Have you ever had a clogged bathtub drain or toilet? Yep, me too. For the waste to exit efficiently, it takes deliberate effort to remove the obstruction that hinders the plumbing system.
The U.S. healthcare system is somewhat akin to an inefficient plumbing system. As is said, “Every system is perfectly designed for exactly the results it gets.” So, in healthcare, when it comes to having transparent prices (and outcomes), our system was DESIGNED to have clogged ‘plumbing.’ Allow me to explain…
The current healthcare pricing system is broken and indefensible. It is a known fact that the escalating prices we pay for our healthcare services is a black box. Whether it be for hospitals, doctors, pharmacy or other healthcare providers, we have no idea what the negotiated prices actually are between insurers and health providers, at least until sometime AFTER the services have been rendered. But this black box was carefully designed to work as intended. To paraphrase noted economist Uwe Reinhardt, where there’s mysteries (in pricing), there’s (larger than normal) margin to be had. In healthcare, obscene money is made when it is allowed to operate in a dark room of denial and obfuscation.
It’s one thing for hospitals to now publicly disclose their ‘list’ prices – (effective January 2019) – but it’s another to disclose the ‘real’ prices that have been negotiated and paid by the insurers we choose to use.
Negotiated prices are largely bound by confidentiality agreements between healthcare providers and insurance companies, and are so closely guarded that even mega employers are not allowed to penetrate this veil of secrecy. While in Indianapolis this past week, I had lunch with the manager of General Motors’ benefits plans who shared her frustrations about these backdoor deals around the country. If this secrecy happens to General Motors, it happens to all employers.
New Transparency Approach Provides Hope
But there is hope. A Wall Street Journal (WSJ) story broke this past Friday that may possibly open up the drain and allow the plumbing to finally function properly. The Trump Administration, through the U.S. Department of Health and Human Services (HHS), is seeking to require hospitals, doctors and other healthcare providers to publicly disclose these secretly negotiated prices – which are the relevant prices we all want to know.
HHS is requesting public comment on whether patients have the right to view the discounted prices in advance of obtaining care. The invitation for comment was actually outlined in a little-noticed passage of a broader patient-data proposal released in March, tucked away in a 700-page draft regulation. According to the WSJ article, the Administration could issue a final rule mandating the disclosure of negotiated rates after the comment period closes on May 3.
Watch for Opposition to Fight this Move
It is often interesting to observe both insurers and healthcare providers who have historically acknowledged the importance of having ‘transparency’ in healthcare. These same organizations, however, appear to believe that ‘transparency’ can only happen when it suits them.
One prime example is the American Hospital Association (AHA), which opposes the move to make negotiated prices public. As reported in the WSJ article, an AHA executive vice president commented, “Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market…While we support transparency, this approach misses the mark.”
Misses what mark? What type of transparency is the AHA looking for? This is a baffling comment made by a trade organization whose sole purpose is to serve hospitals, but at the public’s expense. We don’t need to have the AHA tell us what ‘transparency’ should be…they, along with insurance companies, have had their chance to fix this clogged drain for decades, but they have habitually – and deliberately – failed. Just watch the massive lobbying efforts that will coalesce to fight against this newly-found plunger from being used to fix an enormous problem.
The legal question will most likely center around whether this new transparency initiative violates contract law, or whether it can ‘bust’ antitrust activity that harms the public. The insurance card that we carry represents lost wages and financial bonuses that have, instead, been unnecessarily diverted to pay exorbitant healthcare fees to others.
A Possible New Beginning – More Changes Necessary
By itself, having real prices become publicly available will not solve the inherent problems that persist throughout the healthcare system, but it may serve as the liquid drain cleaner that will eventually loosen stubborn ‘hairy gunk’ that blocks a drain from functioning properly. Price transparency is a good first-step to have, but it is not the sole remedy to a ‘system’ that requires massive fixes.
Despite isolated progress, healthcare ‘consumerism’ has been relatively slow for various reasons. However, by exposing real (negotiated) prices to the public, the aggregation of price data will most likely find new legs due to third-party entrepreneurs and technology companies who will find clever ways to make pricing a relevant decision-making tool for many patients. This has always been the hope for consumerism to take hold. All purchasers want the BEST VALUE in the healthcare being purchased.
Unclogging the healthcare price drain will begin to allow for a natural flow of the real waste to exit the system.
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great article David! I was excited to see transparency of pricing, but now of negotiated rates, that is the true piece for consumers to know to make an informed choice about care.
Thanks, Janis! We don’t know if this will actually grow legs and make it past the vast lobbying efforts, but the fact this is now being debated is long overdue.
So, once patients see that in almost every instance BCBS has the lowest cost one of two things happens. One, a not-so-slow moving tidal wave of new business will be bestowed upon BCBS giving them yet more bargaining power with providers, potentially driving their discounts even deeper (taking us closer to a single commercial-payer system). Or two, the providers at long last realizing their suicidal dependence on BCBS is about to cost them dearly quickly call in their UHC, Aetna, Humana and Cigna reps and grant them better discounts, to keep them in the game (and hospital revenues up).
Yes, you bring up some good points. Truth be known, there will be multiple reactions from many stakeholders if this happens. Rather than fret about what ‘could’ happen, I do believe the markets would eventually determine the ‘right’ prices for each given market, etc. Medical providers must receive a ‘fair’ compensation for their efforts, and by operating in ‘sunshine,’ this will help reveal which providers are reaping more than what the market is willing to bear. In this ‘new world,’ we will need to break out of our comfort zone that the status quo is just easier to live in. I tend to believe the REAL competition is not at the insurer level, but rather, the true payer level. Insurers are merely intermediaries, NOT true payers.