- - Wednesday, June 26, 2019

This week, President Trump signed an executive order requiring health care companies to be more honest about their prices. The White House believes additional transparency in health care will reduce costs.

The troubling specifics of Mr. Trump’s order deserve scrutiny.

Insurers and hospitals both immediately criticized the executive order, which is surprising because they never agree on anything.

The central provision in Mr. Trump’s order requires providers and health plans to give patients good-faith estimates of their expected out-of-pocket costs for health services within 48 hours of a request.

Forcing these companies to release the negotiated costs of medical care between insurers and providers eliminates competition in the marketplace, would not likely lower prices for patients, may even raise costs for Americans, and could further limit access to quality care, particularly in rural areas. Put simply, the unintended consequences of these proposals could be detrimental to American patients and the free-market health care system.

Let’s examine the problems with the order.

Many consumers only have one health care provider in their area. Not every patient has the luxury of shopping for the best prices, particularly in an emergency or in an area with only one option within a reasonable driving distance.

Huge populations of rural communities could essentially be stranded without proper medical care if Mr. Trump’s plan comes to pass. Doctors may be restricted to working with specific insurers. If the only hospital that is within 30 miles doesn’t take certain types of insurance, millions of Americans could find their access to care effectively cut off.

A U.S. Government Accountability Office report earlier this year found that 64 rural hospitals closed between 2013 and 2017, more than twice the number of rural hospital closures in the previous five-year period. Another 673 rural hospitals are vulnerable to shutting down. The argument that health care service transparency would directly lead to lower health care costs is simply unproven.

Some economists are skeptical about whether releasing the prices insurers agree to pay doctors will lead to reducing health care spending, which starts with consumers using pricing data to switch to lower-cost providers.

In theory, letting patients know their actual, bottom-line costs would allow them to make informed decisions. However, the price of a patient’s co-pay or medical bill after treatment is determined by a wide range of factors — including the type of insurance coverage, the location of care, the number of providers seen, pre-existing conditions and so much more — that are completely unaffected by the negotiated cost of a specific service between the insurer and the provider the patients are seeing for medical care.

Recently, the Kaiser Family Foundation and the Los Angeles Times surveyed consumer health care practices. The results showed that 67% of the those polled say it is somewhat or very difficult for them to figure out what a treatment or procedure will cost, even with the tools some insurance companies already provide. There is no guarantee that providing the negotiated costs of certain services will simplify this process for consumers.

A Journal of the American Medical Association study of employee health care decisions found that pricing tools made available to employees did not lower aggregate outpatient spending — they actually increased it. This could be because consumers equate low-cost with inferior care, leading shoppers to choose more expensive options based on potentially flawed perceptions.

While an increase in transparency could lead to collusion and price-fixing at higher rates to guarantee high profit margins for providers, releasing the data could also produce a “race to the bottom,” where providers continually try to match other providers or make prices lower to attract business.

There are additional reasons to be concerned about what Mr. Trump has done.

Forcing private health care providers to publicize their negotiated rates is, by definition, anti-competitive and in direct opposition to our nation’s free market principles. It has the potential to artificially drive up costs if competitors see other providers are getting paid more for the same services.

Too much transparency has the power to hurt competition in any market, and the health care market is no exception. Much of the information that will be forcefully disclosed is of little interest to consumers (if they can even decipher what it means), but of great interest to competitors.

Ordering companies to disclose negotiated terms violates the Constitutional right to freedom of contract, which grants the protection of private or public groups of any legal entity to form contracts without government restrictions.

Because contracts are at the heart of a free-market economy, it is not surprising that contractual freedom is a pillar of the Constitution as well. American law has traditionally left private parties free to advance their own interests through contracts. Courts enforce agreements but do not have the power to supervise the content.

Price disclosure, in short, will not help patients or health care providers in the way the Trump administration intends it to.

Consumers should hope that the administration reconsiders this executive order in ways that boost, not hinder, the free market.

⦁ Matt Mackowiak is president of Austin, Texas, and Washington, D.C.-based Potomac Strategy Group. He’s a Republican consultant, a Bush administration and Bush-Cheney reelection campaign veteran and former press secretary to two U.S. senators.

Sign up for Daily Opinion Newsletter

Manage Newsletters

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide