May 28, 2019 - Health

Washington's favorite health policy isn't a silver bullet

Illustration of a red cross spinning to reveal money

Illustration: Rebecca Zisser/Axios

Adding more transparency to the health care system's secretive pricing structure is a bipartisan idea that's gotten a lot of interest in Congress and from the Trump administration.

Yes, but: Some experts say transparency alone probably won't do much to lower costs, and could even end up backfiring.

Driving the news: The Trump administration is expected to soon release an executive order mandating the disclosure of health care prices, the Wall Street Journal reported Friday.

  • A new bipartisan Senate bill on health costs also includes several transparency measures.
  • The Health & Human Services Department is also requiring drug companies to include their products' list prices in their TV ads.

What they're saying: Critics argue that the industy's secretive pricing practices support its own bottom line at patients' expense, and causes wild discrepancies in what the same service costs in different places.

  • A recent RAND study found that private insurance plans pay hospitals, on average, 241% of what Medicare pays for the same services — and those rates vary widely from hospital to hospital.

The other side: More transparency could still end up being relatively useless for patients, experts said.

  • "In many cases, patients don’t necessarily know in advance what’s wrong with them and what care they’re going to need, so they don’t know what prices to ask for," the Kaiser Family Foundation's Larry Levitt said.
  • There's evidence that patients don't use the tools already available to them to shop around. And even the prices that providers have negotiated with insurers — which are valuable trade secrets for both industries — don't tell patients their actual costs.
  • "Knowing the underlying cost of a service or drug is unlikely to influence their decision ... since they aren’t paying that price to begin with," Avalere's Chris Sloan said.

Transparency could even lead to higher prices, as providers see what their competitors are getting.

  • "Knowing what concessions everyone is getting or giving can often mean that the low price in the market serves as a floor, rather than a ceiling, in future negotiations and that leads to higher prices over the long term," Sloan added.

The bottom line: At the least, more pricing information could help empower future policymakers.

  • "You’re going to see this jagged mountain range of pricing in the private sector, and it’s going to be pretty darn hard for people to justify it," said John Bardis, a former Trump administration health official. "This is what those who have benefited from opaque pricing practices don’t want to see, because it’s just not defensible.”
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