Drawing comparisons to a “moonshot” in health care is usually reserved for breakthroughs like curing cancer. But no less impactful would be legislation to adopt a health care price-disclosure policy that would empower consumers to better control their health care costs. With transparent prices, consumers would be able to compel competition over cost in the health care marketplace, simply by exercising the opportunity to make fact-based choices.
This mandatory disclosure policy, as proposed in legislation at the Minnesota Legislature, would not be a silver-bullet solution but the addition of a sorely missing tool to rein in soaring health care costs, which should be a bipartisan priority.
The late Uwe Reinhardt, recognized as one of the leading authorities in health care economics for more than four decades, was famous for answering the question about what drives high U.S. health care costs with the assertion: “It’s the prices, stupid.”
Reinhardt emphasized the importance of health care price transparency and suggested that an important factor “facilitating high U.S. prices for health care was the shroud of secrecy draped over the health prices negotiated in the private sector. Those prices were kept as trade secrets. Rare were the physicians, hospitals, imaging centers or other clinicians or health care centers who posted on their websites the prices for frequently performed procedures. Furthermore, few health care practitioners or centers were willing to quote prices over the phone for even standard procedures, such as a normal vaginal delivery.”
The implication of Reinhardt’s remarks was that if patients knew more about the costs of their care services, they and their physicians would make better decisions.
Reinhardt pointed out that price transparency exists in virtually every segment of the U.S. economy except health care. He would raise the question: Why are prices hidden from patients? Perhaps it is not possible to determine the true costs? Or perhaps health care organizations are reluctant, even embarrassed, to reveal the actual costs and price variability to patients, such as the wide disparities in prices from hospital to hospital.
For instance, how can a Caesarean delivery cost $1,100 in one hospital and $2,500 in a hospital across the street? The care might be better, but not $1,400 better. Why does the same device or drug cost two or three or even 10 times more in the United States than in Europe?
To bring down intractably rising health care costs, we have been told for years by employers and health insurance companies to be wise health care consumers. But how can we be wise consumers if we don’t know the actual prices of health care services, products and procedures?
How can we have the often-touted patient-centered, patient-controlled, patient-driven health care system without patients knowing prices upfront?
Unlike retail, in health care bigger is not necessarily cheaper. Unlike retail, in health care frequently there is no price competition, because we don’t know the price. The first step in reducing costs is knowing the costs. Right now, what determines price is … whatever they say.
Consumers are accustomed to retail-level transparency of pricing. Price clarity is now becoming even more important in health care because consumers are paying an increasingly larger share of their health care costs.
The policy formulated by the present players for containment of health care costs has failed. We need a new player to take charge — the patient, the consumer of health care. What does he or she need to know?
The health care industry’s ability to maintain high prices in the United States is based on two marketplace realities: protection from competition and negotiating power. Consumers cannot lower their health care costs because they do not have market power. They cannot be effective negotiators because of a purposeful concealment of price. Price information is market power.
This state legislative session, bills in the Senate (SF 3480) and House (HF 3893) deal with health care price transparency. The legislation could be discussed and voted on in each chamber if there were enough public support and public pressure to do so.
This unprecedented legislation would require providers to disclose to a consumer the price of each product, service or procedure at the time of service or sale.
The website-posted prices would show not only how much the patient is charged but how much reimbursement is paid to providers by private insurance, Medicare and Medicaid programs for the same service. This presentation of actual pricing data would allow for more comparative, competitive price shopping.
A bipartisan policy effort of any sort might seem like a “moonshot” given the current political gridlock. But I believe our legislators, in their advocacy for better health and health care for all Minnesotans, understand that cost can be decisive in patients’ decisions whether to seek timely, appropriate care.
Furthermore, I believe that legislators recognize that this disclosure mandate could help level the playing field for patients by facilitating competition that has been paralyzingly absent from the health care marketplace, leading to spiraling health care spending and health insurance premiums.
I would suggest that if legislators aren’t sure about requiring price transparency, they should ask their constituents. I think we all know the answer.
Carl E. Burkland is a retired family physician in New Prague.