Imagine going to a restaurant that doesn’t have the prices on the menu and only tells you the price after you eat and have to pay. That would be ridiculous, and that is exactly how our healthcare system works. Fortunately, changes have been made to fix that and are being improved upon.
The Patients Deserve Price Tags Act (S. 2355), bipartisan legislation recently introduced by Sens. Roger Marshall (R-KS) and John Hickenlooper (D-CO), codifies, strengthens, and expands federal hospital and health insurance rules requiring the posting of upfront prices. Price transparency empowers employers and individuals to compare their healthcare options and choose what works best for them, which is desperately needed under the pressure of rising healthcare prices.
In a recent hearing with the Senate Committee on Health, Employment, Labor, and Pensions (HELP), senators and witnesses from across the ideological spectrum rightly identified many issues with the rising cost of health care. Almost 20% of our national GDP is spent on health care, which is far more than in other developed countries that have much better health outcomes. And with insurance premiums becoming more expensive each year, workers’ wages aren’t rising, while out-of-pocket costs continue to grow. Health care has become a financial burden, not only on patients and their families who are struggling, but also on others, like employers who pay for healthcare benefits.
A contributor to this issue is the secrecy of pricing in the healthcare industry. The cost of healthcare services is negotiated between hospitals, insurers, and other third parties. There, they can set prices based on what will benefit them financially, rather than what reflects fair market value in a transparent market. The Patients Deserve Price Tags Act will finally shine sunlight on prices, including insurance negotiated rates, creating a pro-consumer, competitive marketplace.
Under the opaque status quo, we often see significantly different prices for the same services depending on the patient’s insurance plan, hospital, and providers. For example, the Peterson-KFF Health System Tracker found that the price range of a lower back MRI in Miami, FL, is between $186 and $1,423, and a knee and hip surgery in Newark, NJ, is between $32,493 and $64,386.
Price transparency addresses rising costs and variability by empowering patients to plan ahead and compare prices to pick the best options available to them. While health emergencies are not “shoppable”, about 73% of inpatient and 90% of outpatient services can be. That is a lot of potential services for patients to lower their healthcare costs, and we know it works. New Hampshire created a price transparency website in 2007, which was estimated to save patients about $7.9 million and insurers $36 million over five years—on X-ray, CT, and MRI scans alone.
The first Trump administration implemented hospital price transparency rules requiring hospitals to post a machine-readable file with the standard charges of all their services and display at least 300 shoppable services in a consumer-friendly format. Since going into effect in 2021, compliance and enforcement remain low. The most recent study by PatientRightsAdvocate.org found that only 21.1% of hospitals nationwide were in full compliance, and CMS has only given enforcement notice to 27 hospitals to date. Similar rules went into effect for insurance providers in 2022, yet consumers still can’t access real prices.
S. 2355 codifies the right to upfront prices, increases penalties for non-compliance, and extends these requirements to other facilities such as surgical centers. Insurance companies would have to disclose all negotiated rates and guarantee employers access to their claims data to enable them to design better and more affordable plans. It also provides oversight to third-party administrators and subcontractors, such as Pharmacy Benefit Managers, to reveal costly arrangements that drive up costs. Finally, it requires that patients be given detailed billing information to allow them to see that they were billed correctly, giving them recourse if they are overcharged.
As leading health policy analyst Ms. Chris Deacon said in the Senate HELP hearing, “Transparency is not a talking point. It is a prerequisite for affordability, competition, and accountability.” Shining a light on healthcare pricing allows patients and employers to take control of their healthcare costs, giving them market power that hospitals and insurance companies must be responsive to, and lowering the overall cost of care and coverage. Healthcare price transparency has over 90% voter support, and the Patients Deserve Price Tags Act would finally make it a reality.