Starting January 1st, 2019, U.S. hospitals are required by Federal law to post comprehensive price lists online.
Transparency in U.S. Healthcare Costs
Starting in 2019, Medicare will now require hospitals to post a list of standard prices online, making this information readily available to patients and legislators on a widespread and centralized basis for the first time.
“We are just beginning on price transparency. We know that hospitals have this information and we’re asking them to post what they have online.” — Seema Verma, head of the Centers for Medicare and Medicaid Services
The new Federal policy now in effect nationwide was created by the Centers for Medicare and Medicaid Services. It follows a 2006 California law that required hospitals share master price lists on a state-run website.
“It allows policymakers to review the prices that are out there. [It lets them] say, ‘These are starting prices for negotiations with government and insurers, and maybe you’re starting a little too high. Can you really justify this price?’” -Barbara Feder Ostrov, senior correspondent with Kaiser Health News
The (Still) [un]Affordable Care Act
People couldn’t afford their healthcare costs before the Affordable Care Act, people couldn’t afford their health care costs after the Affordable Care Act, and they can’t afford them now.
“It is incredibly important that we find a way forward for change. I believe we owe the American people a better healthcare system and I know you all are here today because you agree. President Trump has heard from so many Americans who are burdened by high healthcare costs — and he is intent on delivering them a better deal. American seniors, even with the protection Medicare affords, spend 14 percent of their household budgets on healthcare. Amazingly, when you count employer contributions, the average American household spends $28,000 a year on healthcare.” -U.S. Department of Health and Human Services Secretary Alex Azar, Nov. 2018
The answer, according to to Azar, is “Value-based healthcare”.
Welcome to Value-Based Healthcare
Value-based healthcare includes four key avenues for driving the U.S. healthcare system towards a value-based transformation:
- Making patients into empowered consumers.
- Making providers into accountable navigators of the health care system
- Paying for outcomes
- Preventing disease before it occurs or progresses
Making Patients into Empowered Consumers
Transparency in hospital prices is the fundamental first step to empowering patients.
It is an understatement to say that the U.S. healthcare system has not historically empowered consumer choice. Prices for drugs and procedures are not at all accessible to the average patient.
Patients as empowered consumers need transparent and detailed information about drug and procedure prices in order to make better decisions.
If you needed an MRI, for instance, and a price list told you having one at your doctor’s office would mean a substantial savings, but the hospital, while more expensive, could see you sooner, you, and your healthcare provider could make a more informed choice.
Procedures, in particular, have opaque pricing models and huge differences in what each person is charged.
“Knowledge is power,” U.S. Department of Health and Human Services Secretary Alex Azar says, “And knowing more information can lead to better healthcare.”
Azar is no stranger to opaque pricing models himself.
“Meanwhile, with regard to the pricing transparency element of the proposed rule, I want to share a personal story. A few years ago, my doctor, whom I love — wanted me to do a routine echocardio stress test. I thought this would be very routine. But his practice is connected to a major medical center. And so, instead of being referred for a [physician practice-based stress test], I was sent a few floors down, sent to a woman who was asking the same questions I’d answered before. Before I know it, I had a plastic wristband, and I had been admitted to the hospital. And I was going to be paying for that test out of pocket, because I was in a high-deductible health plan. And as someone who works in healthcare, I knew that that cost has just jumped.”
“I asked how much that test would cost, and I was told that that information wasn’t available. Eventually, the manager of the clinic appeared, and said that the list price was $5,500. I knew that wasn’t the right answer either, but rather, the price that my insurance company had negotiated. That information didn’t come easily either, but eventually I found out it was $3,500. So I looked up what it would cost if I received this procedure in a doctor’s office, which was $550. Now there I was, the former Deputy Secretary of Health and Human Services for the United States — and that’s the amount of effort I needed to make to get that information. What if I was a busy parent who just trusted their doctor and the system? A twenty-something, just enrolled in a high-deductible plan?” -Alex Azar
Transparency Growing Pains
Now that pricing information will be made available online and in a machine readable format, more pricing accountability, process improvements and more user-friendly interfaces are inevitable.
But the transition won’t be easy.
A hospital’s standard rates aren’t at all standard; what insurance companies, patients, insurers and government programs like Medicare pay can vary widely, and vary from one hospital to the next.
In addition, the lists themselves are so massive they are known as “chargemasters” by hospital administrators.
“List prices, chargemaster prices- like a hotel room rate that you might see posted on the door of a hotel room- hardly anybody ever pays that list price. Usually, it’s negotiated.” -Barbara Feder Ostrov, Kaiser Health News
Which is fine, as long as you have someone who understands the system to negotiate on your behalf.
Critics who argue that knowing what something costs won’t really help or empower patients all that much, and that most people don’t want to shop and aren’t in charge of what procedures they get anyway are kidding themselves.
That can all be refuted in two words: Medical Tourism.
So many Americans are planning major medical procedures abroad to save money now, medical tourism even has its own magazine. Top 10 Medical Tourism Destinations in the World.
U.S. patients deserve to understand what they are being charged for medical procedures and why. Transparency is the crucial first step toward empowered patients and affordable healthcare for everyone.
(contributing writer, Brooke Bell)