President Donald Trump today signed an executive order that calls for hospitals to disclose to patients up front how much they charge for tests, surgeries and other procedures.
The goal of would be to let patients know how much hospitals charge for common procedures. Those prices are typically trade secrets between hospitals and the insurers they negotiate with.
The administration also wants to make medical providers and insurers give their patients estimates of out-of-pocket costs before they get care.
“We’re fundamentally changing the nature of the health care marketplace,” Trump said at the White House on Monday. “Prices will come down by numbers you can’t even believe.”
The actual text of the executive order leaves significant questions about how much price information would be made public. It orders the U.S. Department of Health and Human Services (HHS) to write regulations “to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates,” in a way that consumers can understand. Those regulations should be proposed within 60 days, according to the order.
Health insurers’ share prices fell after details of the proposal were released earlier today. A subindex of insurance stocks closed down 1.1% in New York, underperforming the broader S&P.
Some details of the executive order were described earlier by Secretary of Health and Human Services Alex Azar, whose department will draft the regulations. The changes are likely to face significant pushback from the health care industry.
“Every day, American patients are being taken advantage of by a system that hides critical information from them,” Azar said on a conference call with reporters.
The health-insurance industry’s main trade group said the plan will backfire. “Publicly disclosing competitively negotiated, proprietary rates will reduce competition and push prices higher — not lower — for consumers, patients, and taxpayers,” Matt Eyles, president of America’s Health Insurance Plans, said in an emailed statement before the order was signed.
Eyles said the industry supports giving patients accurate information about their costs, but publishing negotiated rates would create “a floor — not a ceiling — for the prices that hospitals would be willing to accept.”
The Trump administration has advocated for bringing down health care costs by making prices more visible, boosting competition and reducing regulation. Trump has also called on Congress to pass legislation to stop surprise billing, while major pharmaceutical companies are revealing drug prices online in a bid to stave off pressure from the administration.
Many health care prices are veiled behind contracts between hospitals and insurers. Employers and patients have complained that such secrecy keeps prices high and makes it harder for employers and individuals to shop for services.
The administration took a step toward more transparency earlier this year by requiring hospitals to post their list prices, known as the chargemaster, online. That information, designated with arcane billing codes, is hard for consumers to decipher. Few people actually pay the list prices, which can be multiples higher than insurers’ contracted rates.
Prices paid by private insurers can be many times the amounts paid by Medicare, the government health-insurance program for older Americans, research by health economists has found. Contracted rates can also vary wildly among health plans and providers, meaning that the same test or procedure could be vastly more expensive at different facilities in the same city.
Patients are often in the dark about those rates until they get a bill.
The new executive order goes significantly further than earlier proposals in attempting to make privately negotiated rates public. Though the details will be determined during a rulemaking process that allows industry and other stakeholders weigh in, Azar portrayed it as a watershed moment.
“What we’re announcing today will put American patients in control and address the fundamental drivers of high American health care costs in a way that no president has ever done before,” Azar said.
Hospital care cost Americans about $1.1 trillion in 2017, accounting for one-third of all U.S. medical spending. The Trump administration wants to make available “in an easy to read, patient-friendly format, prices that reflect what patients and insurers actually pay,” Azar said.
The order requires HHS to propose a way to make health care providers and insurers give patients an estimate of their out-of-pocket costs ahead of service. Azar shared a personal story of trying to get the price of a routine heart exam at a hospital, a struggle even for a senior health care official.
Other aspects of the order attempt to simplify quality reporting requirements, expand access to de-identified medical-claims data and expand the use of health-savings accounts.
— Read CMS to Drug Makers: Put Your Prices in TV Drug Ads, on ThinkAdvisor.