As healthcare costs continue to soar, it is both startling and frustrating to discover that out-of-pocket cash prices for hospital services are often cheaper than the prices insurers negotiate on behalf of patients. In his first term, President Trump enacted price transparency requirements for hospitals. However, most hospitals have failed to comply, leaving patients unaware that they could be paying less for their healthcare simply by bypassing their insurer’s price altogether.
A major contributor to high healthcare costs is the disconnect between patients and the cost of their care. Without price transparency, patients are left to trust that they are receiving competitive prices, because they have no way of comparing or assessing them beforehand.
That’s why the rule, that went into place January 2021, mandating hospitals to disclose both cash prices and insurance-negotiated prices for many health procedures should have been a step in the right direction.
Yet, despite the requirement, price reporting is on the decline, with only 21 percent of hospitals reporting prices as of last year. Worse, when prices are disclosed, many hospitals don’t list the actual cost but instead describe a algorithm for determining the price. Starting this year, even when prices are listed, they won’t be enforceable — hospitals will be allowed to provide estimates or average prices, further leaving patients in the dark about what their care will actually cost. Even before the rule has fully been enforced, it is already being watered down.
Despite the widespread non-compliance only 17 fines have been issued in the last four years. How much of a difference can price transparency really make? In one case, a patient saved $2,000 on medical tests alone just by paying the cash price.
In fact, cash prices at hospitals are lower than insurance-negotiated prices in nearly half of cases. A 2021 study found that cash prices were less than the median insurance-negotiated price about 38 to 69 percent of the time. For routine obstetric care, cash prices were lower than all insurance prices in one-fifth to one-quarter of cases. New parents, who already face significant costs, shouldn’t have to worry about being buried in medical debt.
Requiring hospitals to list clear, upfront prices for routine procedures not only benefits patients by allowing them to avoid higher insurance prices immediately, it also puts downward pressure on future costs as hospitals compete for patients on shoppable services.
Health insurance has become an anomaly in the insurance world. Most insurance covers the catastrophic, the unforeseen, or the extremely expensive — think car insurance covering crashes but not routine oil changes. The reason you can find a cheap oil change is that consumers can easily compare prices, and service providers must remain competitive. Health insurance, on the other hand, covers not only emergencies but also routine services like scans and check-ups. But without pricing transparency, there isn’t the competitive pressure on healthcare providers to lower prices since patients can’t easily compare costs.
Hospital price transparency rules, if properly enforced, could lower exorbitant medical bills for patients and provide them with financial security through knowing what their healthcare will cost, rather than hoping it will be affordable.
This article was published at the Economic Standard here.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow on Twitter @ConsumerPal.