For My Family and Yours: It’s Still About the Prices
Family members frequently send me emails with questions or complaints about their experiences with the health care system. Usually, they’re not writing about the care itself they are receiving. What has them totally confused and stressed: the prices of care, and how hard it is to make sense of them. Here’s the latest example (btw, the subject line of this email was: Talk About a Broken System):
“My doctor sent an Rx for a cream to my local pharmacy (Walgreens) which is in network. Apparently, the cream is not covered on my insurance and the cost was $188!!! I have two different discount drug cards, so I presented them. The first card quoted a price of $61 which is 1/3 the original price. Stay seated. The other card quoted a price of $26.46 which I paid and got the cream. Of course, I’m glad to have paid a reasonable price but I am upset such disparities exist.”
Back in 2019, I wrote a column called, “Health Care Transparency Can Be Clear As Mud.” Three-and-a-half years later, my relative’s email demonstrates it can still be that way.
But we are making progress. This month, a new federal rule kicked in that requires health insurers (including self-insured employers) to share more price information publicly. First, insurers must post on their websites their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. And in the near future, insurers will also have to post online price-comparison tools.
It is an overwhelming amount of data. These massive and unwieldy files won’t realistically do much for individual patients. But they will allow researchers and entrepreneurial app developers to translate the data and share it in more user-friendly ways. With easy-to-navigate, easy-to compare information, patients will be able to look up prices for anticipated health services. Uninsured patients could also use this information to help negotiate prices with providers.
Some of this is déjà vu all over again; similar federal requirements went into effect for hospitals 18 months ago. That rollout was bumpy, to put it mildly: compliance remains low, and enforcement is weak. One analysis found that, a year after the hospital price transparency rule went into effect, only 14.3% of hospitals nationally were in compliance. And compliance was only 0.5% among hospitals that are part of the nation’s three largest hospital systems. (I wrote more about the hospital transparency rule in a blog post earlier this year.)
Things might be better this time around for a few reasons:
1. Insurers have had more time to get it right. Partially because of the challenges associated with the roll-out of the hospital requirements, federal officials delayed the effective date of the insurer rule by six months. The government provided clearer guidance on requirements and health plans and employers had more time to get ready.
2. The penalties for noncompliance have more teeth. Adoption of the hospital price transparency rule has been slow for many reasons, including the crushing strain that hospitals have been under during the ongoing COVID-19 pandemic. But a challenge from the start was that the penalties for noncompliance were de minimis — $300 per day to start, although that daily maximum increased to $5,500 in 2022 for hospitals with more than 30 beds. For insurers, on the other hand, the penalties are substantial enough that noncompliance could cause real financial pain: $100 per day per violation, for each enrollee affected by the violation. That could very quickly add up to millions of dollars in fines.
3. Available data may spark renegotiations and lead to meaningful change. As a recent piece in Kaiser Health News put it, the new rule means that, “Everyone will know everyone else’s business: for example, how much insurers Aetna and Humana pay the same surgery center for a knee replacement.”
In addition to providing consumers with more actionable information, entrepreneurs may be motivated to create tools specifically for employers and other purchasers of health care to make more cost-effective decisions. These purchasers could use the data to better shop among health plans. This information would be particularly of use to self-insured employers; a study of self-insured employers in Indiana revealed that access to useful price information enabled employers to more effectively negotiate with insurers and providers. Employers and other purchasers of health care could also use this information to select lower-cost, higher-value providers in their network design.
I’ve said it many times: price transparency alone isn’t going to bring down health care costs or fix a broken system. 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 must be paired with financial incentives, and some people are in insurance arrangements that make them immune to the need for price information.
To understand the limitations of these rules (and to laugh out loud), be sure to watch this video.
Ultimately, health care needs to be more affordable and work better for patients. Making price information more widely and easily available is a big step forward. One of these days, a family member may write to me about a trip through the health care system that left them feeling triumphant and empowered rather than beleaguered.
