When I take my car in for service, they tell me what it will cost before they do the work. When my air conditioner breaks down, they tell me what a new one will cost before I agree to replace it. So why is healthcare any different?
Ever since the advent of healthcare insurance (about 50 years ago) patients have had a hard time figuring out what their healthcare treatment will cost. Before that everybody paid cash so you wanted to know up front what it would cost. But with the introduction of a third party into the transaction, the insurance company, the transparency of healthcare treatment pricing disappeared.
Some states are trying to do something about this problem. Here in my state of Florida, the Florida Hospital Association has created a web site, missiontocare.org, that posts price comparisons for the same treatment at different hospitals.
Naseem Miller, writing in The Orlando Sentinel, says Florida Hospital Association President Bruce Reuben said recently in a news release: “The Mission to Care website is a public resource to help patients and their families make better informed health care decisions. This represents a new step forward as our state works toward a more comprehensive data set that fully captures where we invest our health care dollars.”
Florida Governor Rick Scott supports this effort and has called for increasing price transparency as a priority in the upcoming 2016 legislative session. Scott said, “We need to protect patients from one-sided price fixing by Florida hospitals. Patients should have a place to go when they believe their hospital bills are unconscionably high. That is why we want patients to have the ability to ask for a third-party review of their charges.”
The need for this transparency is demonstrated by a Health Affairs study that found that 20 of the 50 hospitals in the nation that gouged uninsured patients the most were in the state of Florida. All but one of them were for-profit hospitals.
A couple of examples of price comparisons of Central Florida hospitals shows how much prices can vary for the same treatment. At Florida Hospital Orlando the average charge for hip, knee, or ankle replacement surgery is $98,000 and the average commercial insurance pays $50,000 for these charges. The same treatment at cross-town rival Orlando Health costs $80,000 and the average insurance payment is $28,000.
However, a comparison of Caesarean section procedures shows the charge is $25,000 at Florida Hospital Orlando and $38,000 at Arnold Palmer Hospital for Children, an affiliate of Orlando Health.
Hospital officials are quick to explain that average charges do not reflect the out-of-pocket costs individual patients will pay. While that is true, it does not explain why the same treatment provokes such a wide variation in charges at different hospitals. Both of these hospitals are not-for-profits.
Challenges to Transparency
Most consumers would applaud such improved transparency as it allows them to make better-informed decisions regarding their healthcare. This is especially true for those patients who have Health Savings Accounts (HSAs) that give them more incentive to price-shop their treatment. These HSAs represent one of the fastest growing segments of the healthcare insurance market.
Many Americans that used to have healthcare insurance have lost their insurance since the advent of ObamaCare or have chosen to drop their plans because of their increasing cost and diminishing value. For these uninsured patients, price-comparisons are crucial. Yet there are those who object to this movement toward greater transparency. As you might expect, some of these objectors are insurance companies.
The Supreme Court is currently waiting to hear arguments in the case Liberty Mutual v. Gobeille. This little-known case could have a large impact on the transparency movement. Yevgeniy Feyman, writing in Forbes, says the court decision could spell the end of state efforts to inject long-overdue price transparency in health care pricing, potentially affecting millions of Americans.
The legal question centers around provisions of the Employment Retirement Income Security Act (ERISA) that regulates standards for pensions and health plans and generally applies to group health plans provided by employers. Does the ERISA pre-empt state efforts on health care transparency?
The state of Vermont has established a database of all healthcare payments called APCD (all payer claims database). The state requires all payers of healthcare claims to supply the state with their claims information. ERISA, a federally run program, is generally exempt from state regulation, except for fully-insured plans that purchase insurance through another company. These are state regulated.
However, self-insured plans are different. They are generally exempt from state regulation. Liberty Mutual is self-insured, however their plan is administered by Blue Cross Blue Shield (just like Medicare). Liberty Mutual, therefore, contends they are exempt from Vermont regulators. Their case was decided against them in a district court but reversed by an appeals court. Now the Supreme Court will decide.
If the Supreme Court decides in Liberty Mutual’s favor, the consumer will be the loser. The direction the court is leaning is unclear to those following this case. We can only hope the court will favor transparency.