Americans dealing with the worst inflation in 40 years are getting a taste of the rapid price increases that healthcare consumers have long endured. The Labor Department recently announced that consumer prices increased by 7.5 percent over the last year. Yet national health expenditure data reveal healthcare consumers have faced similarly elevated inflation levels for decades. President Biden and his administration can tame overall inflation by addressing this large and long-running source.
To accomplish this goal, Biden can double down on his support for healthcare price transparency — one of 72 initiatives he’s recently touted to address inflation. A new report by PatientRightsAdvocate.org demonstrates why Biden’s backing on this issue is so desperately needed. It finds that only 14.3 percent of American hospitals are complying with a hospital price transparency rule that took effect on Jan. 1, 2021.
This rule implements an Affordable Care Act provision and requires hospitals to publish their discounted cash prices and all contracted rates by health insurer and employer health plan. Yet the study finds that most hospitals aren’t posting their payer-specific negotiated charges “clearly associated with the names of each third-party payer and plan” as required by the rule one year after it took effect.
Three of the nation’s largest hospital systems, whose combined 2021 revenues approached $120 billion, have negligible compliance of just 0.5 percent. (The Department of Health and Human Services estimates the compliance cost of this rule is only $12,000 per hospital.)
Hospitals have resisted complying so they can continue profiteering by blinding consumers to prices then blindsiding them weeks and months after care with massive bills they would never have agreed to. Johns Hopkins research published last year found that hospitals mark up their prices by an average of seven times their cost of care. The Los Angeles Times recently reported on leaked hospital pricing documents that showed automatic markups of 675 percent. Hospital prices regularly vary by ten times for the same care even at the same hospital, depending on the payer.
Hospitals’ financial gain generates significant pain for health consumers. Out-of-control healthcare costs saddle one-third of Americans with medical debt, and scare two-thirds from getting needed care each year.
Rising healthcare costs suppress business earnings and employee wages. The federal government recently announced the U.S. spent $4.1 trillion on healthcare in 2020 — 20 percent of GDP and double the developed-world average.
The Biden administration has the opportunity to make this hospital price transparency rule a reality through robust enforcement, including significant, well-publicized noncompliance fines and clear data disclosure standards. By compelling all hospitals to comply, Biden can arm consumers with the information they need to avoid overcharging and identify quality, less expensive alternatives.
When employers and unions can access actual prices across plans and see wide cost variations, they can steer their employees and members to the best quality care at far lower fair market prices. Resulting competition can substantially lower healthcare costs, raise employee wages, and create a more globally competitive U.S. economy.
In July, a separate health insurance price transparency rule takes effect, requiring insurers to publish their negotiated rates and historical claims data. Enacting this rule without further delay will allow patients to access prices wherever they get care. True compliance with both price transparency measures will usher in a functional, competitive healthcare marketplace, allowing consumers to reduce their healthcare costs through their choices just like in every other sector of the economy. Ultimately, consumers need price transparency systemwide, meaning even the many middle players that capitalize on patients’ misfortune must also reveal their fees and commissions.
PRA’s new report confirms what American healthcare consumers already know: Hospital price transparency compliance remains very low entering the second year since the rule took effect.
The nation’s largest hospital systems are effectively ignoring the law without consequences.
The Biden administration can boost compliance by robustly enforcing these rules, empowering consumers to reverse runaway healthcare prices and overall consumer inflation.
Cynthia A. Fisher is founder and chair of PatientRightsAdvocate.org.