Price transparency is a hot topic in health policy right now. For good reason; employers and their employees fork over a large share of their incomes to health care every year, yet most have trouble planning for those expenses because of complex, often obscure pricing models. At a high level, this article will highlight where price transparency in health care is headed. But first, let’s recap where things currently stand.
Midwest States Are Failing to Deliver Price Transparency
In a 2020 Report Card on State Price Transparency Laws, 16 states received passing grades for their health care transparency laws and implementation, including Minnesota, which earned a B rating. Unfortunately, all other Midwestern states (including Wisconsin and Illinois) received an F rating. States were scored based upon the strength of their transparency laws and the degree to which information is made available to the public in user-friendly formats:
- An All-Payer Claims Database (APCD): APCDs are an important starting point for health care transparency. Typically, states require insurers to submit claims data from commercial health plans, state-sponsored health benefit programs, Medicare and Medicaid. Having robust data from multiple payers means more complete and accurate price information. APCDs often collect actual paid amounts rather than hospital charges, which can differ drastically from what consumers actually end up paying.
- Having a publicly accessible website with prices: Collecting information is only the start. In order for health care to act like other markets, information must be made available in a user-friendly, publicly available format so consumers and purchasers can make informed decisions.
RAND Corporation’s Ongoing Study: Exposing Extremely High Prices
Not only is price transparency lacking in these states, but the prices themselves are high when compared to other states.
RAND Corporation highlights these high prices in their Hospital Price Transparency Project by showcasing the disparity between what private payers pay in each state versus what Medicare pays for those same services at the same hospitals. Here’s what we learned from the study:
- Employers are paying nearly 2.5x more than Medicare: In 2018, private payers paid 247% more than what Medicare paid for the same services at the same facilities for both inpatient and outpatient care.
- There’s no link between hospital prices and quality or safety: Hospital health outcomes do not show that safety and quality are commensurate with price.
- There’s no evidence hospitals need to make up for “uncompensated care: ” Shortfalls from government programs do not explain high prices paid by commercial plans. There’s no correlation between hospital pricing and “low” government reimbursement for Medicare to account for the variation of prices.
Price Transparency Rule: Ineffective Enforcement
With bi-partisan public support, The Trump administration signed an executive order issuing their price transparency rule, which took effect on Jan 1. of this year.
Under the final ruling, hospitals are now required to publish a machine-readable file containing their standard charges for all items and services for 300 of their “most shoppable services” in a consumer-friendly format.
Future Health Care Customers Want Transparency
Markets don’t work if consumers lack adequate information to make purchasing decisions, and the health care market is no different. When patients don’t have the information or tools required to choose care, they tend to rely upon their physician’s recommendation.
However, studies show that younger generations, especially those aged 18-24, place a priority on having information about their out-of-pocket estimates more so than their primary physician’s recommendation. Health systems would stand to benefit by catering to the needs and preferences of their future patients by providing more accurate cost estimates.
What Can Employers Do to Improve Price Transparency (And Lower Prices)
Employers can place added pressure on providers to improve their transparency by submitting claims data to their state’s APCD and to national price transparency studies, like RAND’s Hospital Price Transparency Project. The next round of their study is open for enrollment. The Alliance encourages every employer – regardless of their membership in The Alliance – to participate in this vital research. By their submitting claims data, employers will help benchmark hospital prices to Medicare which will help produce a pivot-point employers – and everybody – can use to reduce hospital prices.
To participate, please email your interest to RAND study researcher Brian Briscombe at firstname.lastname@example.org before May 28. Let him know you want to participate and provide him with your insurance carrier (or which data warehouse you use).
Employers can learn more about this study – and the important role they play in it – by attending The Alliance Annual Spring Symposium on May 6.
Although the battle for price transparency in the public policy arena has seemingly reached a boiling point, its future is still up in the air. Instead of waiting for a market shift or government intervention, smart employers are attacking high prices using other tools, too. These often include:
- Directly contracting with providers or joining an employer-purchasing coalition
- Tiered-network options (ours saves employers an additional 10%)
- Referring employees to designated centers of excellence for select procedures with bundled prices, including warranties.
- On-site and shared-site direct primary care clinics
- Basing provider contracts on a percentage of Medicare rather than discounts
To learn how The Alliance helps 285 employers leverage their purchasing power to directly contract with providers, contact our Business Development team.