Patients are more responsible for healthcare costs now than ever. And this election season, they’re speaking up about price transparency in the healthcare industry—both with their ballots and their choice of provider.
Authored by Jane Sarasohn-Kahn, MA, MHSA
Nearly 20 years ago, in March 2001, the Institute of Medicine (IOM) released a report titled “Crossing the Quality Chasm: A New Health System for the 21st Century.” Among the IOM’s 10 principles was one that began, “Transparency is necessary.” The recommendation went on to say: “The system should make available to patients and their families’ information that enables them to make informed decisions when selecting a health plan, hospital, or clinical practice, or when choosing among alternative treatments.”
Another principle stated, “The patient is the source of control,” further noting that they should be given “the necessary information and opportunity to exercise the degree of control they choose over healthcare decisions that affect them.”
Ask any patient who has received hospital care or dealt with a health plan in the past 20 years if they feel they’re the focus of control. You’ll likely hear that the patient is quite impatient when it comes to knowing their own medical costs based on services received and coverage by insurance.
On November 15, 2019, President Donald Trump declared, “We believe the American people have a right to know the price of services before they go to visit the doctor.” That same day, President Trump announced an executive order, Improving Price and Quality Transparency in American Healthcare, which encompasses two rules to mandate and manifest greater price transparency into the U.S. healthcare system.
These rules address two powerful industry stakeholders in American healthcare: hospitals and health insurance plans. And these stakeholders quickly responded to defend their interests—and to counter these rules based on the interests of the organizations they represent.
Patients-as-Payors, Now Consumers, Demand Transparency
In the meantime, consumers have taken on greater first-dollar healthcare costs, so the issue of healthcare price transparency is very personal to the patient-as-payor.
Healthcare costs have emerged as a top issue for American voters. This health consumer sentiment is growing as affordability and access previously drove U.S. voters to polls in the 2018 midterm elections.
While patients continue to grow as medical payors on the demand side, there’s still a huge chasm in peoples’ ability to access cost information in transparent and friendly ways. In their aptly titled report, Still Searching, Public Agenda found that most people in the United States had tried, and failed, to find the price of a service in advance of an appointment or procedure. The group, Catalyst for Payment Reform, awarded a grade of “F” in 2017 to 43 states’ efforts to provide their citizens with price transparency. (Two states received an “A”: Maine and New Hampshire; Maryland and Oregon scored “Bs,” and Colorado, Vermont and Virginia got “Cs.”)
That’s perhaps what led the Robert Wood Johnson Foundation to suggest that, “price transparency might have the single biggest effect in informing the public about healthcare costs and could support a more efficient healthcare delivery system in the United States.”
Politics on the Supply Side of Healthcare Industry Transparency
Let’s shed some light on healthcare industry transparency by focusing a lens on lobbyist spending among industry groups and individual organizations in the ecosystem.
The hospital and health insurance sectors rank among the highest spenders on lobbying in the U.S. Capitol: In a recent analysis of lobbyist spending in 2019, the American Hospital Association was No. 5 in spending at $18.8 million and Blue Cross Blue Shield Association followed closely behind, at $17.5 million. Other healthcare interests ranked in the top 10 lobbying spenders included No. 3 PhRMA (the Pharmaceutical Research and Manufacturers of America) at $22.8 million and No. 7 American Medical Association at $16.7 million.
For further context, as of late 2019, the top-spending lobbyist organization was the U.S. Chamber of Commerce at $56 million. Another interesting member in the top 10 lobbying spenders was No. 8 Amazon, which spent $12.4 million.
The healthcare industry in aggregate across all sectors was the top-spending industry in lobbying, spending $447.8 million in 2019 to date, Open Secrets calculated. After healthcare, finance/insurance/real estate spent $376 million, general business spent $361 million, and communications/electronics spent $325 million.
The Two Transparency Rules: Shoppable Hospital Prices and Health Insurance Out-of-Pocket Costs
With that context in mind, let’s look at the CMS’s two transparency rules and better understand how hospitals and health plans reacted to the details. The first rule focuses on hospitals and the rates they negotiate with health insurance companies—information that has been kept confidential and seen as proprietary. This final rule will go into effect in January 2021. But hospital industry advocates are mounting legal challenges to oppose it.
One such force against the rule, American Hospital Association EVP Tom Nickels said that the mandate amounts to the government forcing hospitals, “to reveal trade secrets, and violates their First Amendment rights by hurting their ability to negotiate freely with insurers.” Nickels is concerned that revealing this information would result in “a race to the bottom” that would especially endanger smaller and more rural hospitals—many already at risk of closure based on razor-thin margins.
The second rule, which is proposed and not yet final, applies to health insurance companies. This would mandate health plans to provide patients with online transparency tools that describe the upfront costs of services before receiving them. This would include an explanation of benefits, detailing a list price for the service, the negotiated rate with a provider, the cost-shared amount for the member-patient, the amount left on a deductible and out-of-network differences. The objective of this rule is to enable patients to compare “shoppable” healthcare services, allowing patients to behave more like consumers in other retail scenarios.
Larry Leavitt, SVP of the Kaiser Family Foundation, described what the best-case scenario of this rule could deliver: “The public availability of prices will shame high-priced hospitals into lowering their prices because they’ll be so embarrassed.”
Will Patients-as-Payors Vote Based on Their Healthcare Wallets?
For patients, transparency is personal. People as payors care first and foremost about their own out-of-pocket costs, which are based on their own health plan details. As more insured consumers have enrolled in high-deductible health plans, people have sought cost and quality information so they can be more informed healthcare “shoppers,” with little evidence that more skin in the game has resulted in changed healthcare shopping behavior.
Healthcare cost frustration, in the form of surprise hospital bills and out-of-network costs, coupled with access challenges, drove voters to midterm election polls in November 2018. It’s becoming clear that healthcare bills will also play a key role in American voters’ mindsets in November 2020, based on a poll published in the Financial Times on November 24, 2019.
The poll reveals that healthcare is the No. 1 issue in states with some of the largest electoral college votes, especially in midwestern states such as Minnesota, where about half of voters are more concerned about healthcare costs, and Wisconsin and Iowa, which is the focus for the first Democratic primary set for February 3, 2020. Healthcare costs are also a bigger issue among women ages 18 to 54, the poll found.
As hospitals and health plans launch their legal opposition strategies to transparency mandates, they should be mindful that their members and patients wear the hat of health consumer and healthcare voter. Both personae vote—with their pocket book, and through their choice of provider and plan—as well as by casting their ballot.
About The Author: Jane Sarasohn-Kahn, MA, MHSA
Through the lens of a health economist, Jane defines health broadly, working with organizations at the intersection of consumers, technology, health and healthcare. For over two decades, Jane has advised every industry that touches health including providers, payers, technology, pharmaceutical and life science, consumer goods, food, foundations and public sector.
More posts by Jane Sarasohn-Kahn, MA, MHSA