Trump plan to reveal true health care costs spurs fight with hospitals and insurers - T... - 0 views
www.washingtonpost.com/...a-a659-7d69641c6ff7_story.html
health care trump competition transparency rules regulation oligopoly
shared by Javier E on 08 Dec 19
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t should tell you everything you need to know that insurers and hospitals have joined together to oppose new rules proposed by the Trump administration last month that would require them to disclose the prices they now negotiate in secret. Their fear is that disclosure will confirm what many have long suspected: that the biggest insurers and hospitals already have the power to raise hospital prices and insurance premiums, increasing their profits and making it easier to drive smaller hospitals and insurers from the marketplace.
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In today’s market for medical care, the cost for an MRI or a hip replacement at the most expensive hospital in one region can be three times the cost at the least expensive hospital somewhere else. Even within regional markets, the prices paid to the most expensive provider can be twice as much as the least expensive. And within the same hospital, the price for an uninsured patient can be five or seven times what is charged for a patient covered by the largest private insurer.
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There are various reasons for this “price dispersion,” as economists call it, but surely one is that prices are treated as trade secrets. The only time most patients find out the price is after the treatment has been delivered — and even then it often requires an accounting degree to figure it out
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In just about every other consumer market you can think of, the Internet, by making prices instantly available and comparable, has resulted in prices that are lower, more uniform and more closely tied to costs. But in health care, where pricing remains opaque, prices are rising faster than inflation, faster than costs and faster than the incomes of the people paying for it
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The new rules would require hospitals (and the doctors whose practices are owned by hospitals) to publish, in an easy-to-use format, their minimum and maximum rates for 300 common services, along with the amount the hospital is willing to accept from someone without insurance. The aim is to make it easier for uninsured patients, or insured patients with co-payments and deductibles, to shop around for the best value.
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More controversial, however, is a second rule that would require health insurers to create an interactive website that would tell customers what their out-of-pocket cost would be for a service at any provider, whether in network or out, as well as the price it has negotiated for that service with in-network providers. The effect would be to let every hospital and insurer know the rates negotiated between every other hospital and insurer — rates that under current contracts must be kept secret.
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Within minutes of these regulations being announced, the hospitals and the health insurers announced their opposition, warning the rules would result in higher prices for consumers
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Their argument is that if negotiated rates were made transparent, then the hospitals offering the deepest discounts would feel compelled to stop doing so out of fear that they would be forced to offer similar discounts to all insurers. In highly consolidated hospital markets — which at this point describes two-thirds of the country — there is also concern that allowing hospitals to share price information would make it easier for them to tacitly collude and keep price competition to a minimum.
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major hospital chains and insurance already have a pretty good sense where they stand relative to their competitors in terms of pricing. A number of firms — including one owned by United Healthcare, the nation’s largest insurer — already gather and analyze pricing data and sell it to both hospitals and insurers. The only parties who are really in the dark are the consumers and employers who ultimately pay the bills.
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if it is true that transparency will lead the lowest-price hospitals to raise their bids, then logically it should be also true that it will lead the insurers now paying the highest prices to demand better deals. Given that the market for health insurance is now as consolidated as the market for hospital services, the possibility of collusion is high on both sides.
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Indeed, if transparency has any effect on prices, the most likely outcome is to eliminate the outliers at both the top and bottom of the price range, reducing the enormous variations in prices. And to the degree that transparency causes average prices to move in any direction, the more likely direction is down, not up
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Such a positive outcome is suggested from experience in New Hampshire, the first state to establish a website listing how much customers of different insurance plans would be charged at different hospitals and labs for medical imaging such as X-rays, CT scans and MRIs. Zach Brown, an economist at the University of Michigan, found that the cost of imaging declined by an average of 4 percent for insurers and 5 percent for consumers, rising to 11 percent after five years.
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In today’s highly consolidated health-care markets, the goal for hospitals and insurers isn’t so much to lower costs as to shift costs onto someone else. When dominant insurers use their market power to extract lower prices from hospitals, the hospitals’ natural response is to try to extract higher payments from smaller insurers to cover their costs and meet their profit targets.
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As this cost-shifting plays itself out, small insurers and small hospitals find themselves squeezed as they are forced to pay more and charge less.
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The dirty little secret is that neither side in these hospital-insurer negotiations really wants to drive down prices. What matters to either side is not what price they pay or receive in an absolute sense — in general, both hospitals and insurers profit more when prices and premiums are high. The thing they really care about is whether they are getting a better price than their competitors
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The reason insurers and hospitals are prepared to use whatever legal muscle they have to fight price transparency is the same reason pharmaceutical companies and pharmacy benefit managers fought a similar proposal by the Trump administration on drug pricing — because it would expose this con game.
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Given the anti-regulatory tilt of the federal courts, the inevitable legal challenge is likely to succeed. Which means the only way Americans are likely to get genuine price competition in health care is if transparency rules are written into law by a Congress not captured by business interests and free-market ideology.