Why Price Transparency is Important in Medicine

When you buy a house, a car, or a vacation, treat yourself to a meal out, a new pair of shoes, or a ticket to a concert, you expect to know what it will cost. Sure, some admin fees may add on $1 or $2, but overall, the total you see is the total you pay. Give or take that extra $1 or $2.

So why shouldn't healthcare be the same? Today we look at why price transparency is so crucial to one of the most significant parts of a family budget.

What is healthcare price transparency?

Without transparency on the pricing of healthcare, patients are unable to anticipate the costs of the care they need, and while many with insurance plans can absorb prices at a variety of levels, those without, or those with high deductible plans, are left unsure of how much they are going to need to pay. Or whether they can afford it at all. This has largely been to the benefit of the PBMs that are now under investigation for potentially corrupt practices that lead to people spending way more than necessary on medication and healthcare services. Profits over patients became the mandate, and now it is time to change. Luckily the FTC inquiry and the changes in government legislation are helping.

The overall aim of price transparency is to help remove that concern. Having fully transparent pricing primarily increases patient awareness and knowledge of healthcare prices.

Legislators here in the USA say that providing people with knowledge gives them the power to understand, assess and thoroughly evaluate the options available to them across various services. They can then find high-quality services at the best possible costs. In addition to benefiting the patient, transparency in pricing aids lawmakers and stakeholders in pursuing cost containment strategies and policies.

Why is price transparency so important?

Along with paying for your house, healthcare is one of the most extensive parts of the household budget. Unfortunately, while you know your monthly mortgage or rent payments, healthcare can throw some unexpected costs into the mix. The current healthcare system does not allow for much financial planning for predicted healthcare costs. Still, with transparency in the pricing, you can at least have some understanding of potential expenses. Studies have recently shown that prices for procedures can vary from hospital to hospital across the country. More confusing is that with no clear transparency, prices are sometimes found to vary within the hospital for the same procedure, even if the same physician is carrying it out.

Such variation and inconsistency mean that at least 50% of people in the USA requiring medical assistance have been surprised by a medical bill. Full transparency allows for lower costs and a more explicit level of predictability for patients when it comes to factoring medical expenses into their budgets.

How does price transparency lower medical costs?

By allowing people to shop around for the best possible costs, competition is increased among those looking to secure custom. Over the next few years, we will be likely to see a much clearer set of prices in relation to healthcare. Government regulations have recently come into force aiming to help promote price transparency and over the coming years, it is hoped that the changes will become evident and beneficial to all.

Price transparency in hospitals

As of Jan 2021, hospitals were given a rule that stated both clear and accessible pricing information must be provided online concerning the services and items supplied by them. This new rule meant that at least 300 services must have prices shown at their standard cost, cash discount price, and prices negotiated with insurance providers. A problem with this, which will hopefully be rectified, is that none of the ancillary services not provided directly by the hospital are included within these prices. This means that the "price list" of services may not illustrate anywhere near the amount you could be expected to pay.

Price transparency in coverage

The Transparency in Coverage rule, which came into effect in 2022, requires insurance providers and their plans to disclose negotiated rates for in and out-of-network rate history and drug pricing information.

In particular, the insurance companies must specify out-of-pocket cost information.

The purpose of this rule allows for the level of secrecy of healthcare costs to be reduced and therefore gives patients the ability to see detailed pricing information from within their healthcare plans.

Those holding policies can then estimate their cost-sharing liability for services and items from various providers. This helps them understand how the costs for the covered healthcare items and services are determined in their plan. A customer can then shop for comparable prices before receiving care.

This ruling requirse insurance providers to supply a list of an initial 500 shoppable healthcare services via an online self-service tool.

The no surprises act

The final of these recent acts that has been passed has been in effect since January 2022 aims to establish protection against most, not all, surprise out-of-network medical expenses. This law means that patients cannot be hit with a bill that is more than the in-network cost-sharing amount when receiving out-of-network services during an emergency visit or from a provider at an in-network hospital without prior notice. It also allows the patient to raise a dispute over coverage of surprise medical bills and have it reviewed by a third party.

Lack of transparency leads to substantial debt

Price transparency in healthcare is vital to help keep American citizens out of substantial debt. Figures released earlier this year showed that 60% of US citizens have been in debt due to medical costs, and 37% are currently in some debt due to healthcare expenses.

Much like buying a car from a dealership or a house from a realtor, the costs in healthcare can also be negotiated and almost 100% of people that chose to negotiate, saw a reduction or a canceled bill.

With complete transparency in pricing, a patient is armed to know how negotiable the pricing may be and shop around for the most affordable care.

How much more can be done to improve price transparency?

At present these changes only benefit those with insurance. While the plan is to reduce costs for people, it still leads to many people going into substantial debt as they have many out-of-pocket expenses to cover to be treated.

Suggestions are being made on how to further help people with the ever-increasing costs associated with healthcare. Points being raised include:

• Incorporate price transparency on the services that are shoppable, such as prescription medications.
• Give patients the assistance they need to look at cost, quality, and convenience.
• Encourage more shared decision-making around the available treatment options so that the potential patient expense is also a factor.

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