Trump's Patient-Friendly Push on Hospital Costs Has Limits

Max Nisen
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Trump's Patient-Friendly Push on Hospital Costs Has Limits

(Bloomberg Opinion) -- The Trump administration believes in the power of transparency, at least when it comes to health care. President Donald Trump signed an executive order on Monday afternoon that calls for hospitals to tell patients how much they charge for surgeries and other services. These expenses eat up a bigger chunk of America’s health budget than the prices charged by oft-maligned drugmakers, and the hope is that giving consumers better visibility will help them shop for cheaper options. The order follows similar efforts focused on drug prices, including one that would force pharmaceutical companies to disclose the list price of medications in ads. It’s easy to see why this approach appeals to the president. It’s a highly visible and populist move heading into an election year, and a straightforward story. It could do some good: In the best-case scenario, the disclosures could shine some light in one of health care’s darker corners, and channel  the power of information to help bring down prices. But despite Trump’s claim that “prices will come down by numbers you won’t even believe” as a result of the order, transparency is no panacea. We won’t know precisely what information Americans might get until federal agencies finalize the rules requested by the order.  The administration hopes to force hospitals and insurers to reveal the prices that they negotiate for services – information that is a closely guarded secret – and to estimate out-of-pocket costs for patients. Industry groups will fight heartily against such disclosure.Health and Human Services Secretary Alex Azar said in  a press call that the administration wants to make this information available in an “easy-to-read, patient-friendly format.” That will be an enormous undertaking. Consumers aren’t especially active or savvy shoppers when it comes to health care, and price information is often confusing and not particularly useful. That’s especially true if it’s divorced from data on quality or outcomes, which can be hard to come by.Also, and importantly, opacity is only one of the reasons prices are so high – and it’s arguably not the most significant. The real culprit is fragmentation. Americans get coverage from a profusion of different private and public health plans, which contributes to price variation and reduces negotiating power.That’s truer when it comes to hospitals and specialists than anything else because health-plan administrators often have to bargain with highly consolidated hospital systems in any given market. Thus, while health plans might have an idea of how much something should cost, they might not be able to do much about it in high-cost areas with limited competition. In places where there is competition, revealing prices may have the adverse effect of prompting providers that are getting paid less to increase what they charge.The administration deserves credit for targeting a real problem. The order could be a step forward that helps to fix one of American health care’s strangest features, the extreme difficulty of finding out what anything costs. But bringing those now more visible costs down will require more extensive reforms. (This piece was updated to indicate that the order was signed, and to include a quote on the measure from President Trump. )To contact the author of this story: Max Nisen at mnisen@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

(Bloomberg Opinion) -- The Trump administration believes in the power of transparency, at least when it comes to health care. 

President Donald Trump signed an executive order on Monday afternoon that calls for hospitals to tell patients how much they charge for surgeries and other services. These expenses eat up a bigger chunk of America’s health budget than the prices charged by oft-maligned drugmakers, and the hope is that giving consumers better visibility will help them shop for cheaper options. The order follows similar efforts focused on drug prices, including one that would force pharmaceutical companies to disclose the list price of medications in ads. 

It’s easy to see why this approach appeals to the president. It’s a highly visible and populist move heading into an election year, and a straightforward story. It could do some good: In the best-case scenario, the disclosures could shine some light in one of health care’s darker corners, and channel  the power of information to help bring down prices. But despite Trump’s claim that “prices will come down by numbers you won’t even believe” as a result of the order, transparency is no panacea. 

We won’t know precisely what information Americans might get until federal agencies finalize the rules requested by the order.  The administration hopes to force hospitals and insurers to reveal the prices that they negotiate for services – information that is a closely guarded secret – and to estimate out-of-pocket costs for patients. Industry groups will fight heartily against such disclosure.

Health and Human Services Secretary Alex Azar said in  a press call that the administration wants to make this information available in an “easy-to-read, patient-friendly format.” That will be an enormous undertaking. Consumers aren’t especially active or savvy shoppers when it comes to health care, and price information is often confusing and not particularly useful. That’s especially true if it’s divorced from data on quality or outcomes, which can be hard to come by.

Also, and importantly, opacity is only one of the reasons prices are so high – and it’s arguably not the most significant. The real culprit is fragmentation. Americans get coverage from a profusion of different private and public health plans, which contributes to price variation and reduces negotiating power.

That’s truer when it comes to hospitals and specialists than anything else because health-plan administrators often have to bargain with highly consolidated hospital systems in any given market. Thus, while health plans might have an idea of how much something should cost, they might not be able to do much about it in high-cost areas with limited competition. In places where there is competition, revealing prices may have the adverse effect of prompting providers that are getting paid less to increase what they charge.

The administration deserves credit for targeting a real problem. The order could be a step forward that helps to fix one of American health care’s strangest features, the extreme difficulty of finding out what anything costs. But bringing those now more visible costs down will require more extensive reforms. 

(This piece was updated to indicate that the order was signed, and to include a quote on the measure from President Trump. )

To contact the author of this story: Max Nisen at mnisen@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.