By Cheryl DeMars
Price transparency is a hot topic in health policy, and for good reason; employers – one of the largest consumers of health care – fork over larger shares of their expenses to health care every year, yet most employers and employees have trouble planning for those expenses because of complex pricing models.
Failing to Deliver Price Transparency
In a 2020 Report Card on State Price Transparency Laws, many Midwestern states (including Wisconsin and Illinois) received an “F” rating. States were scored based upon the strength of their transparency laws and the degree to which information is made available to the public in user-friendly formats.
Exposing Extremely High Prices
Not only is price transparency lacking, but the prices themselves are high. RAND Corporation highlights these high prices in their Hospital Price Transparency Project by showcasing the disparity between what private payers pay in each state versus what Medicare pays for those same services at the same hospitals. The study shows:
- Employers are paying 247% more than Medicare on average.
- There’s no link between hospital prices and quality or safety.
- There’s no evidence hospitals need to make up for “uncompensated care:” Shortfalls from government programs do not explain high prices paid by commercial plans.
Ineffective Enforcement of Price Transparency
With bi-partisan public support, the price transparency rule took effect Jan. 1st of this year.
Under the final ruling, hospitals are required to publish a machine-readable file containing their standard charges for 300 of their “most shoppable services” in a consumer-friendly format. Unfortunately, many are not yet complying with the ruling.
Future Customers Want Transparency
Markets don’t work if consumers lack adequate information to make purchasing decisions, and the health care market is no different. When patients don’t have the information or tools required to choose care, they tend to rely upon their physician’s recommendation.
However, studies show that younger generations, especially those aged 18-24, place a priority on having information about their out-of-pocket estimates more so than their primary physician’s recommendation.
Health systems would stand to benefit by catering to the needs and preferences of their future patients by providing more accurate cost estimates.
What Employers Are Doing
Although more changes in transparency are likely coming, the future of transparency is still up in the air. And instead of waiting for a market shift or government intervention, smart employers are using network and benefit plan design tools to offer more affordable prices to their workforces. Those tools include:
- Directly contracting with providers or joining an employer-purchasing coalition
- Tiered-network options
- Referring employees to designated centers of excellence for select procedures with bundled prices, including warranties
- On-site and shared-site direct primary care clinics
- Basing provider contracts on a percent of Medicare
To learn how The Alliance helps 285 employers directly contract with providers for high-value health care, visit www.the-alliance.org.
