In a historic win for all Americans on Thursday, President Trump issued a final rule requiring health insurers to post the prices they have negotiated with hospitals, medical facilities, and doctors. Under this rule, health care consumers, including employers sponsoring workplace coverage, can finally know prices before they receive care. This action will increase competition, lower prices, and save American families money.
Combined with the Trump administration’s already finalized hospital price transparency rule, which requires hospitals to publish the secret rates they negotiate with insurance companies as well as the cash payments they will accept, Thursday’s announcement will usher in a transparent health care sector with less need for the middlemen that have capitalized on patients’ misfortune.
Once these rules delivering complete health care price transparency take effect (January 1, 2021 for the hospital rule and one year later for the insurance rule), we can expect our economy to come roaring back, and our beleaguered health care system to rebound as well.
Knowing the real prices of health care and coverage beforehand will be a huge boon for all Americans–patients, workers, employers and taxpayers.
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Together the rules will unleash a real market in health care, usher in competition and choice, dramatically lowering the costs of care and coverage. Fewer dollars going to health care and more going to wages, jobs and small businesses in our local communities will help boost our nation’s economic recovery.
When complete health care price transparency is in place, patients, consumers, and employers will be able to better shop for health care, and high-tech innovators will eagerly develop tools to help consumers access and compare prices. Better informed buyers of health care will take advantage of the huge price variation that exists in the current, opaque market.
For instance, a recent study from the respected RAND Corporation found employer-sponsored plans are paying hospitals two-and-a-half times more than Medicare pays for the same procedure. Since almost all hospitals accept Medicare, those government rates are by definition “acceptable,” which means hospitals are price-gouging workers and employers, and growing rich at the expense of the middle-class.
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Insurance companies are no better, reaping huge profits as health care costs have soared. The average premium for an employer-provided family health insurance plan in 2020 jumped to $21,300–a 55 percent increase over a decade earlier. During that same time, deductibles more than tripled.
Last year I co-authored a study with health economist Larry Van Horn, it found that cash prices are, on average, 39 percent lower than the insurers’ negotiated rates for the same care. Throughout the country, businesses have saved 30 to 50 percent on health care costs by directly contracting with price transparent doctors and medical facilities, leaving insurers out of the equation.
It’s time to disrupt