The cost of health care in the United States is an ongoing conversation. As a way to create transparency around the price of medical procedures, back in April the health and human services secretary, Alex Azar announced a provision that requires hospitals to post the prices of their services online.
It’s called the Inpatient Prospective Payment Systems and in a statement, Azar said it:
“…takes important steps toward a Medicare system that puts patients in charge of their care and allows them to receive the quality and price information needed to drive competition and increase value.”
Not everyone agrees with the proposal, including Martin Gaynor, professor of economics and health policy at Carnegie Mellon University. He believes the new regulation won’t help consumers in the long run.
Gaynor spoke with Marketplace’s Kimberly Adams and started with an explanation of what the price lists will include. Below is an edited transcript of their conversation:
Martin Gaynor: Well what’s going to be on the price list are — I’ll reverse the words — the list prices that hospitals have for all their services. And those aren’t the prices that hospitals get paid. They don’t get paid these list prices by Medicare, Medicaid or by private insurers, and individuals very rarely pay these list prices. The only people for whom these list prices are remotely relevant are those among us who don’t have any health insurance at all. In some cases hospitals may try and collect this entire amount, the list price, which in the industry are called “charges”, from people who are uninsured. But for people who have health insurance, they’re not going to pay these amounts and the amount they’re going to pay is not related much — if at all — to what these list prices are.
Kimberly Adams: But even if this isn’t what people or insurance companies actually pay, isn’t having this information public useful just to compare what one hospital might have as its base charge compared to another?
Gaynor: I would say no. Some colleagues and I have taken a look at the relationship between hospital charges and what hospitals actually get paid, using a very large database supplied by the Health Care Cost Institute that has data on about 28 million Americans with employer sponsored health insurance and we found the relationship between these list prices and the actual amounts hospitals got paid was actually very weak. What that means is that if you see a high list price, that doesn’t necessarily mean that the final price, the actual price that matters, is going to be high. And the opposite is also true: If you see a low list price it doesn’t mean that is going to be the low priced hospital, when you look at the prices that hospitals actually get paid and the amounts that people actually have to pay.
Adams: So, even if something has a relatively low list price you could walk into a hospital and still be charged more?
Gaynor: Not necessarily more than the list price, but you could get charged more at the end of the day than you would at another hospital that has a higher list price. And that’s because the actual transaction amounts don’t bear much of a relationship with these charges. So actually it’s possible that having these list prices be made public, if people pay attention and take them seriously, could actually be misleading. It could be counterproductive rather than helpful.
Adams: So what can consumers do with this information to help them make more informed choices about their health care costs?
Gaynor: I would say nothing. I don’t think this is useful information. Now maybe it’s a step in the right direction. Maybe the government is starting here and wants to move in the direction of getting information out there that people actually can use that’s relevant for them and that’s usable, but that’s not what this information is. I don’t think it’s useful and I don’t think consumers should pay attention to it.
Adams: Is there any indication or any research out there that shows that when patients know the actual prices for their care, whether it’s list prices or not, that actually changes where they go for their care?
Gaynor: This is a new area, so there isn’t a lot of research evidence as of yet, but there is a little bit and there is some evidence, looking at the introduction of this information in the state of New Hampshire, that does show that there’s impact to some degree on what people in the state of New Hampshire who had access to this information did for certain kinds of services. But there’s a lot more we need to know about this. Right now. We have really good information on what things cost for Medicare because it’s a federal program and to some extent for Medicaid, but of course most people in the United States who have health insurance have private health insurance. And there the information is just not broadly available and so that’s a real challenge. We certainly do need to do more work in this area and in my view, what we need is a national health care data warehouse, where all of these data are made available, so people can find a way to get the information they need, and not just individuals, but employers, businesses and all the levels of government.