Wonder why you can’t get a straight answer about how much a health-care procedure will cost you? One big reason: state laws that allow hospitals and other providers to keep costs hidden until they send you the bill.
A report card on price transparency released last week gives 29 states an “F” and seven states a “D” for policies that keep patients and their families in the dark on prices. The failing grade went to those with practically no transparency requirements.
Only two states, Massachusetts and New Hampshire, rate an “A,” and even they could improve their laws, according to the report by the Catalyst for Payment Reform, a consortium of health-care purchasers such as GE, Wal-Mart and Boeing, and the Health Care Incentives Improvement Institute, a nonprofit group seeking to improve health care with evidence-based incentive programs.
The high prices that American health-care providers charge, often with little connection to actual costs, have been in the national spotlight since Time magazine devoted its entire March 4 issue to an investigation by Steven Brill.
Virginia received a “B” in the report, and Maryland got an “F.” (The District was not included in the report.) However, Suzanne Delbanco, executive director of the payment consortium, said the study may have erred about Maryland because, while the state has no law mandating transparency, it does have such regulations, and it posts hospital prices in detail.
“Maryland’s unique rate-setting enables it to make pricing information available to consumers, and that is to be commended,” she said after learning about the the state’s price transparency rules.
Most consumers are unaware of the tremendous variations in price. For instance, prices for knee replacement surgery in the same California market can range from $15,000 to more than $100,000, depending on the hospital, with no discernible difference in quality.
High-deductible insurance plans are becoming more common, with employers hoping consumers with “skin in the game” will shop around to help keep prices down. But, the authors of the report card note, consumers cannot make informed decisions without being able to comparison-shop on the basis of either price or quality.
“Consumers deserve to have as much information about the price of their health care as they do about restaurants, cars and household appliances,” the report says.
The grades reflect the quality and scope of the pricing data that states require and how well they disseminate it — public Web sites gain high points, for example. The grades also discriminate between “charges” — the prices that hospitals say they charge for services — and what a consumer and her insurance company actually pay. There is often little connection between the two. States that require disclosure of actual prices earned higher grades.
Delbanco said that for Virginia to move from a “B” to an “A,” it would “need to broaden its scope” from listing hospitals’ charges to listing actual prices paid by insurers and individuals. “It’s most helpful when consumers can look up what is actually paid for health services.”
Ben Steffen, executive director of the Maryland Health Care Commission, said that although the state’s grade did not reflect that Maryland has regulations mandating price transparency, the report card still “will definitely spark additional conversation about what we are doing.”
Steffen noted that Maryland is also unusual in that it regulates hospital prices. In most states, hospitals are free to charge what they want, and insurers negotiate discounts from listed charges. That means actual prices paid are usually far lower than what patients are billed.
Big private payers can get a discount by paying hospitals on time, he said. Medicaid and Medicare get similar discounts. But prices are always within 5 or 6 percent of listed charges, Steffen said
Delbanco said the group would take Maryland’s unusual regulations into account next time. “We hope to expand the scope of our criteria when we update our report card in the future,” she said.
The groups plan to update the state report cards annually.
Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health-care policy organization that is not affiliated with Kaiser Permanente.