OPINION:
This year has been an especially difficult one for patients with rare or chronic diseases. COVID-19 has disproportionately impacted this vulnerable group, with about 90 percent of those hospitalized with the virus having at least one underlying condition.
Benefit design changes to incorporate so-called copay accumulators, which disallow vital copay assistance from counting toward annual deductibles, have saddled patients with thousands of dollars of new yearly costs. And health care prices themselves continue their inexorable rise, reaching new records in 2020.
Yet these patients, and all Americans who use the health care system, are on the cusp of a major victory. On Jan. 1, hospitals will begin publishing their prices. This information will inform patients how much they owe before they get care, ending the scourge of surprise billing. And it will let them shop for cheaper care, finally reducing health care costs.
As patients know — and chronic disease patients know all too well — it’s virtually impossible to determine treatment costs before care is delivered. This knowledge problem gives hospitals a free hand to bill way more than if patients had pricing information before they agreed to tests, procedures and specialist visits. (Imagine how much more you could charge your customers if you didn’t have to disclose prices before rendering services.)
This price transparency reform is the result of a Health and Human Services rule finalized in November 2019. It requires hospitals to publish their cash prices that they’ll accept from anyone and their negotiated prices they accept from insurers. This information currently isn’t known until patients receive their “explanation of benefits” on their bills after care occurs.
When this price information is public, hospitals must compete over price to attract customers. As a result, health care prices will fall as they do for other price transparent services like bus transportation between New York City and Washington, D.C. New providers, which think they can beat the hospitals’ prices, will enter the market, reversing the current inflationary healthcare provider consolidation.
Hospitals fiercely oppose this reform. They have grown fat and complacent under the status quo where they have overwhelming pricing power. Hospital revenues have roughly doubled between 2005 and 2019, while the U.S. population only increased by 11 percent. Hospital waste is pervasive, representing approximately a quarter of medical spending, according to JAMA. Hospital interests have sued to block the rule’s implementation; a D.C. District Court has already ruled against them.
The hospital lobby argues that hospital price disclosures are meaningless for patients without corresponding knowledge of their insurance benefit design. The rule “does nothing to help patients understand their out-of-pockets costs,” claims the American Hospital Association. This objection overlooks how nearly half of Americans use high-deductible health care plans, which carry annual family deductibles of around $8,000.
For health care purchases under this price threshold — or for the roughly 10 percent of Americans without health insurance — hospital prices certainly matter because patients bear the entire cost out of pocket. Widespread anecdotal evidence also suggests that cash prices can be lower than the post-deductible copayment and coinsurance.
Insured patients still won’t know exactly how much they owe on, say, a $10,000 hospital procedure in 2021. But they will in 2022. That’s when another HHS rule, finalized in late October, takes effect. It requires health insurers to publish how much patients owe in cost-sharing for their treatments and prescription drugs. With this information, patients will enjoy long-overdue price transparency throughout the healthcare system and finally know what they’re responsible for paying for their medications before they’re filled.
Published prices will pop the inflated health care price balloon by encouraging hospitals to undercut each other on prices to attract customers. Patients — especially regular users of the health care system — will be able to focus more on their health and less on their finances. Though it has mostly gone overlooked by the mainstream media, incoming healthcare price transparency is a big win for patients at a time when they need it most.
• Terry Wilcox is the executive director of Patients Rising.
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