Prices matter. They are the fuel that energizes the free market, setting buyers into action. However, when U.S. hospitals posted their prices online for the first time in January, it was nothing but crickets.
The big reveal had no effect on the market. The posted prices were meaningless, and no consumers made buying decisions based on the information.
As you know of course, hospitals haven’t truly posted their prices. What’s online now is the chargemaster, which is more of a list price – a not-so-rational number from which all payment negotiations begin. Consumers don’t pay chargemaster prices. Neither do insurers. Not even close.
The actual prices paid – the allowable charges – are hidden away in proprietary contracts and separate databases. None of these are available publicly.
But the precedent on price transparency has been set. And that’s encouraging news for consumers – especially those with high out-of-pocket costs.
Pathway to a functional market
We can’t speak for CMS, but it’s likely the federal leaders knew the mandate for the big price reveal on January 1 would only be a first step toward transparency. Even so, the effort puts the country on the pathway to a more functional market, in which healthcare consumers can begin making real choices – rational, well-informed choices – about where to seek care and how to get the most value.
The effort is supported by the current administration.
In late January, the White House hosted a roundtable with patients and providers to discuss surprise billing and other cost issues. The president himself joined the conversation. He confirmed that he wants a solution “with the biggest teeth you can find” and has instructed the secretaries of health and labor to brainstorm strategies.
While cost, quality and access have long been the pillars of healthcare policy, now transparency has joined that list.
The time has come to make a bold move so consumers can get their hands on accurate lists of their out-of-pocket costs under their specific benefit plans. Because there is such variability in those in costs, only person-specific data will have the intended effect of driving a Smart Health Market.
[Related reading: The Best Market Opportunities in Healthcare: Four Trends to Watch]
It should look like this: “Here are your costs for service ‘X’ at Hospital A and Hospital B, based on your health plan and where you’re currently at with your deductible. Which one will you choose?”
The technology already exists to provide that level of transparency. What’s missing is the incentive to move it forward in a way that empowers consumers to make rational choices.