Government Considers Health Care Pricing Transparency

“…….the health care marketplace is not functioning adequately because prices do not appear to be based on the costs of producing a product, the laws of supply and demand, or the quality of the products and services.”

By Steve Teske

The federal government and states could take numerous steps to increase health care pricing transparency throughout the health care system, which would increase competition and lower costs for consumers, witnesses told the Senate Finance Committee June 18.

Witnesses at a hearing on pricing transparency said the health care marketplace is dysfunctional because prices for goods and services and how they are set remain mysterious. Increased competition and lower costs could be spurred by requiring providers to publicly release their charges, they said.

Steps to increase transparency include building on efforts by Medicare to release data on inpatient procedures, allowing more access to Medicare’s databases, and requiring health plans participating in the health care marketplaces under the health care reform law to be more transparent, witnesses said.

They said that current pricing transparency initiatives are likely to have minimal impact without changes in insurance benefit design that steer patients to high-value providers or an influx of quality of care information.

One witness, journalist Steven Brill of Time magazine, charged that campaign donations from providers have prevented Congress from doing more to make pricing information more readily available to the public.

The hearing was called to examine a story Brill wrote for Time in March in which he found the health care marketplace is not functioning adequately because prices do not appear to be based on the costs of producing a product, the laws of supply and demand, or the quality of the products and services.

Widely Varying Charges

Charges for products and services vary widely between providers and regions of the country, Brill said. Those without insurance face the highest charges, and discounts negotiated by insurers with providers vary widely, he added.

Providers do not have to explain their charges or how they calculate them because “they don’t have to,” Brill testified.

“They don’t have to explain because they have all the information and all the power,” he said. “Indeed, this is no marketplace at all, if we define a marketplace as involving buyers and sellers who enter into transactions with something approaching a balance of power.”

Brill said more pricing transparency is needed, but providers also must be better regulated. He said hospitals and other providers should be required to charge the same transparent prices to everyone, and price controls on prescription drugs and medical devices may be needed, as well as limits on profits made by nonprofit hospitals.

He also called for medical malpractice reform, and said antitrust rules should be enforced against hospital systems that consolidate with other providers.

In their opening statements, committee Chairman Max Baucus (D-Mont.) and ranking member Orrin G. Hatch (R-Utah) expressed concern that consolidation in the health care industry could lead to higher prices for health care without improving outcomes.

Effect of ACA

According to Brill, campaign donations by providers are helping to keep the status quo in place on pricing transparency. He said that since 2007, the health care industry has given $32 million to the campaigns of members of the Finance Committee.

The Affordable Care Act “does nothing about these prices … zero,” Brill said.

Other witnesses agreed that more pricing transparency is needed in the health care system. But Paul Ginsburg, president of the Center for Studying Health System Change, said ACA contains two provisions that could affect pricing transparency: the so-called Cadillac tax on high-cost health plans set to be implemented in 2018 and the availability of premium subsidies, which will steer consumers to less costly plans.

The federal government could support these efforts by making Medicare Part B claims data on physicians available to insurers and consumer organizations, Ginsburg said. States also could help by designing their all-payer claims databases to allow insurers to assess the quality and efficiency of providers, he added.

Suzanne F. Delbanco, executive director of Catalyst for Payment Reform, a nonprofit corporation working for health care reforms on behalf of large employers and other health care purchasers, told lawmakers that price transparency is needed to help consumers make more informed choice about health care services.

More Information Needed

She said the federal government could facilitate pricing transparency by allowing Medicare to share information on hospital charges beyond that released earlier this month.

The Department of Health and Human Services June 3 released new data resources for researchers, including, for the first time, data sets with county-level Medicare spending and utilization information. The newly released data sets also include certain information from hospital outpatient charges (107 HCDR, 6/4/13).

Delbanco also said the federal government could provide more transparency through its Hospital Compare website and could ensure employers and self-insured health plans have access to claims data.

Giovanni Colella, chief executive officer of Castlight Health Inc. a firm that helps self-insured employers and health plans shop for health care, recommended that all payers should be required to make claims data publicly available. She also said Medicare should expand the scope of its data released June 3, noting that pricing data for 1,000 more procedures has not been released.

Colella also said purchasers of health care, such as employers, should have access to claims data. The federal government and states also should pass legislation preventing providers from restricting access to pricing data, Colella said.