Eakinomics: About as Transparent as Mud…

…The executive order (EO) on transparency in health care pricing, that is. The EO was signed to great fanfare — and trepidation — this past Monday. It was advertised as forcing health care providers, particularly hospitals, to reveal the rates they had negotiated with insurers. The logic was that better informed patients would shop for better health care deals. The problem with this simple logic is that if a hospital cuts a very aggressive, great deal with insurer A but charges a lot more to insurer B, that situation can only persist if the prices are proprietary. The minute insurer B can know about the better deal, the hospital will simply charge insurer A the higher prices. Sure, the patient can shop, but the marketplace is less attractive overall.

As it turns out, it is not clear exactly what the president has set in motion. As detailed by AAF’s Jonathan Keisling, the EO has five pieces:
 

1. Within 60 days of the Order’s signing, propose a rule that would require hospitals to post information on negotiated rates for shoppable items and services in a format that is easily accessible to the consumer;
2. Within 90 days, issue an advance notice of proposed rulemaking on a proposal to require providers and insurers to notify consumers of their expected out-of-pocket costs for a given item or service before the consumer receives it;
3. Within 180 days, work with the relevant secretaries to develop a “Health Quality Roadmap” that would align and improve reporting data and quality measure for all federal public health programs — Medicaid, Medicare, the Children’s Health Insurance Program, TRICARE, and so on;
4. Within 180 days, increase access to de-identified claims data from “taxpayer-funded” health care programs for researchers; and
5. Within 180 days, issue guidance to expand the prevalence and uses of HSAs and FSAs so that HSAs might be compatible with more plans, and be used to pay for more types of preventative care, direct primary care arrangements, and health care sharing ministries; and that the amount FSAs can roll over into the next year without penalty may increase.

Obviously, most of the attention was on the first point. But it is completely unclear what happens next. As Keisling writes, “There is a certain amount of vagueness to the Order that makes it impossible to tell its exact impact. For example, the Order states that the HHS Secretary shall propose a rule that would ‘require hospitals to publicly post standard charge information’ and that this information would be based on negotiated rates, among other things. In other words, the publicly posted charge information could be made up of some sort of composite of rates that insurers have negotiated instead of every single rate negotiated by each and every provider and insurer. The effects of such a rule could vary depending on how the secretary carries out this Order.”

A lot of questions need to be answered. Can the EO force the disclosure of rates negotiated in private, commercial insurance? One prays that the administration has not decided to violate the sanctity of private contracts. At what level will the data be reported: a) every procedure for every insurer for every provider? b) averages by provider for each procedure? or c) something else entirely in terms of aggregation across services, providers, and insurers? The choice here makes a big difference in the impact on effective negotiation.

And make no mistake about it: At this juncture, the U.S. health system relies on insurers as the key element of cost control. Hampering their ability to negotiate in order to empower patients may leave the system with less effective cost control overall.