Emerging Price Transparency Trends in Health Care
By Cheryl DeMars | CEO of The Alliance
Price transparency is a hot topic in health policy, and for good reason; employers and their employees fork over a large share of their incomes to health care every year, yet most have trouble planning for those expenses because of complex, often obscure pricing models.
Failing to Deliver Price Transparency
In a 2020 Report Card on State Price Transparency Laws, many Midwestern states (including Wisconsin and Illinois) received an F rating. States were scored based upon the strength of their transparency laws and the degree to which information is made available to the public in user-friendly formats:
An All-Payer Claims Database (APCD): Typically, states require insurers to submit claims data from commercial health plans, state-sponsored health benefit programs, Medicare and Medicaid. Having robust data from multiple payers means more complete and accurate price information. APCDs often collect actual paid amounts rather than hospital charges, which can differ drastically from what consumers actually end up paying.
Having a publicly accessible website with prices: Information must be made available in a user-friendly, publicly available format so consumers and purchasers can make informed decisions.
Exposing Extremely High Prices
Not only is price transparency lacking, but the prices themselves are high. RAND Corporation highlights these high prices in their Hospital Price Transparency Project by showcasing the disparity between what private payers pay in each state versus what Medicare pays for those same services at the same hospitals. The study shows:
- Employers are paying 247% more than Medicare on average
- There’s no link between hospital prices and quality or safety
- There’s no evidence hospitals need to make up for “uncompensated care:” Shortfalls from government programs do not explain high prices paid by commercial plans.
Ineffective Enforcement of Price Transparency
With bi-partisan public support, the price transparency rule took effect Jan. 1st of this year.
Under the final ruling, hospitals are required to publish a machine-readable file containing their standard charges for all items and services for 300 of their “most shoppable services” in a consumer-friendly format. Unfortunately, many are not yet complying with the ruling.
Future Customers Want Transparency
Markets don’t work if consumers lack adequate information to make purchasing decisions, and the health care market is no different. When patients don’t have the information or tools required to choose care, they tend to rely upon their physician’s recommendation.
However, studies show that younger generations, especially those aged 18-24, place a priority on having information about their out-of-pocket estimates more so than their primary physician’s recommendation. Health systems would stand to benefit by catering to the needs and preferences of their future patients by providing more accurate cost estimates.
What Employers Can Do
Although the battle for transparency has seemingly reached a boiling point, its future is still up in the air. Employers can place added pressure on providers to improve their transparency by submitting claims data to their state’s APCD and to national studies like RAND’s – and instead of waiting for a market shift or government intervention – smart employers are attacking high prices using other tools, too:
- Directly contracting with providers or joining an employer-purchasing coalition
- Tiered-network options
- Referring employees to designated centers of excellence for select procedures with bundled prices, including warranties
- On-site and shared-site direct primary care clinics
- Basing provider contracts on a percent of Medicare
To learn how The Alliance helps 285 employers leverage their purchasing power to directly contract with providers for lower prices, contact our Business Development team.
Cheryl joined The Alliance in 1992, assuming the role of CEO in 2006. She works with the Board of Directors and senior leadership to establish the strategic direction of the cooperative and participates in a number of national and regional initiatives that move health care forward for employers by controlling costs, improving quality, and engaging individuals in their health.