Finance

Why is Healthcare Price Transparency Important?

Ashley Brooks
Ashley Brooks4 Jan 2022

Healthcare price transparency refers to readily available information on the price of healthcare services to enable patients to compare providers and better predict their healthcare costs. In recent years, healthcare price transparency has become a national priority to help spur competition between providers and drive down costs while improving the quality of care. These initiatives offer a great starting point but still lack in providing patients clarity of their healthcare costs.

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What is Healthcare Price Transparency?

Healthcare price transparency can help healthcare consumers better anticipate the costs of care. Nearly 88 percent of Americans believe the government should require hospitals and insurers to disclose prices. Transparency in healthcare costs is especially important for those with high deductible health plans or those who do not have insurance.

Price transparency can take many forms, but the overall intent is to increase consumer knowledge of health care prices. According to the National Conference of State Legislators, the theory with transparency is “knowledge is power,” where if a patient has sufficient understanding of the costs for a health service prior to receiving care, they can seek high-quality services at the lowest cost. Such information is also important for lawmakers and other stakeholders to be able to pursue effective cost containment strategies and policies.

The Importance of Healthcare Price Transparency

Next to housing, healthcare makes up the greatest portion of a family’s budget, but the healthcare system enables little financial planning when it comes to predicting healthcare costs. According to Health Affairs, studies show significant variation in hospital prices, across hospitals and even within hospitals, for the same procedure done by the same physician. As a result, more than half of Americans have been surprised by a medical bill. Transparency in healthcare costs can both lower costs altogether and create better predictability for patients. 

Lower Healthcare Costs

With price transparency, consumers can shop around for healthcare services, spurring competition among healthcare providers and driving down the costs of care. To help promote healthcare price transparency, government regulations have recently taken effect and will continue to unfold in the coming years. Politically, both parties have favored the promise of cost control through healthcare cost transparency. The following section will review the healthcare price transparency initiatives more closely. Still, the effectiveness of these initiatives on the costs of healthcare services has yet to be shown. 

Predictability in Healthcare Costs

A striking 60 percent of Americans have been in debt due to medical bills, and 37 percent currently owe medical debt. Many people don’t know that they can negotiate their medical bills, and nearly 93 percent of those who negotiated had their bills reduced or dropped altogether. By improving healthcare price transparency, consumers and patients can better budget and shop around for affordable care or understand the billing codes to negotiate their bills effectively. 

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Transparency Regulation in the Coming Years

Over the past few years, several regulations have been passed to improve healthcare price transparency for healthcare consumers to better anticipate the costs of their medical care. Rules such as the Hospital Price Transparency and Transparency in Coverage target hospitals and insurers to display the costs of goods and services in user-friendly ways.

Hospital Price Transparency

Beginning January 1 of 2021, the Hospital Price Transparency rule took effect, requiring hospitals to provide clear and accessible pricing information online regarding the items and services they provide. Under the Affordable Care (ACA), hospitals had to previously publish a list of thousands of billing codes and undiscounted prices known as a chargemaster; however, this information may not reflect accurate out-of-pocket costs for services. 

The Hospital Price Transparency rule expanded on this requirement by mandating hospitals display standard pricing for at least 300 services (colonoscopies, diagnostic testing, etc.), their list prices plus discounted cash prices, and negotiated prices with insurance providers. Still, this pricing does not tell the patient what they will pay for their care and also presents a challenge for hospitals to comply. 

Hospitals work with physicians who are not directly employed by the hospital and may set their own charges without informing the hospital. Additionally, hospitals are not required to include prices for ancillary services they do not provide themselves. As a result, the “shoppable” services list may not reflect additional sizable charges that could accrue, and 55 percent of hospitals nationwide are compliant with the Hospital Price Transparency requirements. 

Transparency in Coverage

Beginning January 1 of 2023, a new transparency rule will take effect. The Transparency in Coverage rule requires insurers and plans to disclose negotiated rates for in and out-of-network rate history and drug pricing information. Specifically, the ​​insurance providers will need to make personalized out-of-pocket cost information available. This information will include the underlying negotiated rates for all covered health care items and services, including prescriptions to participants, beneficiaries, and enrollees (or their authorized representative). 

