Democrats have been taking incremental steps toward universal health insurance coverage for nearly a century. The latest Affordable Care Act (ACA) subsidy expansions have pushed the U.S. closer to universal coverage than ever before. But skyrocketing health care costs — which makes coverage more expensive for individuals, employers, and the government — continue to hamstring the goal of universal coverage.
In 2021, the average premium for a family of four with employer-sponsored coverage was $22,221. In response to exponentially growing increases in premiums, employers have been shifting costs onto their workers, with the result that roughly half of those with employer-sponsored coverage now are enrolled in high-deductible health plans. The average deductible for a family plan in 2021 was $5,969. No wonder that Americans who don’t have coverage cite high costs as the reason.
U.S. policymakers would like to bring down these high out-of-pocket costs, but don’t have many policy levers to pull. However, in an effort encourage price competition between hospitals, in 2021, the U.S. Center for Medicare and Medicaid Services (CMS) began requiring hospitals post the prices for 300 so-called “shoppable” services, online. They are required disclose “standard charges, including the rates they negotiate with insurance companies and the discounted price a hospital is willing to accept directly from a patient if paid in cash … in a consumer-friendly display” so that patients can view them in advance. The idea is to help patients who haven’t hit their deductibles or don’t have full insurance coverage to shop around for care.
In reality though, only 14% of hospitals are in compliance with the regulation. The Biden administration has increased the maximum non-compliance penalty to $2 million per hospital. But even with the stiffened penalty, many hospitals have decided that with limited enforcement, the fine is worth the risk of non-compliance.
But if the rule were more effectively enforced, would price transparency alone really give consumers a break on their health care expenses? This report looks at how the price transparency rule could reduce health care costs through two mechanisms. First, will the price transparency regulation encourage competition between providers and reduce costs? And secondly, does posting the cash price for shoppable services reduce costs for patients?
This report reviews the status of the price transparency regulation and finds that greater enforcement is needed to achieve the full potential of price transparency. After reviewing cash-pay data from 14 of the 300 “shoppable” billing codes we find that on average, hospitals charge 120% of the commercial insurance rates to cash pay patients. However, there is evidence to suggest that hospitals are inflating their publicly reported cash-pay rates from the rates they charge cash-pay patients at the point of service.
Policymakers need to consider more aggressive ways of obtaining health care pricing information. For example, they could consider requiring all-payer claims databases and even adopting price caps if hospitals refuse to comply with price transparency rules.
