In 2023, the U.S. remains the only developed country worldwide that doesn’t have a universal healthcare system. For millions of Americans, affordable healthcare is still a significant issue. Faced with hidden or unexpected costs, many would rather avoid seeking medical help than risk their financial stability.
However, in these past two years, the U.S. government has made a historical step in reducing the economic burden by supporting price transparency in healthcare.
Unsurprisingly, people almost unanimously support knowing the price of their next medical bill.
In a 2019 Harvard CAPS and Harris poll, 88% of the U.S. voting population agreed that the government should mandate hospitals and insurers to disclose prices. At the time, 67% of respondents felt that medical care costs must be more transparent.
Thus, the government issued two acts to tackle the problem:
- The Hospital Price Transparency Rule, January 1, 2021
- The Transparency in Coverage Final Rule, July 1, 2022
Despite some implementation obstacles and delays, the healthcare transparency acts are now in motion. To understand their economic implications, this Shortlister article explores the case for healthcare transparency and how it can help Americans get better healthcare.
Why Is Price Transparency Important in Healthcare?
The U.S. has the most expensive healthcare in the world, per capita and GDP percentage.
According to World Population Review, Americans pay approximately 40% more for health expenses than other countries. The average cost for 2022 was $12,318. In comparison, Germany holds second place on the list with $7,383.
Despite taking up a significant portion of people’s budgets, the American healthcare system doesn’t allow its consumers to plan their spending. But if they anticipate their costs before receiving care, customers can manage their budget by seeking better services at lower prices.
Initially, that’s why price transparency is important in healthcare.
It’s even more crucial for those who don’t have insurance or roughly 10% of the U.S. population.
This newly gained consumer knowledge will ultimately affect healthcare in two ways:
- People can use predictable pricing to plan their expenses before opting for a medical service.
- Spurring competition will potentially reduce costs now that consumers can shop for their preferred healthcare services based on price and quality.
Lack of Price Transparency in Healthcare
On average, childbirth expenses can range from $14,768 to $26,280, and out-of-pocket charges are between $2,655 and $3,214. The price difference depends on many factors, including the type of birth, prenatal care, hospital charges, location, and more. A hip replacement falls anywhere between $23,203 and over $74,000. Even an ambulance ride can cost from $1,000 to $2,000.
Before the transparency acts, there was little way of knowing which price tag one would get. As a result, the significant cost disparity often “surprised” patients with hefty medical bills. In fact, according to an AmeriSpeak survey from NORC at the University of Chicago, 57% of Americans reported experiencing this.
With the lack of price transparency in healthcare, the need for economic survival overcame the need for proper treatment. In fact, research by HealthSparq reveals that in 2022 this deterred 44% of people from seeking medical help. The percentage significantly grew from 2021, when it was 25%.
This is one of the many issues with untransparent healthcare, which is why the need for complete transformation was more than necessary.
Examples of Transparency in Healthcare
Before the changes in healthcare, some health providers, plans, and associations were open about their prices. There were also other attempts to make healthcare costs transparent in the past. Non-profit groups like the Health Care Cost Institute and FAIR Health had advocated for this years before it happened. Even some state governments joined in.
For example, a few years back, Ohio tried to pass a law to inform patients about the cost of non-emergency procedures. However, after facing opposition from hospitals and doctors, the law went into a state of suspended animation.
Even now, there’s still some resistance.
Despite the hospital transparency law, the non-profit organization Patient Rights Advocate reports that some bigger healthcare facilities are still adamant against giving insight into their price rates.
Regardless of this, the transparency revolution is in full force.
Americans can now access many tools and websites to reap the benefits of healthcare price insights.
Benefits of Price Transparency in Healthcare
Unforeseen medical bills can be so high that they put people in serious debt. In fact, an astounding number of Americans have or currently owe hospitals money. The KFF Health Care Debt Survey reveals that 41% of adults are currently in debt, with 12% owning more than $10,000.
At the same time, healthcare premiums are rising, directly affecting employers and the quality of care they provide to their employees.
The fact that people don’t know what they’re paying for and why their expenditures are ridiculously high is a significant contributor. Improving transparency will lead to predictable and realistic costs, which could ultimately alleviate some of the price burdens.
After implementing the nationwide rules, the following are some of the most considerable benefits of price transparency in healthcare.
1) Customer Experience & Satisfaction
Understanding and managing costs are equal parts of the positive customer experience.
In that sense, a negative outcome will reduce patient satisfaction.
This, ultimately, leads to decreased trust in the healthcare system. According to Deloitte, the trust between patients and their health providers is low, especially among minorities. Of them, 55% reported a negative experience that impacted their trust. Having prices beforehand can reduce some of the adverse outcomes and uncertainty.
2) Cost Efficiency
Like other types of consumers, healthcare consumers benefit from price and billing transparency. Knowing about different price rates, comparing providers, and having easy-to-use payment can increase efficacy in budget planning. In return, that can decrease patient expenses and even prompt hospitals of insurers to lower their prices.
3) Health Literacy
Finally, clear communication goes a long way.
When health providers and group plans break down their pricing elements, this could increase the health understanding and knowledge of the consumer. Patients will see the costs and procedures attached to them and make an informed decision.
Healthcare Price Transparency Solutions
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Disadvantages of Price Transparency in Healthcare: Federal Price Transparency Rules
Despite being a step forward in the right direction, there are a few downsides to federal price transparency rules.
From a customer’s perspective, the disadvantages are mainly related to the complexity of hospital cost lists. Although an easy-to-read report was an implementation requirement, the data turned out to be quite challenging for the regular consumer to understand.
Big corporations were against the rules from the very beginning. In fact, four of the largest hospital organizations, the American Hospital Association, Association of American Medical Colleges, Children’s Hospital Association, and Federation of American Hospitals, issued a joint statement in 2019.
“Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery,” read the statement.
Moreover, at the start of 2022, a year after the hospital transparency law went into effect, only 14.3% of hospitals were compliant, shows a Patient Rights Advocate report.
This has much to do with the low noncompliance penalties.
Namely, the fee ranges from $300 to $5,500 per day. For some organizations, the profit they get by not disclosing prices can be considerably larger than accepting the new regulations. This only increases the noncompliance rate, harming the consumers.
Ultimately, for hospitals and health insurers, the main disadvantage of price transparency in healthcare is associated primarily with price shopping and intensified competition. Additionally, since many things changed in such a short amount of time, complying with these regulations was challenging for everyone.
U.S. Regulations for Price Transparency in Healthcare
The changes in healthcare transparency began with The Hospital Price Transparency Rule, which went into effect on January 1, 2021. This act requires hospitals to disclose their fees.
As part of the Consolidated Appropriations Act of 2021, the No Surprises Act came into effect one year later, on January 1, 2022. Its purpose is to protect patents from unexpected medical costs.
Then, on July 1, 2022, the government motioned The Transparency in Coverage Final Rule. This initiative by the Centers for Medicare & Medicaid Services (CMS) gives much more insight into the actual medical costs that insurers and insureds pay.
Despite the delay in its implementation, the healthcare transparency act is a significant step in improving price and quality transparency. It helps consumers, including insureds and employers, understand pricing and manage their healthcare expenditures better.
Since its implementation, group health plans and issuers of health insurance are disclosing their pricing information, including:
- Negotiated rates with participating providers.
- Allowed amounts for out-of-network providers or the maximum rates insurers will pay for a medical service.
- Billed amounts for out-of-network providers or the actual provider charges.
As of January 1, 2023, they also must provide digital price comparison tools that allow customers to anticipate better the cost of care with data on 500 items and services. By 2024, or the final stage, this list should cover all services and prescription drugs.
The Role of Technology in Healthcare Price Transparency
Technology is at the forefront of the new healthcare wave.
The latest requirement of the price transparency act mandates group health plans and issuers of a group or individual health insurance to provide online price comparison tools for additional access to pricing information.
That means, moving forward, technology will be the connection point for transparency between all parties. As such, it allows providers to be more open about their prices and enables consumers to quickly access detailed cost estimates for medical services and procedures.
Overall, this consumer-focused initiative has made it easier for employers and insureds to:
- Understand the cost of care.
- Identify saving opportunities.
- Schedule the right bundle of services.
- Receive the same transparent pricing information.
Healthcare Price Transparency Solutions
There are many ways to save on medical costs, from care management to disease prevention and management programs.
However, with health premiums on the rise, healthcare price transparency solutions offer an insightful way of tackling the financial burden health plans pose for employers.
These tools can help them understand the actual cost of each service through a breakdown of what the insureds get. Hence, by comparing their options, employers can reduce their expenses without cutting down on quality.
There are many different solutions, and we narrowed the search to some of the best ones in the market right now:
Healthcare Bluebook has provided transparency solutions since it was founded in 2007, long before the healthcare revolution. Its online healthcare shopping tool enables employers and their employees with engagement solutions, a pharmacy savings solution, deep analytics and reporting, in-network navigation concierge support, and a compliance solution for the Transparency in Coverage and No Surprises Act mandate.
HealthSparq is a healthcare benefits vendor focusing on price and quality transparency solutions for health providers, medical and dental services, and prescription medications. Their platform HealthSparq One helps plans and groups save on medical and prescription medication costs.
Optavise is a benefits provider focusing on employee healthcare. The company offers pricing transparency solutions to employers and care options in person, online, or over the phone, with claims to save its consumers $445 on average per employee.
Castlight Health is a leader in healthcare navigation. This digital health assistant guides employees to the best care by simplifying the decision process. It does that by giving recommendations matching individual clinical needs, geography, plan coverage, and employer-preferred networks across virtual and in-person options.
Best In Class Care is a vendor that specializes in healthcare transparency solutions. Their intelligent online marketplace enables direct contracting and bundled pricing with a curated network of local, regional, and global health providers.
Improving Price & Quality Transparency at the Forefront of a Patient-Centric Healthcare
The American healthcare system is still flawed. Transparency in healthcare, and for that matter the entire system, needs to forgo more transformation before the U.S. gives away the title of “most expensive healthcare in the world.”
However, the latest events have prompted a positive change.
It pushed health organizations to start prioritizing price and quality transparency. These two critical principles should remain at the forefront of the health priorities of healthcare providers and insurers to better serve the needs of their consumers.
As a result, this could ultimately create a patient-centric approach to healthcare instead of the profit-absorbed and debt-inducing one that’s currently prevalent.
On a Final Note
The case of price transparency in healthcare favors the consumers, helping them unlock a more affordable, accessible, and equitable healthcare system. At the same time, it’s an excellent way to foster healthy competition and innovation in the healthcare industry.
In the long run, having an exact price tag on medical items and services beforehand can build trust in the healthcare system and help healthcare consumer protect their health and financial well-being.
- Hospital Price Transparency
- The Transparency in Coverage Final Rule
- Requirements Related to Surprise Billing; Part II Interim Final Rule with Comment Period
- National Health Statistics Reports
- Health Care Costs by Country 2023
- New Survey Reveals 57% of Americans Have Been Surprised by a Medical Bill
- The State of Healthcare Transparency and Health Plan Member Engagement
- Transparency in Coverage Report
- Health Care Debt In The U.S.: The Broad Consequences Of Medical And Dental Bills
- Medical Cost Trend: Behind The Numbers 2022
- Rebuilding Trust in Health Care
- Semi-Annual Hospital Price Transparency Compliance Report February 2022