President Trump signed an executive order (EO) Monday calling for price transparency in health care, aiming for patients to learn the price of a treatment before they undergo it. It is ridiculous that this EO is necessary at all—what other business routinely conceals its prices until after the sale?
But among health industry insiders, disclosing pricing is an outrage of epic proportions. Industry leaders pounced on the EO, saying it would require them to disclose propriety contract terms. Before we cue the violins, those contracts govern the terms of patients’ experience with hospitals and doctors. They spell out the terms you may live and die by, and the bill you (and your employer) will pay. It seems reasonable you get the terms in advance. But reasonable business terms have not traditionally governed health care.
The EO paves the way for something the health care industry never truly experienced: an open market where providers compete for discerning customers, AKA patients. In addition to requiring those newfangled price tags, the EO calls for regulations to expand health savings accounts, the tax-protected accounts patients can use to pay their medical bills in a high-deductible health plan. This may improve the ability of patients to afford to pay those bills, which means providers get payment from their patients, instead of anonymous health plans.
The EO also calls for establishment of a claims database, a long overdue archive of what happens to patients in health care and payments. Employers have been demanding this for decades. This helps capture that pricing data and also gives us real insights into the quality of care.
Like all things, the devil is in the details. This will fail, or worse, backfire, if the follow-up by federal agencies is mishandled. First, the improvements to Health Savings Accounts (HSAs) should not pay for health plan premiums. HSAs are exempt from taxes because they help patients pay providers directly, which in turn puts positive pressure on the market. The accounts don’t work if they siphon funds to health plans. On the other hand, HSAs could be improved to expand incentives for employer subsidies, so employers can support the accounts the way they currently support premium costs. Employers also advocate smart regulations that improve how they support people with chronic conditions and other situations. These are reasonable updates that would help.
Second, alongside price transparency, federal agencies must publicly report information on quality of care. Price transparency alone could raise prices, as industry leaders themselves admit. But coupled with quality data, patients can drive a market for the best care at the right price. Ironically, quality, more than pricing, is the key to lowering our nation’s health costs. You can get an magnetic resonance imaging (MRI) and surgery at a great price, but if the MRI yields a mistaken diagnosis or the surgery causes an infection, the price no longer matters. The patient’s medical bills will be orders-of-magnitude higher, paying for that first MRI and surgery, as well as the care to correct the mistakes, get the right treatment, and survive the complications.
Currently, administration officials like HHS Secretary Alex Azar, who have been admirably bold about price transparency, seem timid and defensively bureaucratic about quality. They launched an initiative, called “Meaningful Measures” purportedly seeking to streamline reporting of quality and reduce unnecessary measurement. But today, patients don’t have enough information to compare options in health care. They should be the priority in releasing information about quality.
The cost of health care threatens our future. States have to make terrible choices between funding education or funding health care. We wonder if Medicare will run out of funds in a decade. Employers curtail wage increases as health costs intrude on budgets.
To right-size spending and achieve excellence in any industry, there is no greater force than a wave of consumers spending their own money. Like it or not, we need that tsunami in health care. This executive order is not revolutionary, it is simply reasonable. And that is a breakthrough.