One Health-Policy Change That Should Outlast Trump
Much of President Trump’s health-policy agenda seems destined for reversal when he leaves office (either in January or 2025) because it is not supported by the Democratic Party and isn’t enacted into law. His push for greater price transparency might be the exception, even though it too is being implemented through executive actions rather than enacted legislation. Robust disclosure of meaningful prices is one of the few issues in health care that does not accentuate partisan divisions. As such, Trump’s campaign in this area may outlast his presidency.
The health sector is notoriously opaque. For decades, consumers have complained that they cannot get basic pricing information before accessing needed services. Before Trump, states and the federal government took steps to force more meaningful disclosure, and to create tools to help consumers. While some progress occurred, it was on the margins. For the most part, usable price information has remained elusive.
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The Trump effort is more ambitious in its reach that what came before it, and thus more likely to make a difference. It took a major step forward this week with the release of a final rule imposing sweeping new requirement on health insurers. The rule imposes two significant new data disclosure obligations on insurers that complement the requirements placed on hospitals in a regulation finalized last year.
- First, insurers, including employers offering self-insured plans to workers, must offer online price transparency tools that facilitate comparisons of what enrollees would pay out-of-pocket when accessing care from competing service providers. In 2023, the pricing tool would be required to cover 500 “shoppable” services defined by the Department of Health and Human Services (HHS). In 2024, the requirement would extend to all services patients might seek to address pressing health needs.
- Second, the rule requires covered insurers to make available three standardized data files (in machine readable formats) containing relevant pricing information covering the full costs of services covered by the plans. The first file would disclose the payment rates insurers have negotiated with their in-network providers. The second would disclose billed charges from, and historical payments to, out-of-network facilities and practitioners. Lastly, insurers would be required to create a file disclosing their negotiated rates for covered prescription drugs, sorted by the pharmacies available to their enrollees. Covered insurers would be required to update each of these data files on a monthly basis and make them readily available to interested consumers, researchers, and outside vendors. It is hoped that software firms will convert this avalanche of pricing data into information payers can use to immediately lower their costs.
The rule also allows insurers to reward plan enrollees with shared savings payments without running afoul of medical-loss ratio (MLR) requirements. Previous MLR rules require insurers to meet minimum thresholds for medical care payments as percentages of their premium collections; insurers that fall short must rebate excessive “profits” to their enrollees. Under the new price transparency rule, insurers can reward enrollees who use lower-priced providers with a percentage of the savings (relative to a benchmark), and these payments will count as medical care expenses under the MLR requirements.
Predictably, the insurance and hospital industries are united in their opposition to all of these requirements, and are trying to block implementation of them through the courts. They make two substantive arguments. First, they suggest that all of this information will overwhelm and confuse consumers, and thus impede rather than advance the cause of cost discipline. It is hard to see this argument as anything but a last gasp for an unsustainable status quo. Today’s system of billing patients for services is a bewildering mess for most people, and it has been that way for decades. Could change make things worse? Possibly. But it is far more likely that breaking the industry’s iron grip on meaningful price data will force down pricing among the practitioners who have taken advantage of opaqueness to overcharge payers and patients.
The more serious objection is that the forced disclosure by hospitals and insurers of selective discounts on services will mean higher prices because the hospitals cannot afford to give their best prices to everyone. While this risk is real, it is outweighed by the potential gains from more transparency. Employers and insurers will be able to easily compare pricing across hospitals, and large discrepancies that now go overlooked will have to be explained. In this environment, low-pricing by providers will become an advantage in the marketplace because of its visibility. This is the reason hospitals feel so threatened by the changes coming their way.
Allowing consumers to share in the savings from use of low-priced services could be transformative and is the missing ingredient from previous efforts. Most insurance plans do not reward shopping by consumers. They charge cost-sharing, but the amounts do not vary much based on the negotiated rates insurers have struck with their in-network facilities and practitioners. If plan enrollees shared in the savings from using low-priced care, they would have stronger incentives to use the pricing tools that will be made available to them.
In 2017, the Trump administration had big plans for health care. To lower prices for prescription drugs. To implement work requirements in Medicaid. To allow consumers to purchase insurance across state lines. Most of this agenda has gone nowhere. That’s not the case with price transparency. The rules the administration finalized over the past year have the potential to be transformative, and it is unlikely than any future administration will want to undo them.
James C. Capretta is a columnist for State of Reform and holds the Milton Friedman Chair at the American Enterprise Institute.