Transparency in Health Care Costs a Worthy Goal, But May Not Affect Prices, Analysts Say

February 12, 2020 Updated: February 12, 2020

The jury is still out on whether President Donald Trump’s executive order last year–highlighted in last week’s State of the Union address—to require hospitals to be more transparent about the prices they charge will actually bring health care costs down, according to health care experts consulted by The Epoch Times.

The system by which prices are determined—which includes the government getting involved, negotiations between hospitals and physicians, as well as between hospitals and health insurers—is impenetrably complex and difficult to understand, analysts say. And very few consumers feel the sting from high hospital prices because they don’t pay them directly.

But Trump’s action, Executive Order 13877, signed June 24, 2019, aims, in the words of the administration, to dismantle “opaque pricing structures.” Although the order doesn’t itself make law, it helps to set the administration’s regulatory agenda.

“The American patient should never be blindsided by medical bills,” Trump said in his State of the Union address on Feb. 4.

“That is why I signed an executive order requiring price transparency. Many experts believe that transparency, which will go into full effect at the beginning of next year, will be even bigger than health care reform. It will save families massive amounts of money for substantially better care.”

EO 13877 instructs the departments of Health and Human Services (HHS), Treasury, and Labor to prepare regulations requiring hospitals to publicly display and regularly update what they charge for services, fees, and supplies. The order also asks the agencies to come up with rules requiring health care providers, health insurers, and self-funded health plans to disclose information about anticipated out-of-pocket expenses for patients before they receive services.

The order also asks HHS to prepare a report on how the administration can reduce incidents of “surprise” medical billing. That issue is now being debated in state legislatures and in Congress. On Feb. 11, the U.S. House Education and Labor Committee approved legislation on a bipartisan basis that aims to curb surprise medical bills that surface after a service has been performed, The Hill newspaper reported.

The bill, one of several competing measures, is expected to move to the House floor for consideration.

“Under the status quo, healthcare prices are about as clear as mud to patients,” Seema Verma, administrator of the Centers for Medicare and Medicaid Services, said in November 2019 when HHS released draft regulations that have yet to be finalized. The president’s plan “will bring forward the transparency we need to finally begin reducing the overall health care costs,” she said.

But health care analysts suggest EO 13877 is more aspirational than substantial, and that the devil is in the details.

David Hogberg, author of the book, “Medicare’s Victims: How the U.S. Government’s Largest Health Care Program Harms Patients and Impairs Physicians,” told The Epoch Times that greater price transparency in health care is generally a good idea.

“But I doubt Trump’s executive order will have much effect on the cost of health care, since consumers will still pay very little of the cost of their care directly,” he said. “Reforms such as expanding Health Savings Accounts (HSA) and experimenting with reference pricing in Medicare would have a greater impact.”

An HSA is a type of savings account that allows consumers to set aside money on a pre-tax basis to pay for medical expenses. External reference pricing requires researching the price of drugs outside the United States, where they tend to be less expensive.

Epoch Times Photo
Gregory Conko. (Courtesy Gregory Conko)

Gregory Conko, a senior fellow at the Competitive Enterprise Institute, a pro-free market think tank, said it remains to be seen what impact the president’s approach will have.

“Conceptually, I would say the idea that we ought to have greater transparency in health care is a good one,” he said.

But making hospital prices more easy for consumers to find doesn’t help most consumers because they won’t be paying the price that is made public, he said.

Health care prices in the United States are often quite high because, except in the individual market, people are “insulated” from the decision to buy health care services in that they don’t see the true cost, he said.

Most consumers aren’t going to hospitals and paying out-of-pocket for services, he said.

Employers generally pick up the tab for insurance premiums, and about one-third of Americans don’t even have private insurance because someone else, for example, Medicare or Medicaid, or both, is paying the bills, Conko said.

“There are no incentives to shop around for health insurance or health care services, and nobody who is providing health care services has an incentive to advertise the price.”

Trump’s plan will also require health care insurers to create a mobile phone app, “so at the margin, this is arguably a good thing that would be beneficial,” but it depends how the plan is actually implemented, he said.