Biden Continues Trump’s Medical Price Transparency Rules

Last Friday, President Biden signed an executive order directing the Department of Health and Human Services (HHS) to continue enforcing the “price transparency initiatives for hospitals, other providers, and insurers” that were put in place by the Trump administration. The transparency rules aim to increase competition by allowing consumers to make an informed choice about their medical care.

A basic economic assumption is that, in each transaction, people seek to maximize their benefit and minimize the cost. If the cost outweighs the benefit, the transaction will not take place. This principle is what allows for competition. In order for markets to be free, fair, and functioning, both the cost and benefit must be known to consumers—there must be an informed decision. Therefore, when the cost is difficult to ascertain and consumers are unable to find or compare prices, a great issue arises. Price transparency laws seek to remedy this situation by requiring hospitals to be open with consumers about their prices. It is true that consumers do not always have the ability to shop for the lowest price, such as in emergency situations, but a 2018 Federal report on healthcare reform notes that “the vast majority of healthcare services are routine or elective services that can be organized by markets to enhance patient welfare.”

Under the Affordable Care Act (ACA), hospitals are required to “make public a list of the hospital’s standard charges.” Since the ACA’s enactment, HHS merely required hospitals to post their chargemaster, or price list, to satisfy this requirement. When the chargemasters were initially released in 2013, there was significant backlash over the enormously high prices. In response to the outrage, then-vice president of the American Hospital Association, Carol Steinberg, told the Washington Post that chargemasters are “confusing because it’s highly variable and generally not what a consumer would pay. Even an uninsured person isn’t always paying the chargemaster rate.” Essentially, the information was useless and unhelpful for consumers.

In light of this history, the Trump-era rules sought stricter enforcement of the ACA’s price transparency provision in a way that would be benefit consumers and promote competition in the healthcare marketplace. A June 2019 Executive Order called for regulations requiring hospitals “to publicly post standard charge information” as ACA already mandated. But it also went on to clarify how it would be defining this information. The new definition includes “charges and information based on negotiated rates and for common or shoppable items and services.” They must be reported “in an easy-to-understand, consumer-friendly, and machine-readable format using… standards that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals.”

The rule was immediately challenged in court; however, the rule was upheld by both the Federal District and Circuit Courts. So, as planned, the rule went into effect at the beginning of this year. Unfortunately, enforcement has been lacking. By the beginning of April, 32% of hospitals had not posted any of the data required by the rule. Even those who posted some prices did not publish everything. In fact, a March 2021 study found 65 of the nation’s largest 100 hospitals were “unambiguously non-compliant.” This information led a bipartisan group of lawmakers to write a letter to HHS Secretary Becerra asking him to enforce the rule. With President Biden’s latest Executive Order, reinforcing these existing price transparency rules, there is much reason to hope that enforcement will soon follow.

ALEC has had model policy on health care price disclosures that is very similar to the current rules since 2012 and states are also acting to make it easier for consumers to find price data. Nine states have online price comparison tools. States as diverse as Colorado, Florida, and New York have embraced price transparency, providing mechanisms to make it more useful and consumer-friendly.

The Kaiser Family Foundation (KFF) reported earlier this month that the information released by hospitals already “illustrate[s] the huge differences in prices — nationally, regionally and within the same hospital.” They write that the information is particularly helpful in 3 situations:

Patients who are paying cash or who have unmet deductibles may want to compare prices among hospitals to see if driving farther could save them money.

Uninsured patients could ask the hospital for the cash price or attempt to negotiate for the lowest amount the facility accepts from insurers.

Insured patients who get a bill for out-of-network care may find the information helpful because it could empower them to negotiate a discount off the hospitals’ gross charges for that care.

However, this pricing data will only benefit consumers if they know about it and choose to use it. While a 2019 poll showed 88% of Americans support price transparency initiatives, a recent KFF survey showed only 9% are aware of the federal price transparency rules and merely 14% had researched hospital prices in the past 6 months. After enacting these policies, raising public awareness and encouraging usage is crucial for transparency to be a successful policy.

Because most Americans are not used to shopping for health care and our current third-party payer system makes it even more difficult, the benefits of transparency likely won’t happen overnight. But the latest rule pushes price transparency forward, and it makes healthcare in the United States more open, costs more clear, and health care markets more free.

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