A new rule from the Trump administration required hospitals to begin posting their price lists online on January 1st. The goal is to give consumers more information in order to make better decisions regarding our care, but both in theory and practice, the effort, at least in its current form, offers little in the way of illumination.
First, the theory: “We must do something about rising cost, and a key pillar is to empower patients with the information they need to drive cost and quality by making our health care system evolve to one that competes for patients,” says CMS administrator Seema Verma.
This theory is based on the idea that health care is a consumer product that we buy, just like a car or a computer. But there is little evidence to support this notion. We generally choose our health care based on factors other than price: recommendations from our doctor, experiences of family and friends, our insurance network, the closest hospital in the case of an emergency. When making life and death decisions, consumers care much more about quality than cost.
Health care consultant Lynne Bailey explains to the Greenville News, “The asymmetry in health care is that you are the patient and all you know is you’re having chest pains or your abdomen is hurting. You don’t know the cause until you encounter the provider, who says it could be this or that so let’s run some tests,” she said.
“And if you’re in the ER,” she adds, “you can’t say, ‘Can we wait until tomorrow morning so I can get the imaging done at a center down the street for a third of what the hospital charges?’ It’s not like you can get back in your car and drive to the state line or the next community and get a better deal.”
Despite this reality, Verma insists the new rule is “a small step” toward price transparency and “empowering patients.”
Unfortunately, even if you believe this to be true, the actual implementation of the new rule is too deeply flawed to result in anything close to transparency.
Hospitals have posted what is called their “chargemaster,” the list price of tens of thousands of procedures identified most often by a billing code and a cryptic abbreviation that only an expert can decipher.
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Vanderbilt University Medical Center, for example, lists a charge of $42,569 for a cardiology procedure described as “HC PTC CLOS PAT DUCT ART,” writes Robert Pear in the New York Times. Kaiser Health News (KHN) gives another example: “Arthrocentesis Aspir&/Inj Small Jt/Bursa w/o Us,” otherwise known as draining fluid from the knee ($378).
“I don’t think it’s very helpful,” Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management, told Julie Appleby and Barbara Feder Ostrov at KHN. “There are about 30,000 different items on a chargemaster file. As a patient, you don’t know which ones you will use.”
Appleby and Ostrov attempt to analyze prices for delivering a baby:
Minnesota Mayo Clinic’s online chargemaster page shows two listings, one for $3,030, described as “labor and delivery level 1 short” and the other for $5,236, described as “labor and delivery level 2 long.” But, what’s a short labor? What’s a long one? How is a patient who didn’t go to med school supposed to know the difference?
Also, those are just the charges for the actual delivery. There are also per-day room charges for mom and the newborn, not to mention additional charges for medications, physicians and other treatments.
When University of California-San Francisco shows the “bundled charge for an uncomplicated vaginal delivery,” as required under California law, the price is $53,184, suggesting that the “procedure” cost has little to do with the actual price of delivering a baby in a hospital.
Add to this confusion, the fact that the chargemaster list has little to do with what people actually pay for their health care. Insurers negotiate rates, and patients are liable for different portions of those costs, depending on their plan. Someone without insurance—or seeing an out-of-network provider—may be billed based on the list price, but even that price is negotiable.
The real problem here isn’t that costs aren’t transparent, but that our health care system, which consumed 18 percent of GDP in 2017—more than $3.5 trillion—is irrational. It is the most expensive system among the world’s high-income countries, and yet it delivers the worst outcomes. Mission has been overpowered by greed. Though greater transparency may be a goal worth pursuing, it isn’t one that will fundamentally change what consumers really care about: universal access to quality care.—Karen Kahn