Perhaps the only thing worse than being told you need to go to the hospital is getting the bill for the treatment you received there. The anxiety surrounding a diagnosis is inevitable, but there’s no excuse for all the angina-generating mystery surrounding the cost of care.
To its credit, the Trump administration is working on multiple fronts to give consumers more information about healthcare prices. On Friday it rolled out the latest of those efforts: a regulation that forces hospitals to reveal what they charge for a wide range of treatments, starting in 2021, and a proposal to require insurers to reveal the patient’s out-of-pocket costs for a scheduled treatment in advance, rather than after the care is provided.
Like much of what President Trump is doing on healthcare, however, the benefits of the proposals aren’t as great as the administration claims. These moves, at least, are well intentioned, unlike the administration’s efforts to undermine the Affordable Care Act and to help healthier Americans at the expense of those in need of comprehensive insurance coverage. But Trump’s faith in the power of market forces to hold down healthcare costs is overblown.
The underlying assumption in Friday’s proposals is that consumers are eager to shop around for their healthcare needs. They should be — there are big differences in prices charged by providers for various services. For example, getting a knee replacement in California could cost you as little as $30,000 or as much as $60,000, according to Guroo.com.
And because insurers also want to hold down healthcare spending, some of them have rolled out price- and quality-comparison tools to help their customers find better deals and lower their costs. But so far, at least, consumers aren’t doing much with those tools; according to one industry source, only about 2% of the consumers being offered these tools are using them, on average.
Why? One reason is that the vast majority of Americans have insurance that covers much of their costs, so they aren’t as sensitive to healthcare prices as they are to the cost of gasoline or food. And even as deductibles increase, leaving consumers to shoulder more and more of their healthcare bills, they’re handicapped by their lack of expertise. You can’t just diagnose yourself, pick a specialist and select a hospital the way you can determine whether your dishwasher is broken and who should fix it. You rely to a great degree on the doctors and hospitals who’ve treated you in the past.
Beyond that, no one shops around for emergency care.
Given the inherent limits in the power of market forces, Washington needs to apply pressure in other areas to slow the growth in treatment costs. In particular, it has to change the incentives in the system that tie doctor and hospital profits to the amount and intensity of the care delivered. Simply put, we need to devote more of our healthcare dollars to keeping us healthy, as opposed to rewarding those who tend to us when we’re sick. That means more reforms in how Medicare, Medicaid and private insurers pay for care. And we need to do a better job addressing the factors behind the chronic illnesses that account for so much of healthcare spending.
It’s a good idea to bring more competition into healthcare, and parts of the new mandates unveiled Friday look promising. The rule that’s due to take effect in 2021 requires hospitals to reveal how much individual consumers would pay for 300 “shoppable” services (meaning treatments arranged in advance, such as delivering a baby), reflecting each consumer’s insurance plan or lack thereof. For those who want to shop around, that information could be extremely helpful. The rule also would force hospitals to disclose the rates they negotiate privately with different insurers, theoretically heating up competition among insurers and hospitals.
With so much consolidation in the hospital industry, however, there’s a real risk that revealing this information will lead hospitals with lower prices to demand higher rates, rather than helping insurers push prices down. Regardless, hospital trade groups have pledged to challenge the rule on statutory and constitutional grounds, so it will be tied up in court for years.
That sort of opposition has stymied many of the administration’s other efforts to reveal prices and promote competition, including its efforts to end surprise bills for emergency care or to hold down the price of the prescription drugs manufacturers advertise on television. How ironic it is that private industry should be the main obstacle to Trump’s free-market vision for healthcare reform.