Healthcare consumers scored two major victories recently in their effort to lower out-of-control healthcare prices, which have been brought back front-and-center by the Covid-19 pandemic.
This week, Sens. Mike Braun (R-IN) and Chuck Grassley (R-IA) joined a group of Senators to introduce legislation to require hospitals and health insurers to post their discounted cash prices and secretly negotiated rates online, so patients and employers can shop for care as they do in all other economic sectors, reducing the costs of care and coverage.
And last week, a D.C. Circuit Court struck down the American Hospital Association's lawsuit against the Trump administration's final rule that similarly requires hospitals to widely publish their real prices.
With healthcare price transparency initiatives speeding ahead in both the legislative and executive branches of government, patients, employers, and taxpayers can be optimistic that lower healthcare costs are finally on the horizon.
Sen. Braun is the perfect sponsor for this legislation because he knows the power of healthcare price transparency first-hand. Like numerous small business owners, including me, he was able to cut healthcare costs for his company and employees by around 45 percent by contracting with providers that post clear prices before care. The Senator's legislation can bring the healthcare savings we've enjoyed to all Americans.
Similar price transparency legislation has already been introduced in the House of Representatives. Congress can pass this effort, which is supported by 90 percent of Americans, as part of its next stimulus package. This legislation can enact the Trump administration's healthcare price transparency orders issued last fall and moot further legal appeals from the healthcare cartel.
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Last December, hospitals filed suit against the final rule that requires them to post their cash prices and secretly negotiated rates beginning January 2021. The plaintiffs argue that they already display their standard prices in the form of chargemasters, which are the virtually meaningless, inflated list prices that almost no one pays. They also claim that disclosing prices violates their First Amendment rights and would confuse patients.
In his decision last week, Judge Carl J. Nichols dismissed the plaintiff's arguments as "unpersuasive," "half-hearted," and "not well-developed." "The fact that [hospitals' secret] charges will be revealed to consumers (after a hospital procedure)," writes Judge Nichols, "severely undermines plaintiffs' argument that negotiated rates constitute trade secrets."
The judge affirmed what economists, patient advocates, and healthcare consumers have long argued: Real prices are the key to lowering America's devastating healthcare costs. "Naturally, once consumers have certain information," he wrote, "their purchasing habits may change, and suppliers of items and services may have to adapt accordingly."
In other words: Empowering healthcare consumers to shop will allow them to identify hospitals that price gouge and profiteer off the opaque status quo where patients don't know what procedures cost until they get their bills in the mail. To attract consumers in this new competitive environment, providers will need to lower prices.
Indeed, patients in New Hampshire, where some healthcare price transparency is required, have enjoyed lower associated healthcare costs. After California Public Employees Retirement System (CalPERS) enrollees were given pricing information, hip and knee replacement prices at high-cost facilities in the Golden State fell by 18 percent. Research by economists Art Laffer and Larry Van Horn finds that cash prices for healthcare are, on average, 39 percent less than insurers' negotiated rates.
Reducing the healthcare costs plaguing American patients, employers, and governments would provide an unprecedented economic stimulus at no cost to taxpayers. The U.S. currently spends about 18 percent of its GDP on healthcare, nearly double the developed-world average.
Such economic stimulus is needed now. U.S. unemployment is in the double-digits. About one-third of small businesses are closed for good, according to one recent survey. And state and local governments have had to cut their budgets to reflect falling tax revenues.
Bringing healthcare prices in-line with international counterparts would put trillions of dollars back in the productive economy by increasing employees' take-home pay, companies' net earnings, and the portion of government budgets spent on services. Former House Speaker Newt Gingrich estimates that healthcare price transparency can save the average family $11,000 per year.
Healthcare price transparency, which the country recently took significant strides toward, will lower healthcare costs, improve healthcare outcomes, and boost the economy -- three of the most pressing priorities facing the nation today.
David Bristol is the CEO of Employee Solutions.
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