On Monday, President Donald Trump signed an executive order that may shake up the entire system of healthcare.  The goal of the order is to increase transparency in order to help reduce costs and improve the quality of care.  Under the order, patients will gain access to pricing information that is currently not available.  Providers should then be forced to begin competing with each other when opacity is lifted and confusion is removed.

The order calls for hospitals to disclose actual prices for certain items up front. These include many common tests and procedures and out-of-pocket costs, such as deductibles and copays.  Insurers currently disclose their payment rates in the EOB (explanation of benefits), but only after the service is rendered.  If patients have that information ahead of time, they will be able to make informed decisions that are currently not possible.  This type of “pre-determination” of benefits is already often used in the dental insurance arena.

The current lack of information about health care prices is one of the major factors that has pushed up U.S. costs far beyond what is charged in most other countries. The same test or procedure, in the same city, can cost widely different amounts depending on who is performing it and who is paying the bill.  In a June 25th interview on MSNBC, HHS Secretary Alex Azar stated that 70% of inpatient hospital services and 93% of outpatient hospital services are capable of being shopped.  It is also true that hospitals’ list prices don’t reflect what they are actually paid by insurers and government programs.

The order also calls for

  • Easy-to-use tools to enable consumers to shop,
  • Expanded uses for health savings accounts (HSAs), and
  • A plan to improve the government’s various health care quality rating systems for hospitals, nursing homes, and Medicare Advantage plans.

Implementation will be slow and little will change right away. The rule-making process used by federal agencies typically takes months or even years. The details of what information will have to be disclosed and how it will be made available to patients must be worked out, and that will involve complex negotiations between hospitals, insurers, and others affected.

The administration claims that if we don’t control healthcare costs through competition, we may end up with a single-payer system.

The health insurance industry counters that disclosing negotiated prices will only encourage hospitals that are now providing deep discounts to try to raise their rates.  The Federation of American Hospitals, representing for-profit facilities, warned that the regulations may result in higher spending.

If you question the efficacy of transparency and competition, just consider how the price of LASIK eye surgery has dropped over time while the quality has improved. LASIK is a serious medical procedure that consumers pay for without insurance. There is an efficient market for LASIK, and the same concept can work well for healthcare in general.

(Image courtesy LasikPlus)