An Executive Order on Health Care Price Transparency - Potentially a Good Start

Jun 25, 2019

Yesterday, the Trump Administration announced an executive order that would require hospitals, doctors, and health insurance companies to publish their prices. (here) The goal is to inject more consumerism and competition in the U.S. health care system and ultimately decrease costs. Basically, the Department of Health and Human Services has two months to finalize the rules for the executive order.

Hospital and insurance associations are already pushing back on the idea. (here) Their argument is that pricing between a hospital and an insurance company is proprietary. If prices are made public, other hospitals would actually raise charges to match the best payment rate.

This payment rate increase may or may not occur, but forcing hospitals to post their charges doesn’t really address the underlying problem. Patients and doctor are essentially price insensitive because a third party is actually paying the bill. This third party is either the government (through Medicare, Medicaid, Obamacare, and the VA system) or the patient’s employer (through private insurance).

Patients and doctors currently have no economic motivation to consider hospital costs, especially when someone else is paying for the patient's care. Posting prices has the potential for at least increasing their awareness of costs.

Another part of the executive order would require physicians to post their charges for any out-of-pocket costs to the patient. This makes economic sense and would be a step toward more consumerism in our health care system. Patients could make treatment decisions based not only on quality but also on cost, just like they do in other areas of life.

Officials at HHS have already been looking at more price transparency. Hopefully, the rules on this new executive order will have a meaningful impact on actually holding down health care costs.