People should be told in advance how much they will be charged for medical services. So why do so many Americans get sticker shock when the bill arrives?
The main problem is that US healthcare markets are highly concentrated. This limits consumer choice, as well as competition between plans and providers.
Thankfully, policies to promote greater healthcare pricing transparency are garnering rare bipartisan support in Washington. The Biden administration has already embraced the Trump administration’s groundbreaking hospital and health insurance transparency initiatives. The House Energy and Commerce Committee recently passed important price transparency legislationH.R. 3561 jointly sponsored by Rep. Cathy McMorris Rogers (R-Wash.) and Rep. Frank Pallone (DN.J.). Similarly, the House Ways and Means Committee recently held an important hearing on the matter.
Knowing the price of a medical service or procedure and being able to easily access and compare the prices of different medical professionals offering those procedures is real progress. But more needs to be done. To ensure the savings and health benefits of choosing high-quality, efficient care, patients must be able to act directly on this information.
>>>Transparency of healthcare prices: a right to know for patients
One area where Congress can do more: Expand people’s options for private health insurance. The vast majority of Americans enrolled in private health plans get coverage through their employer plan. If an employee covered by a group health plan chooses the purchasable services of an affordable medical professional or hospital, the savings accrue to the employer who owns the health insurance plan, not to the employee who is enrolled in it. Hence, there is little or no economic incentive for the employee to choose an affordable medical service provider.
Too many employees thoughtlessly treat employer-sponsored health insurance as a free commodity that automatically comes with the job or believe that the employer somehow pays for their coverage, and not them. So, it doesn’t make much sense to consider the cost. In fact, however, virtually every increase in occupational health benefits represents a corresponding decrease in wages and other compensation. And current health insurance arrangements cut off the opportunity for workers to secure personal savings from their health care decisions.
Rather than being passive recipients of corporate decisions, patients should be given the ability to directly engage and decide on healthcare cost and quality options. Congress could take two steps to promote patient engagement and enable informed pricing decision-making in health care.
First, Congress could authorize a shared savings option in both the group and individual health insurance markets. The goal would be to align and leverage the economic incentives of patients and insurers to deliver financial savings. Patients who choose a low-cost coverage option would get a share of the savings as a tax-free refund or deposit into a tax-free health savings account (HSA). (Filing would be exempt from HSA annual fee limits). Cash refunds would be classified as benefit payments, allowing insurers to avoid administrative fines.
Second, Congress should expand the opportunity to own Health Savings Accounts (HSAs). Analysts at the American Academy of Actuaries note that people with high-deductible plans, such as HSAs, are very price sensitive and can be avid users of new price transparency tools. Existing restrictions on these personal accounts, including limits on how much patients can set aside each year, are costly and irrational. They encourage a much heavier than necessary reliance on reimbursements by insurers’ bureaucratic claims processing systems.
>>>How Congress Can Help Open America’s Healthcare Markets
To achieve this goal, lawmakers should take three steps. First, they should allow any American with health insurance to have such an account, not just those who enroll in high-deductible health plans.
Second, they should clarify that HSA funds can be used to pay for enrollment in directed primary care programs, facilitating stable relationships between patients and primary care physicians. Indeed, Republican Senators Bill Cassidy of Louisiana and Tim Scott of South Carolina have joined Democratic Senators Jeanne Shaheen of New Hampshire and Mark Kelly of Arizona in proposing legislation to do just that.
Finally, Congress should allow patients to raise their annual HSA tax-free contributions up to the out-of-pocket expense limits set by the Affordable Care Act of 2010: $9,100 for individual coverage and $18,200 for family coverage. Today, individuals can set aside just $3,850 and families just $7,750.
Advances in price transparency will intensify competition between health plans, hospitals and medical professionals. It will spur innovation in health plan benefits and provider care delivery, and fuel popular demand for information about hospital performance and the ability of medical professionals to deliver high-quality care and improved patient outcomes.
In short, price transparency is the key to ensuring better value for US health care dollars. Patients win.
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