Federal Legislation for Pricing Transparency?

The House has 3 bills under consideration for promoting health care pricing transparency. Unfortunately, there is no commitment for moving the legislation through this year. And no bills introduced in the Senate yet.

The worst indication of where this may be heading came from Frank Pallone, chairman of the Energy and Commerce health subcommittee. “The concern I guess is about the unintended consequences of too much transparency,” he said. Apparently he believes such transparency will make prices go higher since Peter Orszag stated so back in 2008. If we assume that future health benefits will preserve the worst parts of the insurance models, then maybe that is possible.

However, if we look at private reform and adopt the newer benefit designs with consumerism, then we are much more likely to see prices fall as consumers engage in their care decisions.

Until the legislature brings meaningful pricing disclosure requirements, consumers can find fair price estimates for free at Healthcare Blue Book.

The three bill were summarized by California HealthLine

Bill Details

HR 4700: The bill -- sponsored by Rep. Steve Kagan (D-Wis.) without any Republican support -- would require hospitals, physicians, nurses, pharmacies, and a number of manufacturers and vendors to disclose publicly the prices they would charge patients. The HHS secretary would levy a fine on providers and vendors that fail to comply with the requirement (Ethridge, CQ Today, 5/6).

HR 2249: Cosponsored by Texas Reps. Gene Green (D) and Michael Burgess (R), the bill calls for transparency in hospital charges (Pecquet, "Blog Briefing Room," The Hill, 5/6). The legislation also would expand reporting requirements to all 50 states and require insurance companies to disclose out-of-pocket cost estimates for a number of medical procedures (Reichard, CQ HealthBeat, 5/6).

HR 4803: The proposal, sponsored by House Energy and Commerce Committee ranking member Rep. Joe Barton (R-Texas) with broad Democratic support, would cover ambulatory surgical centers serving patients who are not hospitalized after their operation ("Blog Briefing Room," The Hill, 5/6). It would require the centers, as well as hospitals and private and public health insurers, to disclose to their patients and customers information about the costs for services they provide and the items and services that they cover, respectively (CQ Today, 5/6).

See also comments at:
The Hill

AHIP Calls for Transparency

The consequence of health reform continue to unfold.

One interesting development is the response by health plans to the HHS request for transparency of price increases.

AHIP wrote a letter to HHS suggesting that health plans would be glad to provide transparency into rate increases, and would like the same standard to be applied to providers.

The letter reads in part:
"As you request transparency from our members, we urge you also to consider pursuing transparency for hospitals, physicians, pharmaceutical and device companies, and other suppliers. Consumers should have data on year-to-year price increases in these sectors, as well as quality performance information. We believe this is an opportunity to ask of all other sectors what you are asking of health plans. Pursuing transparency in these sectors is essential both to educate consumers about what drives health care costs and to ensure that patients and their doctors have the information and decision support tools they need to make informed decisions in accessing care and in choosing among providers and care options."

Asking health care providers to explain price increases implies that consumers know what prices are to begin with.

What an excellent idea.

The Healthcare Blue Book welcomes the idea that HHS will encourage all providers to provide real pricing transparency to consumers.

Save Big

Elisabeth Leamy who is the Consumer Correspondent for the Good Morning America show has a new book out called Save Big.

In addition to tips on expenses around housing, transportation, loans and grocery shopping, she has an entire section devoted to healthcare costs.

It is definitely worth reading and can help consumers with health insurance suggestions as well as suggestions for finding care and prescriptions.

Not surprisingly she recommends negotiating with your doctor.

We were glad to see that she suggested using The Healthcare Blue Book as a great place to find out how much your care should cost. As Leamy reports, the Healthcare Blue Book's fair price is "a great starting point for discussion- and negotiation."

Why do we pay more money without getting better quality care?

Value is one of the most important missing topics in the health reform debate.

We might not be so concerned with how much health care costs or how much of our national budget gets devoted to health care, IF we felt we were getting good value for our money. But the fact is that we all know we aren't getting a good value. We see prices continue to rise faster than inflation and very often that is accompanied with lower levels of service, less time with our doctors, etc.

There have been some studies focused squarely on this issue. I have commented before on the Health Affairs article last year.

Now comes a nice report from Massachusetts that examined the costs of healthcare and how they relate to quality.

What did they find?

Their preliminary review revealed serious system-wide failings in the commercial health care marketplace which, if unaddressed, imperil access to affordable, quality health care.

Their investigation has shown:

- Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and amongst providers offering similar levels of service.

- Price variations are not correlated to (1) quality of care, (2) the sickness or
complexity of the population being served, (3) the extent to which a provider is
responsible for caring for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.

At The Healthcare Blue Book our work with employers reveals this fact frequently. We routinely see employees paying 500% more than necessary for common services while getting no better (and sometimes lower) quality of care. These are prices paid to in-network providers; and prices that ultimately are paid for by the employer under their health benefit costs.

The more research the better, but each study points in the same direction: there is a lot of opportunity for employers and employees to lower costs and raise quality.

How Much Will Your Surgery Cost? Hospitals Can’t Tell You

Press Release regarding Healthcare Blue Book Survey: How Much Will Your Surgery Cost? Hospitals Can’t Tell You


Washington, DC. -- Patients are the losers in both the Democrat and Republican versions of the health care reform bills. Proposed health care reform won’t help patients find out how much health care costs before they get care and many hospitals aren’t set up to help.

A new research paper from The Healthcare Blue Book (www.healthcarebluebook.com) entitled Surgery Pricing Secrets: The Challenges Patients Face, shows that it is almost impossible to get prices ahead of time if a patient plans to have surgery in a hospital.

Healthcare Blue Book researchers found that:

• It took three times as many phone calls and four times as long to get pricing information from a hospital.

• Hospitals would not provide guaranteed prices and price ranges often varied by more than 100%.

• ASCs were more likely to discount prices for cash customers; regardless of the patient’s financial status.

• Facility fees are 3-4 times higher in a hospital than in an ASC.

Healthcare Blue Book researchers contacted hospitals and ambulatory care centers (ASCs) in three markets: Raleigh-Durham, NC; Denver, CO; and Portland, OR. Hospitals and ASCs were asked to provide the costs of an anterior cruciate ligament surgery of the knee for a patient without health insurance.

Queries were primarily about facility fees, but researchers also asked respondents about other fees associated with the surgery.

It’s almost certain health care expenditures, which totaled about $2.5 trillion in 2009, will continue to climb by at least 6% a year. Hospital costs are 31% of the total according to the Centers for Medicare and Medicaid Services. So what are health care consumers going to do?

The Healthcare Blue Book, an Internet content provider, offers a free consumer guide to fair pricing for healthcare treatments and services for local markets at www.healthcarebluebook.com.

“One of the main tenets of successful healthcare reform will be patients taking more responsibility for finding out what their care costs as they make treatment decisions,” said Dr. Jeffrey Rice, Healthcare Blue Book CEO, and white paper author. “But until hospitals are able to provide exact pricing, managing out of pocket costs for both insured and self-pay patients is almost impossible.”

For a free copy Surgery Pricing Secrets: The Challenges Patients Face go here.

Everything Old Is New Again

Blue Cross Blue Shield of Massachusetts Inc. recently announced a deal covering 60,000 members of the Caritas Christi Health Care system. The new payment arrangement is touted as one of the country's largest experiments in fundamentally changing the way doctors and hospitals are paid.

The contract includes a so-called global payment system in which the hospitals will be paid fixed amounts based on the estimated annual costs of patients’ care instead of the fee-for-service system in which providers bill insurers for individual visits and procedures. It also includes incentives to improve the quality and affordability of care.

Not to take anything away from a health plan attempting to address the ills of fee for service incentives, but the new system has an old name: capitation.

Capitation payment systems have been used in many forms for many years. However capitation has not become the predominant payment system in US healthcare because it shifts the provider incentives from doing too much to potentially doing too little. Providers want to deliver good care and be compensated in a reasonable manner. Asking providers to be the arbiters of the value of treatments puts them in an uncomfortable, if not impossible, position.

Patients should decide the value of treatment options. Different patients will make different decisions.

To actually make a fundamental change the current healthcare system, health plans need to support pricing transparency and plan designs that let patients have some 'skin in the game' as they make decisions.

Related articles:
WSJ
Boston.com

Facility Surcharge for Doctor Visits

Consumers must always be careful of hidden fees and unexpected charges when purchasing healthcare services. A new version of hidden fees has been gaining attention the past several months: Called "provider-based billing", there is a rule that allows hospitals that own physician practices and outpatient clinics that meet certain federal requirements to bill separately for the facility as well as for physician services as long as the bill all patients for it.

What does this mean? If you go to your doctor for an office visit, you expect to pay for the office visit. If you happen to go to a doctor that is owned by a hospital, then you may also be charged a "facility charge". According to Kaiser Health News facility charges can range from $25 to hundreds of dollars. Unaware consumers can be in for quite a surprise.

One of the troubling issues that results is the fact that this hidden billing has its largest impact on uninsured and self-paying patients. While the Medicare program allows hospital owned physicians to charge the facility fee, Medicare typically dictates a below market fee schedule for the physician services. Private insurers can also negotiate set rates that eliminate the facility fees. Self-pay patients are left paying the full amount of the physician bill plus the facility fees.

Given the recent increase in physicians joining hospitals as owned practices, the issue of facility fees is likely to grow.

For other reports on this see:
Cleveland Plain Dealer
USA Today

$100M Healthcare Pricing Database

We have been following the NY attorney general's cases against Ingenix and large health insurance companies. The attorney general recently announces where the $100M in fines will go and what they intend to do with the healthcare data.

They will create a new Non Profit entity called FAIR Health that will be centered at Syracuse University. Other NY universities will share in the money and collaborate on the project.

FAIR Health will ultimately offer pricing information to consumers on a new website they intend to create. It should help consumers understand typical Insurance company reimbursement for out-of-network care. They hope to have the website up within one year.

You can view the attorney general announcing FAIR Health here.

Too Much Care?

In the past couple of weeks health care writers have been warning about the pitfalls of too much care. Maybe they are priming the pump for the potential of healthcare rationing in the future? More likely they are revealing one of the areas that gets little attention but results in a lot of unnecessary expense.

A Washington Post article, In Delivering Care, More Isn't Always Better, Experts Say, explores the unnecessary care delivered each year. According to a 2008 report by New England Healthcare Institute, wasted expenditures total over $700 Billion every year.

The Wall Street Journal also addressed this issue recently: Getting Well: It's About Time. While we don't want patients to avoid necessary care, in many cases patients will get better own their own. For example, Americans spend approximately $1 billion every year on unnecessary antibiotics for viral infections. These antibiotics don't treat the illness and lead to antibiotic resistance.

The savings opportunities are large and they are real. However, it is unlikely we will achieve savings in this area unless we give consumers the incentives and education they need to make value based healthcare decisions.

Will Anyone Know the Price of Their Drugs?

While the Senate Finance Committee rejected a proposal requiring drug companies to rebate an additional $100 Billion over 10 years, the agreement reached earlier this summer still requires $80 Billion in drug rebates over 10 years.

Rebates are often difficult to track or understand and are not helpful for consumers that want price transparency.

If we are going to ask patients to be make cost conscious decisions about their care, we have to able to let them know how much that care costs. If patients are charged one price at the check out counter, but the government or insurance companies later get rebates on those drugs purchases; then the consumers really never know the true cost of their medications.

Maybe we should stop the rebate game as part of health reform?
An accurate, upfront price would be helpful for consumers.

To read more about the current politics around the rebates, see the NYT.

First Know the Problem, Then Fix It

This is the recommendation from the dean of Harvard Medical School, Dr. Jeffrey S. Flier. See his article here.

He suggests three problems that are at the root of the healthcare system.
1- A tax system that hides the true cost of employer provided coverage and significantly penalizes individuals.
2- Over regulation that limits innovation in health insurance and health care.
3- Large government programs (Medicare and Medicaid) that have fundamental inefficiencies and inequities in the way they pay for care.

All of these issues also directly impact pricing transparency in healthcare. Employer provided coverage has shielded individuals from the true cost of care and limited their need to understand healthcare pricing. Over regulation has limited competition and provided cover for insurers to hide provider pricing. Government programs underpay providers in many instances causing price shifting and distortion in the consumer market.

Dr. Flier doesn't offer a lot of hope for the current health reform initiatives suggesting that even after six decades, they haven't even fixed some obvious problems with tax deductibles for individuals.

It is hard to argue with the premise that you need know what the problem is before you try to fix it.

I would also suggest that pricing transparency is one of the core problems that needs to be understood and addressed.

Americans can agree on many healthcare reforms

Recently John Mackey wrote a thought provoking editorial in the Wall Street Journal- The Whole Foods Alternative to ObamaCare

While some take issue with his suggestions for health reform, it is nice to hear an alternative to the assumption in Washington that the government can or should solve every problem by increasing the federal government’s involvement in personal and local issues.

Of course we need some health reforms, but the current proposal lacks many opportunities for improvement that the vast majority of the American people would support.

To name three easy ones addressed in Mackey’s article:

Pricing Transparency- What American would argue for a system that allows some patients to be charged 3, 5 or even 10 times more than the next patient for the same service at the same location? Who would support a system that allows hospitals to charge those without any insurance much more than those with insurance? The government doesn’t need to set prices; that would rightly offend many Americans as limiting the markets or freedoms. But there should be broad public support for pricing transparency so that patients will know how much healthcare services will cost and a simple rule that hospitals will charge all patients the same price.

