Hospitals are suing to block the Trump administration's new requirements to disclose the prices they secretly negotiate with insurers. But could these disclosures help trim the country’s heavy spending on health care?
New research suggests they might — if the disclosures motivate hospitals to lower the cost of their most exorbitantly priced services.
Overall spending on people with workplace coverage could be lowered by 9 percent if hospitals and doctors all set their prices at the median rate for each medical service, according to researchers with the Health Care Cost Institute, a nonprofit funded by the insurance industry.
While prices for some services would go up under this scenario, the most expensive services would be slashed so dramatically it would more than make up the difference, the researchers found. That’s because the most expensive health-care claims are proportionally more expensive than the cheapest claims are cheap.
“There is more wiggle room on the high side — it could make up for price increases on the lower side,” said Kevin Kennedy, one of the study researchers.
Health economists — and the health-care industry, for that matter — are hotly debating the impact of President Trump’s controversial new requirement for hospitals to post prices online. Yesterday was the deadline for submitting comments on the proposal to the Department of Health and Human Services.
Finalized in November and scheduled to take effect in January 2021, the rule says hospitals must for the first time reveal in a consumer friendly format the discounted rates they negotiate privately with insurers. The regulations apply to prices for 300 common services such as X-rays and C-sections. Hospitals must also show the amount they’re willing to accept in cash from patients, as well as the rate negotiated with insurers.
Trump and his officials have argued these unprecedented transparency measures will ultimately induce hospitals to lower their prices because patients will be able to start shopping around and insurers will have more leverage to negotiate plan rates. Such negotiations have long been cloaked in secrecy, making it extremely difficult for patients to learn how much a service might cost and where they could obtain it less expensively.
“This is bigger than health care,” Trump said in a November address announcing the regulation. “The word is transparency. I love transparency in many ways. It is going to be incredible for consumers, patients, good doctors.”
The regulation has fueled this fierce debate: Will exposing the prices of medical procedures such as surgeries or scans ultimately cause hospitals to lower those prices?
Hospitals — perhaps not surprisingly — insist it won’t. The American Hospital Association, which filed suit in December, says the rule violates hospitals’ First Amendment rights and wouldn’t help patients make more informed care decisions.
“The rule … does not provide the information patients need,” lawyers for the AHA wrote. “Mandating the public disclosure of negotiated charges would create confusion about patients’ out-of-pocket costs, not prevent it.”
Others have argued this: Once hospitals are able to view one another’s rates, they’ll be able to collectively raise prices for everyone. Transparency will make health-care more expensive, not less is what they contend.
One example has been frequently cited to support this claim. When the Danish government required concrete manufacturers in the early 1990s to disclose their negotiated prices, prices then rose 15 to 20 percent. Researchers concluded it was easy for companies to raise their prices once they knew what their competitors were charging.
But Denmark’s concrete industry isn’t exactly a perfect comparison to the U.S. health-care system. Economists still don’t have a great sense of how hospitals might change their behavior once they start posting prices online.
That’s not a question at which the HCCI researchers looked. But their study did find there’s a lot of potential for savings if the most expensive hospitals can be induced to bring prices closer to the median.
They found the following, from a sample of nearly 420 million medical claims in 2017 across 963 markets:
- Spending would still decline even if all the services were priced at the 60th percentile of the median price.
- Spending would decline 6.4 percent if the highest-priced claims were lowered to the 75th percentile price and the lowest-priced claims were raised to the 25th percentile market price.
- But spending would increase if the lowest half of prices were increased to the median market price and the top quarter of prices declined to the 75th percentile.
“Symmetric reductions in price variation would lead to a decrease in our sample's medical spending,” the researchers wrote.
AHH, OOF and OUCH
AHH: Life expectancy improved slightly for the first time since 2014, and the number of fatal drug overdoses declined for the first time in 28 years, our Washington Post colleague Joel Achenbach reports, according to new data published by the Centers for Disease Control and Prevention.
U.S. life expectancy moved up from 78.6 to 78.7 years, which remains lower than the peak of 78.9 years in 2014.
“A decline in the death rate from cancer is the single largest driver of the small increase in life expectancy, the CDC reported,” Joel writes. “Five of the other nine leading causes of death also showed declines in death rates, including the top cause, heart disease, as well as unintentional injuries (which includes overdoses), chronic lower respiratory diseases, stroke and Alzheimer’s disease. Two more, diabetes and kidney disease, were essentially unchanged. Deaths from suicide and influenza/pneumonia increased.”
The death rate per 100,000 people from drug overdoses declined for the first time since 2012 and the raw number of deaths fell for the first time since 1990 — from 70,237 in 2017 to 67,367 in 2018. Health and Human Services Secretary Alex Azar called the news "a real victory" and said it shows the administration's focus on opioid addiction is paying off.
"The drop in overdose deaths shows that the President’s new level of focus on the opioid crisis, and the administration’s science- and community-based efforts to combat it, are beginning to make a significant difference," Azar said in a statement.
OOF: A trio of female scientists teamed up to understand why there's a dearth of women leading the biotech industry and to push for change. They found, based on data from the Massachusetts Institute of Technology, that fewer than 10 percent of the 250 start-ups by MIT faculty were founded by women, even though women made up 22 percent of the faculty.
“If men and women started companies at the same rate, they estimated there would be about 40 biotech start-ups that don’t exist today,” our Post colleague Carolyn Y. Johnson writes.
