Forced Priced Disclosure is the Wrong Prescription
President Trump, in a recently signed an Executive Order, paved the way for the forced disclosure and publication of secretly negotiated rates between healthcare providers and private insurers. The apparent goal is to prescribe more transparency and reduce costs. More transparency and informed decisions, what could possibly go wrong? While it sounds good on the surface, there are risks to you, your pocket book and even to access to healthcare, all in the name of prescribing price transparency.
The fact of the matter is, knowing the price of a medical procedure doesn’t predict the full cost. There are just too many variables. A given health diagnosis can be capricious, often leading to additional lab tests, procedures and eventually increased costs. So, published prices will only be the starting point for treatment.
In reality, knowing the negotiated cost of specific procedures doesn’t give us a full view of our own health issues or the cost of getting well. Simply said, most patients aren’t doctors and aren’t able to diagnose what they will need, so, decisions based on price maybe the wrong decision for your health issue.
Forcing providers to disclose prices could also cause malignant growths in marketing strategies by competitors that could actually increase costs. Unnecessary items on sale at your grocery store shift costs to needed items to cover the reduced cost of the sale item. Hernia surgeries, for example may be on sale but the surgery you need could have embedded costs shifted from the bargain procedure. Transparency is not a risk adverse treatment.
One side effect of the President’s latest healthcare prescription is that it would greatly benefit hospitals but could give patients the same headaches as gas stations. Knowing what a competitor charges conveniently allows manipulating prices or at least enable possible price fixing which in effect limits competition and effectually increases costs.
Understandably, hospitals have fewer competitors than gas stations. But you may have noticed that when gas stations are located near or on the same intersection, often the price per gallon is the same. Ten miles over though, the price can vary by 10 to 20% despite the fact that crude oil, the feed stock for gasoline, remains relatively the same. Publishing the secretly negotiated rates between healthcare providers and insurers would make hospitals like gas stations on the same corner. They could fix their prices based on the nearby competitor, not the actual cost or the concept of competition.
Ironically, the biggest concern to many patients is cheap healthcare. Our health is important. Most of us try to eat right, exercise when we can and avoid risky behavior. It is a natural path of self-preservation. So why would we consider the cheapest provider for something as important as our health?
This was confirmed in a study done by the Journal of the American Medical Association of employee healthcare decisions. The study found that transparency pricing tools made available to employees actually increased healthcare spending because their decisions weren’t based on lowest price. We may look for bargains for things we use daily but were far less likely to purchase cheap healthcare, as consumers often affiliate these lower costs with inferior service.
Adopting measures that place additional burdens on healthcare providers could also lead to less rural healthcare access. Many rural healthcare facilities are already struggling to cover operating costs and the cost of complying with arbitrary price disclosure laws could be enough to put them out of business.
We are already experiencing rural hospital closures as noted in recently published data by the U.S. Government Accountability Office (GAO). The study found that 64 rural hospitals closed between 2013 and 2017, more than twice the number of rural hospital closures in the previous five-year period. Another 673 rural hospitals are also vulnerable to shutting down. 16% of Americans already live 30 miles or more away from the closest hospital or emergency care center and this new Executive Order could result in an even broader access crisis for emergency needs.
A cloud of questions cover the prescription of forced price disclosure. It turns out that the cost of treating people can be as complicated as treating them. Even the Federal Trade Commission has warned that adopting these measures will only provide marginal benefit to consumers and could reduce competition in markets. This new Executive Order will likely increase costs, lower the quality of care, even reduce healthcare availability in rural areas and void existing agreements between insurance companies and providers. President Trump is right to pursue lower healthcare costs but this prescription of forced price disclosure is a misdiagnosis.
Todd Tiahrt is a former Member of Congress (1995 to 2011) who served on the Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies
