David Sandman

Most of my family — immediate and extended — don’t fully understand what I do for a living. They know I’m somehow involved with health. Good enough; family is family and I love them.

Given their vague awareness, they often come to me with health care and health insurance related problems. A family member recently sent me an email with the subject line, “Talk about a broken system.” The email continued:

Just received my statement of benefits paid for my medical insurance. In one instance, the amount charged was $1,250. Medicare approved $260; paid 80% of that and my secondary picked up the other 20%. In another case (for an MRI of the abdomen), amount charged was $2,360. Medicare approved $345.63; paid 80% of that with my secondary picking up the other 20%. How messed up is this?

I’m surprised that he even read his explanation of benefits; most people don’t. It’s not surprising, though, that he found it all to be bizarre and byzantine — “messed up,” in his words. He was confused and wanted to know what to do. How could the “charges” ($1,250 and $2,360) be so high, and yet seem to have no relation to the actual “prices” paid by his insurance? In what world can something seem to cost more than $2,000 and yet only a few hundred dollars changes hands? And lucky for him, he has a Medicare supplemental policy that picked up the remaining share of the negotiated price, so his out-of-pocket copay was zero. He walked away from it all confused, disgusted, and very happy when I reassured him that his part of the bill was nothing.

This trip through the twilight zone of health care costs happens all the time. But change could be on the horizon. As David Blumenthal and colleagues wrote recently, “there’s no question that the tectonic plates of public policy are shifting on the issue of price transparency.” Federal policymakers have introduced a number of proposals to make health care information more available and less opaque; many of those ideas are even attracting bipartisan support.

Last month, the Senate HELP committee passed a sweeping, bipartisan proposal with a 20–3 vote to increase transparency and reduce health care costs. Included were measures to tackle surprise medical bills, eliminate “gag clauses” that restrict health plans’ ability to share price information with patients, and require and create a national database of health care costs (known as an all-payer claims database).

The package, called the Lower Health Care Costs Act, also included provisions beyond transparency to tackle health care costs, including measures to increase access to generic drugs, for example.

Also last month, President Trump issued an executive order designed to increase the transparency of health care price and quality information. (The Health Affairs blog has a good summary here.) The details and implementation of the order are left entirely to various federal agencies through regulation and rule-making, so we are left with many unknowns. Central to the order is a call for hospitals to disclose their actual negotiated prices for common procedures and services (those dollar amounts in my relative’s benefits statement, which he received only after the care had been rendered.) This information has historically been considered proprietary, and it’s widely expected that hospitals and insurers would challenge this directive in court. But having accurate price information could enable consumers to make more informed choices about where to get their care and understand ahead of time what they can expect to pay for it. The order also calls for an exploration of ways to make information about out-of-pocket costs more accessible to consumers.

Prices alone aren’t nearly enough to make good decisions. The executive order also addresses issues related to health care quality. Health care experts have long argued about which quality measures are most meaningful and the best way to report and share information about health care quality. Some measures matter to patients much more than others. The President’s order calls for simplified measurements and reporting that would allow patients to compare quality information — along with price information — more easily.

I’m optimistic, but also realistic that there’s no guarantee that any of this will come to fruition. Some price transparency plans have fallen apart just in the last few weeks. A proposed requirement on TV drug advertisements to include the price was recently blocked by the courts, hours before it was to take effect, in the face of pharmaceutical industry opposition. That decision came just days before the Trump administration pulled its own plan to end the drug rebate system, which Health & Human Services Secretary Alex Azar earlier this year described as “a shadowy system of kickbacks.”

And the regulatory details that guide the implementation of any new policy will also matter. I’ve written previously about the requirements that went into effect earlier this year for hospitals to post their prices publicly. It was a good idea in theory, but the execution has been flawed, and the posted information has been of limited utility to patients.

I’ve said it before and I’m sure I’ll say it again: health care transparency alone isn’t going to bring down health care costs or fix the broken system my family member talked about. It isn’t a magic bullet and there are serious limitations: a lot of care isn’t shoppable, the ways that prices are presented to consumers aren’t comprehensible, high prices might be used by some as an inaccurate proxy for quality, information has to be paired with financial incentives, and some people are in insurance arrangements that make them immune to the need for price information.

But greater transparency is absolutely part of a broader solution. Real information can help reduce spending and make markets work better. Transparency can help patients and purchasers make smarter choices and get better value for their health care dollars. People want it; a recent poll showed that 88% of voters favor government action to require insurers, hospitals, doctors, and other providers to disclose the cost of their services and the discounted or negotiated rates between them. Until then, I’m sure my email inbox will stay full with messages from family members and others seeking relief.

By David Sandman, President and CEO, New York Health Foundation
Published in Medium on July 29, 2019

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