“Women have made significant gains in the sciences during the past few decades, but men continue to dominate leadership of the biotech industry — where science and business collide to turn ivory tower insights into medicines and biomedical technologies that can change the world,” Carolyn writes.
Amy Schulman, a managing partner at venture capital firm Polaris Partners explained that “the barriers to women may stem from inadvertent bias, such as prerequisites that turn out to be a proxy for picking a man. For example, if experience as a chief executive and prior experience on a company board is a requirement for a new leadership position, many women would find themselves excluded. Overt sexism may also play a role, including concerns about how public markets or investors will react to first-time female chief executives.”
OUCH: The World Health Organization will reconvene its emergency committee today to determine whether to declare a public health emergency of international concern over the coronavirus. The number of cases in mainland China have now surpassed the number infected with SARS during the 2002-2003 outbreak, our Post colleagues report.
The committee previously declined to label the outbreak a PHEIC, which is a special designation reserved for serious crises.
The number of cases in China and Taiwan continue to markedly rise, and by Thursday morning in Beijing, Chinese officials said there had been another 1,658 confirmed cases overnight and another 38 deaths, bringing the totals to 7,736 cases and 170 deaths, our colleague Lena H. Sun writes.
Meanwhile, the U.S. Centers for Disease Control and Prevention said yesterday there were no new confirmed cases beyond the five already reported.
Vas Narasimhan, chief executive of Novartis, one of the world’s largest pharmaceutical companies, told CNBC it could take more than a year to develop a vaccine for the coronavirus.
— Today the Trump administration will invite states to convert part of their Medicaid programs into block grants. The program will be branded as “Healthy Adult Opportunity,” Politico’s Dan Diamond and Rachel Roubein report.
Even with the rebrand, the program “retains the original mission long sought by conservatives: allowing states to cap a portion of their spending on Medicaid, a radical change in how the safety net health program is financed,” they write.
Health and Human Services Secretary Alex Azar will be present at the announcement of the new program, alongside Seema Verma, the Centers for Medicare and Medicaid Services administrator.
“Aware of criticism that any cap on Medicaid funding would target vulnerable patients, Verma will stress during Thursday’s announcement that her plan, by focusing just on the Obamacare expansion, will not affect the poorest or disabled patients,” Dan and Rachel write. “Verma has long argued Medicaid expansion is siphoning away resources from the most vulnerable patients covered by the program. CMS will frame the block grant as a way for states to reinvest any savings into care improvements for Medicaid beneficiaries.”
HEALTH ON THE HILL
If @realDonaldTrump chooses to unleash his dangerous plan to block grant Medicaid tomorrow, it will underscore the flagrant disregard he has for the health of American patients.— Rep. Joe Kennedy III (@RepJoeKennedy) January 29, 2020
With dozens of our colleagues, @repjimcooper & I are demanding he abandon this plan. pic.twitter.com/iQwT8QGoHU
— Meanwhile, three dozen Democratic lawmakers sent a letter urging the Trump administration to reverse course on its block grant plan.
“These waivers would give states the ability to remove enrollees or cut certain health care benefits and rates, if they believe they are too costly or unnecessary. Permitting waivers to allow for less spending in return for limited oversight directly contradicts Congress’s intent when establishing Medicaid; a safety-net health program,” reads the letter signed by Rep. Joe Kennedy III (D-Mass.) and 35 other Democrats. “… The administration should not issue any guidance encouraging block grant waivers, should reject these waivers and the concept of block grants, and urge any state that is considering this misguided policy to commit its energy to implementing Medicaid as Congress intends.”
— The U.S. Court of Appeals for the 5th Circuit won’t reconsider a ruling from a three-judge panel that last month ruled the Affordable Care Act’s individual mandate unconstitutional.
The federal appeals court judges voted 8 to 6 to reject a request to rehear the case.
“California and other Democratic-led states defending Obamacare have appealed the ruling to the US Supreme Court, which has denied a request to fast-track the appeal -- meaning it is possible a Supreme Court decision may not be issued until after the 2020 presidential election,” CNN’s Dan Berman reports. “Wednesday's request for the 5th Circuit to reconsider the case en banc, meaning as a full panel rather than only the three judges, was made by one of the judges on the appeals court, who was not identified in the docket. All eight judges who voted against hearing the case were appointed by Republican presidents. Five of the six who said they would rehear the case were appointed by Democrats, including three by Obama.”
— A recent study found women who are unable to get abortions experience financial distress, including higher amounts of debt, and higher rates of bankruptcy and eviction, HuffPost’s Emily Peck reports.
The paper, published in the National Bureau of Economic Research, found the economic ramifications of being blocked from access to an abortion “lasts for years … when compared with women who have abortions — and crucially, compared with those who choose to have an abortion and then go on to have a child later.”
Emily notes that this new study uses a more objective measure to examine women’s financial health, looking at their credit reports instead of self-reported data.
— And here are a few more good reads:
- The House Foreign Affairs Committee holds a hearing on “Unique Challenges Women Face in Global Health” on Feb. 5.
- The House Veterans' Affairs Subcommittee on Oversight and Investigations holds a hearing on how the Veterans Affairs Department supports survivors of military sexual trauma on Feb. 5.
- The House Ways and Means Subcommittee on Health holds a hearing on “Overcoming Pharmaceutical Barriers” on Feb. 5.