Healthcare Policy Analyst: New Proposed Pricing Rule an Initial, But Insufficient Step Towards Transparency
A healthcare policy analyst has looked at the new proposed federal healthcare pricing rule announced July 29 by the Centers for Medicare and Medicaid Services (CMS), and found it to be a good step, but deficient in terms of longer-term impact on consumer behaviors. Writing in the Health Affairs Blog on Aug. 26 in an article entitled “The New Hospital Price Disclosure Rule Is Important, But Only A First Step,” James C. Capretta looks critically at the current moment. Capretta is a resident fellow and holds the Milton Friedman chair at the American Enterprise Institute. He studies and provides commentary on a wide range of public policy and economic issues, with a focus on health care and entitlement reform, and US fiscal policy.
Capretta writes that “The Trump administration’s new proposed regulation on hospital price transparency is an important step toward consumer-friendly price information. For the first time, it introduces into federal price transparency requirements the concepts of service standardization, consumer-friendly organization and terminology, and bundling, all of which are crucial for the marketplace to become more price competitive. However,” he adds, “as the administration acknowledges, this regulation by itself will not fully address the opacity of today’s market. Further disruptive changes will be necessary to give consumers usable pricing information. Among other things, meaningful transparency requires even stricter standardization of the services being priced and “all in” pricing that matches how consumers think about the services they need.”
And, he writes, “In addition, reform of the nation’s insurance payment system must be integrated into the price transparency effort to ensure consumers are price sensitive across a wider range of services. Suppliers of services will only compete on price when significant numbers of consumers have strong incentives to seek out low-cost alternatives.”
As Capretta notes, “Hospitals, and insurers, are balking at the new rule because it forces them to disclose confidential price information that they view as fundamental to their business operations and financial viability. Hospitals responded to the requirement that went into effect this year by posting online their chargemaster rates for the thousands of codes used in today’s insurance billing system. Most of the information now available online is indecipherable to the lay consumer but can be used by technology companies to refine price transparency tools. The new proposal would require supplementing the existing chargemaster rates with the actual rates paid by insurers for those same codes.”
Capretta notes that “A major innovation in the new rule is the introduction of a short list of ‘shoppable’ services for which hospitals must disclose relevant prices in a consumer-friendly manner,” with “shoppable” referring to procedures that can be scheduled in advance. And while he sees that element as a win for consumers, he adds that “Consumers want to know the ‘all in’ price for the services they need and do not have the time or expertise to gather up pricing information from multiple billing parties. It would be much better for consumers if pricing were set based on definitions of services that cover an episode of care, rather than based on billing conventions.”
Still, Capretta notes, the “price-sensitive” healthcare consumer has not yet emerged, and, given that, some of these advances remain incomplete. Or, as he put it, “While the administration’s proposal is a welcome development, it doesn’t fully address the barriers that limit the consumer role today. Easily accessible price information is a necessary condition of a functioning market, but it is not sufficient in the case of medical services. The prices also need to be based on standardized, episode-based services that are defined in ways that are meaningful to consumers.”
