Healthcare sector should publish their prices (like everybody else)

Healthcare
June 6, 2019

Lawson Mansell

Research Assistant

Shea Carroll

Summer Fellow

Most South Carolinians facing surgery or other complicated medical procedures have no idea how much they will pay out of pocket. Whether they are covered by private insurance or a government program (Medicare, Medicaid), the common method for determining cost is to have the procedure… and then wait for the bill to arrive.

Why the doubt and confusion?

Transparency in Hospital Care

The first factor in the cost of a procedure is what an insurer pays a provider. A recent article in the Post and Courier highlights a study by the RAND corporation that compared what insurance plans in 25 states paid hospitals to what Medicare paid for the exact same services. It was a groundbreaking study that allowed healthcare insurance managers to see what others were paying. The article also explored the effects of undisclosed hospital agreements with insurance companies and their impacts on both healthcare competition and the rising costs of care in United States:

“[Hospitals’] secret contracts with private insurers give them an incentive to spend more than is necessary on health care delivery. If they had to compete on pricing they would have a stronger incentive to hold down unnecessary costs.”

Prior to this study, the main purchasers of medical services (insurance companies) did not have access to information on what their competitors were paying.

Then, there is the issue of what the insured (you and I) pay after insurance kicks in. Just last month, the New York Times revealed that a common blood test could cost anywhere from $11 to $1,000. Prices vary widely on simple as well as complex procedures. Out-of-pocket costs can drastically change from insurer to insurer and also will vary depending on whether or not a patient pays cash.

For these reasons, Palmetto Promise supports the idea of “Right to Shop” legislation. Right to Shop would require providers to post a cost estimate for procedures requested by the patient within two business days. Insurance carriers and healthcare providers would be required to work together to provide these out-of-pocket cost estimates. Then, if a patient shops around and finds a more affordable option, the insurance company allows patients to take home some of their savings.

Patients support the Right to Shop concept, and Right to Shop bills are passing into law in other states. The Foundation for Government Accountability (FGA) reports that 82% of voters want to know the price of a non-emergency procedure prior to deciding whether that procedure is performed. And just last week the Tennessee legislature passed Right to Shop.

Here in South Carolina, we saw some progress when CMS, the Medicare-Medicaid arm of the U. S. Department of Health & Human Services, began requiring hospitals to publish their prices. Then there is SCPricePoint.org, which allows patients to compare prices from hospital to hospital. These efforts are helpful, but they do not give patients an accurate idea of what they will spend and are often very difficult for the average user to navigate and understand. To force providers to post accurate out-of-pocket cost estimates to their prospective patients, Right to Shop legislation similar to what passed in Tennessee will be required.

Transparency in Primary Care

An example of real pricing transparency can be found in the Direct Primary Care model. Direct Primary Care (DPC) medical practices streamline the healthcare pricing process by charging monthly, quarterly, or annual fees that cover almost all primary care services.

They also publish their prices for patients who chose to just pay for a specific service without subscribing monthly or annually. DPC clinics can offer prices for their services up-front because they do not accept insurance of any kind (including Medicare or Medicaid).

Last week, Yahoo! Finance published an article that explored the pricing benefits of DPC clinics and surgery centers. Yahoo! highlighted The Oklahoma Surgery Center, founded by two Anesthesiologists (Drs. Smith and Lantier) who grew frustrated working in a healthcare system that didn’t allow them enough time with patients or transparency in operation costs.

At their clinic, they offer an interactive online pricing tool where consumers can simply click on a part of the body that needs a procedure and then have immediate access to the specific prices offered by various specialists. They have received patients from around the globe, particularly from countries with socialized medicine. Smith and Lantier have even been told by potential patients that they have used their pricing system as leverage with their own hospitals.

Key Takeaways on Healthcare Price Transparency

  • Healthcare expenditures total $3.5 trillion annually in the United States, an average of over $10,000 per person per year. It is important that healthcare consumers know the true cost of care.
  • The confidential nature of hospital-insurer contracts comes at a high cost: inflated medical prices and uninformed patients.
  • Right to Shop legislation would establish price transparency requirements into state law. With the Tennessee legislature acting in the 2019 session, there has never been a better time for healthcare reform in support of pricing transparency and incentives for providers, insurers, and patients.
  • Direct Primary Care (DPC), whether in local primary care clinics or national surgery centers, refocuses the healthcare conversation back to the patient and their needs.

Transparency in pricing for primary care services will empower South Carolina consumers and reduce the cost of care. For more information about Right to Shop and Direct Primary Care, please visit our Healthcare Freedom page.