Equal tax treatment for health insurance- What Americans would vote against allowing individuals to deduct their health insurance but allow companies to do so? The vast majority would support equalizing the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits.

Tort Reform- What American would vote against tort reform? The lawyers, sure. Anyone else? So let’s say 85% support for this one. Are the politicians listening to the people? No, they left this out too.

Since the politicians are leaving out the easy improvements that most voters would support, we have to ask ourselves who are the politicians listening to? If not the voters, then maybe the lobbyist? Big business?

With a 1000+ page bill, they ought to be able to find room for the simple things that most Americans would support.

Keep the dialogue going, maybe at some point the politicians will listen.

The Public Option

President Obama is championing a "Public Option" to offer insurance to Americans. The government's Public Option is proposed to give Americans more choices and pressure traditional insurance companies to do better. Obama has stated that the Public Option would compete fairly with the private insurers on a "level field".

We all need to evaluate this issue. If the Public Option is subsidized by the government, then it will offer 'cheaper' premiums - even if its costs are really higher. If people can buy a government subsidized Public Option that may cover more with lower premiums, then how will private insurers survive? They won't over time.

So will the Public Option use the government's power to compete on a "level field" with private insurance?

Let's make this simple. One proposal states that the Public Option would pay healthcare providers 105% of Medicare rates. However, a Federal Court in Florida recently ruled that a private insurer must pay 239% of Medicare rates to providers. The Federal Court found that 239% of Medicare rates was fair and a reasonable market rate to pay providers. See Weinberger, et al v. Aetna Health, Inc., No. 1:2006-cv-20249).

So let's stop there. The Public Option will pay less than 50% of a fair market rate.

Is there any way the Public Option can be championed as another market based insurance alternative competing on a level field?

What will happen to private insurance as an option?

Where is the mature, responsible and thoughtful health reform we need?

Health insurers may not be looking out for their employer customers

Health insurers are supposed to be managing care to make sure employers get a good value for the money they and their employees invest in healthcare. Unfortunately employers haven't seen many rate reductions the past two decades.

In fact, insurers make a percentage of the total spend. The larger the spend, the more they make. Some may be starting to wonder if insurers would ever make real efforts to shrink the pie?

Providers have given discounts to insurers, but don't see any real value in the 'service' insurers provide. Now comes a lawsuit by one provider system claiming that 'big insurance' is collaborating with 'big providers' to make sure the pie grows over time. Specifically, West Penn Allegheny Health System is accusing rival University of Pittsburgh Medical Center of conspiring with Highmark Inc. to destroy the region's No. 2 hospital network and drive it out of business. The concern is that collectively they could raise rates and pass the increases on to employers and patients. See article.

Is it possible that an insurer would put its on long-term profits ahead the employers interest? Even pay the providers a little more to 'grow the pie'? What do you think?

The Impact of Insurance on Healthcare Costs

It is well known consumers will demand more services if they don’t have to directly pay for them. It is also well known that there are large administrative costs and risk premiums included in insurance. That is why we don’t insure our cars for the periodic oil change or tire replacements. And yet, we routinely expect health insurance to cover the most trivial of services like check ups and routine care. But at what additional costs?

I would recommend reading Holman W. Jenkins, Jr. insightful argument published in the WSJ on January 21, 2009 “Can Obama Make Government Solvent”. In part he states:

“End the tax preference for employer-provided health care. Make it up to workers with an income or payroll tax cut. This one step would move the economy towards consuming health care efficiently and designing insurance policies that actually insure rather than channel the privileged class's health spending through a tax loophole.

The privileged class, exposed to meaningful price tags, would become a force for disciplining cost and quality rather than the opposite. Nothing else would so improve the country's long-term fiscal prospects or do more to lend practicality to Mr. Obama's goal of universal coverage.

Back in 1993, when minds were still fresh, economists left and right recognized that the enormous tax subsidy to third-party payership was the original sin of our health-care woes. The Senate Finance Committee devoted a full set of hearings to just this issue. But it was a fix that lacked the grandiosity of a flow chart showing how government would re-engineer health care from top to bottom. There's a lesson here: Real reform is often deceptively simple, leading naturally to changes in behavior that are more far-reaching than any detailed government prescription could hope to achieve.”

The decisions our current government makes will have a large impact on the cost, quality and availability of healthcare in the future.