Hospital Price Transparency: More Toothless Regulation
The Administration continues to promulgate ineffective regulations that are supposed to help patients understand how much money they owe their hospital. Here is this month’s proposed rule updating the hospital Inpatient Provider Payment Services (IPPS) schedule for 2015:
Hospitals are responsible for establishing their charges and are in the best position to determine the exact manner and method by which to make those charges available to the public. Therefore, we are providing hospitals with the flexibility to determine how they make a list of their standard charges public. Our guidelines…are that hospitals either make public a list of their standard charges (whether that be the charge master itself or in another form of their choice), or their policies for allowing the public to view a list of those charges in response to an inquiry.
It is hard to imagine how this is going induce hospitals to present good-faith charges to patients, whether they are insured or not. A better solution would rely on common law, not federal regulation.
I think having prior knowledge of the cost of a service is pretty important, both to the effective functioning of markets at the macro-level, and to micro-level concerns about allowing individuals to make smart choices for themselves. But I don’t think this proposal is a meaningful move in that direction.
I loved your idea about binding arbitration, and endorsed it at the time.
However, I think there would have to be some kind of ‘reference point’ for the arbitrator to look at: in other words, what is a reasonable amount for the provider to charge? Is it the Medicare fee schedule, or Medicare plus 15%, or an average of what five major insurers would pay?
I could live with any of these.
Still, just the imposition of a fee schedule is itself a kind of regulation, is it not?
The real issue I think is this:
in America today, the only way to protect one’s self from medical price gouging is to buy an expensive insurance policy. That is a shame. Some protection should be granted as a right of citizenship.
Thank you for your comment. I think one of the benefits of my proposal is that it would allow the resolution of issue to happen at the local level.
If we see Greg Scandlen’s post today, we see that there is a lot of variance of prices at the local level that is quite easy to observe and describe, but difficult to identify from our helicopter view.
However, people in a community would be able to better understand what is driving prices and arbitrate accordingly.
There is a great article by Dr G. Keith Smith called “What a Scorpion Sting Teaches Us About Hospitals and Health Insurance, 9-13-2012
A woman goes into a hospital in Arizona with a scorpion sting. She is charged $83,000 for her care, most of which was for an anti-venom drug which the hospital priced at $40,000 per dose.
Dr Smith runs a hospital in Oklahoma, and he states the the cost of the drug to the hospital was $7,000.
The insurance company in this case paid $57,000. The hospital is billing the patient for the difference. The insurance company (according to Dr Smith) gets a portion of the ‘savings’ they achieved for the patient.
From your writings, John, I think you believe that a case like this should go to binding arbitration of some kind.
That will not be easy. First you need a law that empowers a judge or someone to actually arbitrate. I do not want to wait 60 years until every city and state in the US has such a law.
I am getting beyond my pay grade when talking legal remedies, but I hope that someone has a plan.
Meanwhile, this case is also a good illustration of why our health insurance premiums are so high. Insurance companies take a ludicrous charge and cut it by
60 per cent, but even the amount they settle for will still drive up premiums.
Cases like this still make me believe that we need all payer regulation of hospitals. Whatever Medicare would have paid the hospital would be all that the hospital could collect.
If Medicare rates are too low (and I am skeptical about that, but let’s move on), then the right thing to do is to increase Medicare rates and increase Medicare taxes. That spreads the cost over all taxpayers.
Instead, we currently allow hospitals to balance their budgets by overcharging patients under age 65. That focuses the pain on anyone unlucky enough to be a patient. Getting a scorpion sting is not what a I call a bad health habit.
Thank you for your comment. Like you, I’ll leave aside the question of whether Medicare rates are too low. With respect to all-payer databases, there’s been a lot of promotion of the idea lately (especially here in DC), so it’s something I should consider and write about.
The charge master doesn’t help much. It’s not an actual list of normal prices. Rather, it’s a starting point for negotiation with insurers. Attempts to force transparency really isn’t the way to go. When patients control their funds, hospitals would willingly disclose prices.
I’m not a fan or forcing firms to disclose when they don’t want to. But I’m also not a fan of gag orders (i.e. forced non-disclosure agreements in price negotiations).