health, and Christus. Among the Texas hospital systems he has looked into so far, the nonprofit Baylor Scott & White is the only one to have precisely complied with Trump’s order.
For the price of a cup of coffee, $5 a month, you can help build the The Houston Courant. Your donation allows content to remain viewable by all, and not hidden behind a paywall.
“The penalties are minimal,” Balat told HC, “and what we’re seeing now is that many of the hospitals are opting to just pay the penalty rather than be transparent and communicate with communities in good faith to show them what the real prices are.”
Healthcare bean counters seem unashamed. In a Twitter exchange with Balat, healthcare economist Michael Bertaut of Blue Cross and Blue Shield of Louisiana said of hospitals’ paying the fine, “I would advise them to do just that. Waaaaayyyy cheaper than compliance. Way cheaper.”
Balat’s reply: “That is the problem. Bottom line over public trust.”
Research suggests this secrecy is costing consumers dearly. Economist Larry Van Horn of Vanderbilt University has found that cash prices for medical services average roughly 40 percent below insurer-negotiated rates.
This hasn’t stopped some anti-market diehards like Ezekiel Emanuel, the main crafter of Obamacare, from weirdly suggesting transparency might lead to higher costs.
“The worry here is, hospitals won’t reduce their price,” Emanuel told CNBC after Trump announced his executive action. “One hospital in the city will look across town and say, oh, he’s getting more. I’m gonna negotiate a higher rate.”
Balat said he “would encourage Dr. Emanuel to read an economics book.”
While Emanuel stipulates that medical costs are too high, he sees price controls, not transparency, as the likely resolution. Price controls are, however, not untested. They’ve long been in use in the Veterans Affairs healthcare system, which, Balat notes, has major shortcomings in terms of quality.
Balat hopes legislators will codify price-transparency requirements in federal law, giving them more durability. Sen. Mike Braun (R-IN) has spearheaded legislation toward this end. Recently retired Texas Congressman Bill Flores (R-17) sponsored similar legislation in the House of Representatives last session.
In the meantime, Right on Healthcare is doing more than most similar organizations to directly empower consumers. This summer, it launched its Healthcare Shopping List (online here), a compilation of online healthcare price-comparison tools. Already, it’s done demonstrable good: Balat recalls a Medicare patient who needed a chemotherapy drug was able to acquire it for $50 per month, rather than the $500-per-month copayment he would have originally paid. A family was able to have their child’s ear tubes removed for a total of $1,500 instead of the $5,000 deductible they originally would have owed.
“Price transparency is not going to be the great solution to fix healthcare; healthcare has a lot of issues,” he said. “But it’s the very first step…. The surprise billing problems that we have today are really a symptom of a much bigger problem, of not seeing what the prices are, not know who’s in network or what’s in network; these are all problems created by both government and the insurance companies. And we’ve got to get to a point where employers and patients are back in control.”
With your $2 a month donation, we can keep writing and pushing the agenda. Your donation allows content to remain viewable by all, and not hidden behind a paywall.
