Health Cost Transparency Rules

Another widespread belief in regard to our health system is that the largely hidden web of prices in the private insurance world leads to higher spending.  Not sure of the logic of this, but it has led to a variety of cost transparency and comparison tools, now widely available to most privately insured consumers.  This theory has also attracted the attention of policymakers, leading to two federal rules.  One, recently finalized, is directed at hospitals and basically tells them they have to publish their list prices.  (HHS Rule)  As usual, what seems pretty simple requires a lot of pages of definitions and other terms, 331 pages in the non-PDF version to be exact.  To show how non-simple this is, there are five kinds of basic hospital “prices” that are defined.  One is list price, one is negotiated price with each plan, one is the discounted cash price, one is the minimum negotiated price and one is the maximum negotiated price.  Not sure why you need all those.  All are supposed to be made available in a machine-readable file.  And for up to 300 “shoppable” services the hospitals will have to create a “consumer-friendly” version of all those types of charges.  Not sure for the average consumer it is possible to make a “friendly” version. Hospitals are howling about the rule, so it probably is a good idea, although I personally doubt it will actually reduce spending or costs.

The second rule, and more interesting in some ways, is one directed at health insurers, basically requiring them to help their insureds figure out what they are going to owe for a service before they incur the bill.   (HHS Rule)   Plans are required to try to provide the specific cost-sharing amounts and to post a list of prices they have negotiated with in-network providers and typical allowed amounts or paid charges for out-of-network providers.  Be interesting to see if hospitals and payers post the same prices!!  Payers also must disclose any “prerequisites” for coverage of the service the member is seeking.  This would include things like prior authorization and other utilization management techniques.  The notices and disclosures under the proposed rule would be available on the internet, and on request, in paper form.  Finally, the proposed rule requests comments on whether plans should also have to disclose quality information related to providers.

I don’t know what impact these rules will have on health spending.  A big unknown is the effect they have on negotiated prices between plans and providers.  Does disclosure tend to level all prices, and if so, does it level them upward or downward.  I suspect upward.  Does revelation of how high-priced some providers are compared to others embarrass them into lowering prices.  I doubt it, hospitals in particular have shown absoutely no remorse over their pricing.  Will disclosure drive more explicitly volume-based pricing differences in order to justify different prices charged to different health plans?  Probably.  Who knows what other unintended consequences will arise.