Transparency in Health Care: Pros and Cons

In July, the Trump administration proposed an initiative requiring greater transparency in health care pricing. Specifically, the proposal would require hospitals to publish prices negotiated with insurers for individual services. However, studies have shown that consumers seldom use this type of information to shop for lower prices, presumably because their insurance pays for a large portion of the expense. For people who might be inclined to shop, it’s also unlikely they would — or could — do so in an emergency.

Insurers fear that such a policy could potentially lead to higher hospitals costs as institutions begin monitoring what their competitors are charging.1

While the federal government continues to explore options to mandate affordability in the health care industry, much of the financial burden still falls on consumers. It can be especially difficult for those who would like to retire before age 65 — the age at which one qualifies for Medicare benefits. If you’re looking for ideas on how you can bridge that gap, please give us a call. We may be able to help you develop a strategy.

Speaking of Medicare, one of the Affordable Care Act’s cost-cutting test programs asked hospitals to bundle the Medicare cost of treating a specific condition, such as a knee or hip replacement. Among hospitals required to participate, about half saw savings by bundling the cost of end-to-end services from surgical hospitalization to physical therapy and recovery. While a roughly 50% success rate yielding about 5% comparative savings may be considered a good result, the bundling concept may only work for certain conditions and procedures. The Trump administration has expanded the concept of bundled payments but has done so on a voluntary, rather than mandatory, basis.2

Researchers from the Washington (State) Health Alliance studied that state’s health care expenditures by looking at spending on 47 specific tests and services. In 2018, the group reported that more than a third of the money spent on those 47 tests or services went to unnecessary care.If that is the case in Washington state, or across the country, whose responsibility is it to consider how to control health care costs?

While the idea of some form of universal health care continues to be debated and will likely be a political issue throughout the 2020 election year, the key components to consider are how to achieve lower costs and higher quality outcomes. By addressing the problem of unnecessary care and expenses, some argue that it’s possible any cost savings generated by a more efficient health care industry could be funneled into other aspects of the economy, thus driving growth.4

Knowledge@Wharton. July 2, 2019. “Will Price Transparency in Health Care Lower Costs or Backfire?” https://knowledge.wharton.upenn.edu/article/will-price-transparency-health-care-lower-costs-backfire/. Accessed Aug. 12, 2019.

Knowledge@Wharton. May 21, 2018. “Can Bundled Payments Help Control Health Care Costs?” https://knowledge.wharton.upenn.edu/article/bundled-payments-a-model-for-controlling-health-care-costs/. Accessed Aug. 12, 2019.

Marshall Allen. NPR. Feb. 1, 2018. “Unnecessary Medical Care: More Common Than You Might Imagine.” https://www.npr.org/sections/health-shots/2018/02/01/582216198/unnecessary-medical-care-more-common-than-you-might-imagine. Accessed Aug. 12, 2019.

Insurance News Net. April 26, 2019. “Econometer: Would Univ1ersal Health Care Help The U.S. Economy?” https://insurancenewsnet.com/oarticle/econometer-would-universal-health-care-help-the-u-s-economy#. Accessed Aug. 12, 2019.

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