According to CMS, this rule is intended to reduce the secrecy of health care costs and provide health care consumers with the ability to access pricing information from their health plans. Those insured will be able to estimate their cost-sharing liability for health care items and services from different providers, allowing them to understand how costs for covered health care items and services are determined by their plan and shop and compare health care costs before receiving care. 

Health insurance plans in the individual and group marketplace will be required to provide an initial list of 500 shoppable healthcare services via an internet-based self-service tool beginning January 1, 2023. By January 2024, health insurance plans will be required to disclose the remaining items and services. Unfortunately, this rule only applies to those that have insurance plans beginning in January of 2023 and 2024 and does not provide transparency for the healthcare costs of those who do not have insurance.

No Surprises Act

The No Surprises Act ​​takes effect in January of 2022. This act establishes new federal protections against most surprise out-of-network medical bills. Surprise billing can occur when a patient receives out-of-network services during an emergency visit or from a provider at an in-network hospital without advance notice. This law prohibits providers from billing patients more than the in-network cost-sharing amount in these situations and allows consumers to appeal disputes over coverage of surprise medical bills to an external reviewer.  

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Room for Improvement in Transparency

Without insurance, people cannot anticipate the costs of their medical care because the transparency initiatives do not apply. Americans visit the doctor four times per year, on average, yet nearly one-fifth of Americans cannot afford health insurance. Even with health insurance, those with high deductible plans who must pay out-of-pocket are challenged with the financial planning of their medical care.

While the intentions of healthcare price transparency initiatives aim to reduce healthcare costs and allow consumers to shop around for their healthcare, they may still be missing the mark to be effective. Unfortunately, the rules altogether still fail to tell all healthcare consumers what they will have to pay out-of-pocket if they need health care and whether there’s a lower-cost alternative to hospital care that will meet their needs. 

Hospitals are being held accountable for not meeting the requirements of the transparency rules and may face upwards of $2 million fines per year for noncompliance. Additionally,  the passing of the No Surprises Act, which takes effect in January, aims to close some of the gaps in the transparency initiatives for better patient protection when it comes to surprise medical bills. 

Additional Suggestions For Price Transparency

The Commonwealth Fund and other organizations have expressed their dissatisfaction with the transparency initiatives and have offered additional ways improvement on transparency can be obtained: 

  1. Focus transparency efforts on products and services that are truly shoppable, such as prescription drugs or diagnostic imaging.
  2. Group health care products and services into units that patients can wrap their heads around, such as episodes of care, procedures, or the annual cost of care.
  3. Combine pricing data with data on quality or health outcomes.
  4. Present standardized data in the same format, in a centralized, convenient location — similar to the Medicare Plan Finder tool, which lets Medicare beneficiaries compare estimated total annual out-of-pocket costs for all Medicare Advantage and Part D plans available to them.
  5. Require price information to be made available to physicians and other providers that direct patient care but rarely know the prices or quality of the services they deliver.
  6. Give patients the help they need, such as technology, care navigators, or counselors — to weigh quality, cost, and convenience.
  7. Encourage more shared decision-making around treatment options so that patients’ out-of-pocket costs become part of the equation.

Bottom Line

As healthcare costs continue to rise, a need for price transparency on healthcare goods and services becomes more blatant. Despite the prioritization of healthcare price transparency by government officials, hospitals struggle to be compliant, and healthcare consumers are still in the dark when it comes to anticipating their healthcare costs. These initiatives have only recently taken effect, and improvements in these regulations are becoming more apparent.

Mira helps those uninsured or underinsured better anticipate the costs of basic and preventative care services. Members have access to low-cost payments to maintain low copayments on urgent care, primary care, and telebehavioral health services, and more. Engaging in preventative care can help improve patient outcomes and reduce healthcare expenditure later on. Every $1 spent on primary care saves $13 in total lifetime healthcare expenditure. Sign up for Mira today!