August 16, 2019

Last month, The Centers for Medicare and Medicaid Services released a new proposal which will increase price transparency for American consumers by requiring hospitals to post the prices they have negotiated with insurers.

This is a step in the right direction for the Trump Administration, forcing hospitals to show how they have increased prices on patients and shedding much needed light on the variability of hospital pricing for the same service.

The proposal would help patients to see not only what the hospital negotiated but as well the “codes” which their insurance will be charged, an unprecedented level of transparency.

Unsurprisingly, the American Hospital Association opposes the rule, even threatening that it “exceeds the Administration’s legal authority.”

Given hospitals are the largest contributor to rising health care costs, this shouldn’t surprise anyone. Hospitals have continuously raised prices on consumers, precisely because they can. If no one is forcing them to be transparent, they won’t be.

Hospitals get to set their prices irrespective of quality or market forces. One study of a specific procedure found “no correlation between price information obtained from hospitals and the average reimbursement from major insurers in the same market…no evidence to suggest that hospitals that charge higher prices provide better quality of care.”

Likewise, a national study from RAND Corp. found wide variation, sometimes as much as 300 percent, in what hospitals charge for care relative to Medicare.

Currently, it’s simpler to find the cost of parking at your hospital than it is to find the cost of your care.

It’s why the system needs transparency. Price transparency will spur competition as hospitals will have to offer lower rates in order to compete with one another.

Patients deserve to know how much a trip to the hospital will cost them. Currently, 1 in 5 Americans has medical debt, hurting their credit and their economic stability.

The Trump Administration’s rule will benefit patients immediately, all while injecting needed competition into the system. By checking hospitals’ monopoly on information, the administration is putting patients first and putting them in control of their care.

It helps to ensure that hospitals can’t charge over $18,000 for a three hour visit and baby formula. As Yale, Healthcare Economist Zack Cooper noted, “Hospitals are against price transparency…It seems then that they’re broadly for the status quo. Problem is the status quo isn’t working for anyone else.”

The bottom line is hospitals shield their rates from the public because they can, and it allows for massive price increases which hurt patients. It’s time they were accountable to the public. We applaud the Trump Administration for taking this step to inject that accountability into the system.