The recently released RAND report on hospital pricing has fur flying over what hospitals charge and whether it has the right numbers. The study provided employers a glimpse into the high and variable prices they pay for health care services for their employees.
The report makes one point absolutely clear: The most basic information needed to create a functioning health care market — data on health care prices — is lacking in the United States. Even assembling RAND’s incomplete sample of hospital prices required heroic effort.
Why is it so hard for purchasers to find out what they’re paying for health care? The main reason is that insurers and hospitals treat prices as trade secrets.
At least 26 states have begun to demand release of prices to construct statewide databases, known as all-payer claims databases, or APCDs, but ERISA, the federal statute that sets minimum standards for most employer health plans in private industry, prevents states from requiring that self-insured employers reveal their prices.
In addition, many of the APCDs are underfunded and under-resourced. And to be fair, there hasn’t been much demand for the data until recently, when some employers and employees awakened to their inability to make informed health-care-purchasing decisions.
So how can valid and useful health care pricing data be obtained?
For starters, employers could insist that contracts with insurers and third-party administrators include language requiring that negotiated prices be shared with purchasers of insurance.
Federal and state policymakers could legislate the right of employers and employees to have access to price information. State governments could establish statewide all-payer pricing databases and support them with analytic resources to document patterns and unexplained variations in what providers charge.
The federal Centers for Medicare and Medicaid Services has in the past required hospitals to make public their official price lists for services, but this is not enough. Official prices have little bearing on the secret negotiated prices that insurers and hospitals agree upon.
Congress is considering options to increase price transparency. On May 23, the Senate Health, Education, Labor and Pensions Committee released a bipartisan “discussion draft” of legislation that seeks cost control in part through creating a national database of deidentified claims data, including prices. This would establish the equivalent of a nationwide APCD. In addition, the draft law aims to give employers tools to manage their health benefits more effectively and provides funds to support state APCDs.
The Trump administration is also expected to release an administrative order soon that would mandate the public disclosure of prices negotiated between insurers and providers.Either the proposed legislation or the executive order or both would be major leaps toward empowering purchasers in health care markets.