The Trump administration’s hospital price transparency rule, upheld by a district court judge this week, will require hospitals to post publicly the rates they negotiate with insurers beginning in January.
President Trump called it a “BIG VICTORY for patients — Federal court UPHOLDS hospital price transparency. Patients deserve to know the price of care BEFORE they enter the hospital. Because of my action, they will. This may very well be bigger than healthcare itself.”
This is undoubtedly false. Price transparency is always a good thing, in health care or any other market. But the effect of Trump’s order is likely to be modest at best.
The idea is that if prices are posted, informed consumers — aka patients — can compare prices between providers for elective surgeries and procedures. This would encourage them to pick lower cost providers and subsequently, providers would lower their prices to remain competitive.
But the jury is still out on how much affect price transparency could have on overall health care costs. One study found that only 2 percent of patients with health plans that offered price transparency tools used them. There are three main reasons that patients are not responsive to price in health care:
1. People with insurance are insulated from health care costs at the point of purchase
2. Patients follow their doctors’ referrals rather than shopping for care on their own
3. Patients see price as a proxy for quality and associate higher prices with higher quality care
Even though they don’t price shop, Americans are still concerned about health care costs. Before the pandemic, 1 in 3 Americans were worried about being able to afford health care. Though price transparency isn’t likely to change consumer behavior, it could help insurers negotiate better prices with hospitals. It remains to be seen. But in the meantime, hospitals are appealing the court’s decision.
To support efforts to reduce health care prices, Congress could:
Require hospitals to post prices publicly. Codifying the rule would render the lawsuit challenging the Trump rule moot.
Empower the FTC. Giving the Federal Trade Commission more resources to review and limit hospital mergers could reduce health care prices. Hospital mergers are continuing despite the pandemic and cash-poor physician practices are selling out to larger hospital chains. The data show that consolidated markets have higher health care prices. Giving the FTC more resources to consider the market implications of these mergers and acquisitions could limit market consolidation and price increases.
Ban surprise bills. Congress could resume negotiations over a comprehensive package to ban surprise medical bills. My preferred approach is a benchmark price for out-of-network services tied to Medicare prices. Tying the benchmark to in-network prices or median charges has perverse incentives to increase in-network prices. Is it politically difficult? Yes. But it’s necessary to both protect patients and to stop the exponential growth of health care costs in the U.S.
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