Why Trump's health care cost transparency drive doesn't actually help anyone

The typical rationale for how transparency can help consumers doesn't apply in the nonsensical health care industry.
Senior doctor looking at x-rays, rear view
Health care costs can be murkier than X-rays, but transparency won't be enough to fix the problem.Phillip Spears / Getty Images
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By Wendell Potter, former vice president for corporate communications at Cigna

President Donald Trump recently announced concrete steps to improve transparency in health care costs. They seem like slam-dunk moves that will right one of the great wrongs in our current system: that people generally have no idea what they are paying until they are presented with a nonnegotiable bill.

But despite the seeming logic of forcing insurers and providers to be more forthcoming with information for patients, it is not enough — and could even be counterproductive. Indeed, it underscores why tinkering with the current way of doing business won’t be close to sufficient to cure our diseased system.

The Democrats must present plans that do what Americans really need — guarantee that every one of us not only has the care we need but that we can pay for it.

The two regulatory changes Trump announced Friday would provide hospital patients and people enrolled in private insurance plans more information about how much health care actually costs them. On their face, they make radical sense. But my experience working for health insurance companies convinces me that they will probably be blocked. And the typical rationale for how transparency can help consumers doesn’t apply in the nonsensical health care industry. The president’s Democratic opponents must embrace a different approach.

The first of Trump’s changes, scheduled to go into effect in January 2021, would compel hospitals to tell patients upfront what they pay for services and to disclose the rates they negotiate with health insurers. The second change would require insurers to tell patients what their expected out-of-pocket costs would be for care before — not after — they receive a service. The effective date of that change has not yet been set and is still subject to 60 days of public comment.

The Trump administration’s assumption is that both health care prices and insurance premiums will begin to fall when patients have information that will enable them to be more prudent consumers of health care services, since health care — at least for the last several decades — has been anything but transparent.

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“Under the status quo, health care prices are about as clear as mud to patients,” Center for Medicare and Medicaid Services Administrator Seema Verma said in a statement. “Today’s rules usher in a new era that upends the status quo to empower patients and put them first.”

No one would argue with the first part of Verma’s statement. Since the advent of health insurance in the U.S. in the late 1920s, Americans haven’t been able to find out how much medical care would cost them because the insurers rather than the patients get the per-procedure cost. This model hasn’t controlled the cost of care because no insurance company, even the very largest, has the ability to negotiate to bring down the rates charged by huge pharmaceutical and medical device makers and sprawling hospital systems.

Making things worse, in the late 1990s and early 2000s, insurers began requiring patients to pay more out of their own pockets in the form of high deductibles before coverage would kick in. It, too, was premised in part on the idea that patients would pay more attention to the cost of care and bring down prices by choosing lower-cost providers.

That didn’t work out as envisioned, which is why it won’t work now under Trump. Study after study has shown that to avoid shelling large sums out of their own pockets, Americans began skipping or delaying doctors visits and purchasing medication.

And even if they continue with treatment, it doesn’t mean that patients will have the desire — or ability — to shop for low-cost providers. Perhaps the best illustration of why that’s the case: A high percentage of health care expenses occur in the final 12 months of life when patients are not well and often not cognitively alert. They frequently are fighting for their lives and have an unbridgeable gap in knowledge with the people they must trust for guidance — their doctors.

Further, even if people can find out online that Hospital Y is cheaper than Hospital X for their surgery, and they are willing to choose the one where their doctor doesn’t have admitting privileges, patients might actually opt for the higher-priced hospital on the assumption that the quality’s better.

Of course, even for those Americans who have tried to “shop” for care, finding out upfront how much a drug or treatment might cost them is next to impossible. That’s because each private insurer negotiates separately with hospitals, doctors and drug companies for the rates of each service or medication. As a consequence, someone enrolled in a Cigna plan might have to pay more out of pocket than someone enrolled in a comparable Aetna plan.

But because insurers and providers insist that the rates they negotiate with each other are proprietary, they refuse to make cost information available to customers and patients. And that’s why even with the new rules, it’s very unlikely that information will now be available.

First, it is unclear that either rule will ever go into effect. Organizations representing the nation’s hospitals have already said they will challenge the changes in court on the grounds that the government doesn’t have the authority to make them disclose their rates; that the proposed changes violate hospitals’ First Amendment rights to have private conversations with insurers; and that the changes would require hospitals and insurers to disclose “trade secrets.”

Courts have frequently sided with companies over these issues, and recent federal legislation to carry the day for them gives them more legal support.

And even if implemented, insurance companies are warning the rules could have the unintended consequence of causing prices to rise even higher and faster, as hospitals now charging less than their competitors might raise their prices. We have many years of evidence that competition in health care can drive prices up instead of down.

Insurance companies are warning the rules could have the unintended consequence of causing prices to rise even higher and faster.

Despite the seeming logic of forcing insurers and providers to be more forthcoming with information that patients should have, it is not enough and could even be counterproductive. Democrats, who have been primarily working in recent years to get more Americans covered than control health care costs, need to focus on bringing prices down in the way that a single-payer, Medicare-for-all type of system could. Under bills supported by presidential candidates Bernie Sanders and Elizabeth Warren, private insurers would be replaced by a government plan that would have more ability to negotiate and regulate the cost of drugs and medical services.

The Democrats must present plans that do what Americans really need — guarantee that every one of us not only has the care we need but that we can pay for it.