So, Trump says he wants health cost transparency. What’s up with that?

So the Trump Administration issued an executive order on June 24, 2019, saying that it would set in place a process to make health prices available to consumers.

Historically, of course, the prices people will pay to the doctor or hospital have been shrouded in secrecy — characterized as “trade secrets” by the hospitals, insurers and doctors, and protected by gag clauses in contracts. The hospitals and insurers and doctors don’t want the prices to be public. The result is that patients are often outraged when their bills land.

So can the administration do this? We wonder.

Of course we are supporters of anything that pushes us toward transparency. But the administration (and others) have done headline-grabbing things that amounted to pretty much nothing. For example, the Jan. 1 ruling that hospitals need to make their prices public — which they did, in the most obstructionist fashion. I wrote about this in these three pieces.

Yes, a lot of health care is ‘shoppable’

We do believe that a lot of health care is “shoppable.” The executive order says, “One study, cited by the Council of Economic Advisers in its 2019 Annual Report, examined a sample of the highest-spending categories of medical cases requiring inpatient and outpatient care. Of the categories of medical cases requiring inpatient care, 73 percent of the 100 highest-spending categories were shoppable. Among the categories of medical cases requiring outpatient care, 90 percent of the 300 highest-spending categories were shoppable. Another study demonstrated that the ability of patients to price-shop imaging services, a particularly fungible and shoppable set of healthcare services, was associated with a per-service savings of up to approximately 19 percent.’

So what does the new executive order mean? Well, it sets a task for rulemakers to generate rules that will make this a possibility. If you think that sounds like appointing a committee to study something, we’re with you.

Here’s what’s supposed to happen

What the order says:

“(a) Within 60 days of the date of this order, the Secretary of Health and Human Services shall propose a regulation, consistent with applicable law, to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services, in an easy-to-understand, consumer-friendly, and machine-readable format using consensus-based data standards that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals. The regulation should require the posting of standard charge information for services, supplies, or fees billed by the hospital or provided by employees of the hospital. The regulation should also require hospitals to regularly update the posted information and establish a monitoring mechanism for the Secretary to ensure compliance with the posting requirement, as needed.

“(b) Within 90 days of the date of this order, the Secretaries of Health and Human Services, the Treasury, and Labor shall issue an advance notice of proposed rulemaking, consistent with applicable law, soliciting comment on a proposal to require healthcare providers, health insurance issuers, and self-insured group health plans to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.

“(c) Within 180 days of the date of this order, the Secretary of Health and Human Services, in consultation with the Attorney General and the Federal Trade Commission, shall issue a report describing the manners in which the Federal Government or the private sector are impeding healthcare price and quality transparency for patients, and providing recommendations for eliminating these impediments in a way that promotes competition. The report should describe why, under current conditions, lower-cost providers generally avoid healthcare advertising.”

What will the end result be?

A nonprofit foundation exec said: “It directs things to happen, but it will depend on the rule-making process, what HHS comes up with. Historically there has been so little insight and transparency in prices, that anything at all could be a good step. It will depend on wha they end up coming up with.”

An insurance company exec told me: “Re: executive order, your guess is as good as mine. I could entirely imagine that they are going to try to be aggressive, but I also bet that they will get so much backlash behind the scenes from hospitals that they will then water it down.”

He then told a story about a hospital CFO who had spoken with one of his colleagues after a recent RAND study on health prices came out. “Her reaction was not ‘our high prices are embarrassing,’ but ‘I didn’t know that other hospitals can get EVEN higher prices, we’ve got to get those too!'”

The extraordinary Margot Sanger-Katz wrote a piece for The New York Times with Reed Abelson about the executive order. One passage: ‘How successful the administration will be may depend on what legal authority it can claim to make the changes. ‘No one should get credit for doing this until it gets done,’ said Frederick Isasi, the executive director for Families USA, a consumer group.”

Will transparency have the effect of raising prices? We think not.

Sanger-Katz also wrote another piece explaining why transparency could make prices go higher — citing a scholarly study of Danish ready-mix concrete prices. We have heard this before — actually, pretty much since ClearHealthCosts launched. People have told us time and again that making prices public will cause the lower-price providers to raise their prices. So far, that hasn’t happened to our knowledge.

In fact, what we have noticed in our cash pricing surveys is that cash prices tend to stay flat or rise a little or sink a little over time — except when a provider is purchased by a hospital group, at which point prices can as much as triple. For details, go here.

My friend Leah Binder, who runs the Leapfrog Group, a quality ratings organization, praises the move yet says price is meaningless without quality metrics. We too are enthusiastic about ways to judge quality of health care, and yet — it’s complicated. Quality means very different things for a hospital vs. a patient vs. an insurer vs. a doctor vs. a trade association. We think that’s why the quality conversation always disintegrates into finger-pointing, and has never resulted in a meaningful, actionable quality metric that can be used by patients (or, as we like to call them, people) to make decisions.

So, what does the executive order mean? We’ll have to wait and see what they come up with — and whether, whatever it is, it can survive any court challenge by the deep-pocketed health care industry. Oh, and whether it’s ultimately enforceable.