insurance

Drug Price Info Is No Cure for Sticker Shock

Efforts to curb spending raise questions about just how competitive health care can be.

Chances are you’ve weighed a trip to the doctor based on how poorly you feel as well as how much you will pay the provider. But good luck comparison-shopping. The amounts paid by health insurers for identical services are shrouded in secrecy and can vary widely, even within the same state, metropolitan area or neighborhood.

Because these “contract negotiated rates” are typically the result of intense, closed-door negotiations between individual insurers and health care providers, patients rarely know how much they’ll pay for a procedure or service until after they’ve used it. And with the rise of high-deductible health insurance plans, which require consumers to pay more out of pocket, many patients are feeling the pain of steep, opaque costs.

Over the past few years, the Trump administration has tried a few different approaches to bring down health care costs, mostly centered on making the system operate more like a free market. One of the latest ideas: price transparency. An executive order issued in June says patients can make better-informed decisions if they know the price and quality of a service in advance.

Tough to implement. Supporters of the move say it will improve competition and lower prices. But industry groups representing both hospitals and insurance providers have spoken out against the order, suggesting transparency could actually raise prices.

Some industry analysts have also expressed skepticism that the executive order will radically alter the current landscape. “Most patients don’t think of health care as something you can shop around for, and there’s not much incentive when you don’t foot most of the bill directly,” says Larry Levitt, executive vice president of health policy at the Kaiser Family Foundation. “And in areas where hospitals effectively have monopoly power or significant market leverage, seeing what their competitors are paid elsewhere could push them to ask for more—rather than shame them into asking for less.”

And in a blow to the administration’s strategy, a federal judge threw out a rule instructing drug companies to display the sticker price of their products in television ads, saying the government lacked the authority under current law.

The Department of Health and Human Services (HHS) has to figure out how to implement the president’s executive order and define “price transparency”—a process that will likely take several months. HHS could require service providers to publish their negotiated rates, along with quality-related statistics, such as mortality rates and incidences of hospital-acquired infections associated with services. Or it could adopt a less-sweeping approach that would allow hospitals to simply post the price range for a given service.

Supporters of price transparency say that still wouldn’t tell you how much care would cost under your insurance plan. “We need complete systemwide price transparency to make it work, which means full negotiated rates across all plans, all systems, in real-time,” says Cynthia Fisher, a life sciences entrepreneur and CEO who has pushed for price transparency in Washington for years. “Consumers can shop around when prices are accessible and searchable, and when consumers can shop around, we’ll see prices come down.”

Did You Know?
K9-AHEAD.indd

Getty Images

Most Popular

Retirement: It All Starts with a Budget
personal finance

Retirement: It All Starts with a Budget

When you’re meeting with your financial planner, do you talk about your budget? If not, you should.
November 10, 2020
Planning to Sell Your Home in Retirement? Downsize Costs Along With Space
Budgeting

Planning to Sell Your Home in Retirement? Downsize Costs Along With Space

In this hot real estate market, consider the costs of buying and selling a house along with the expenses associated with your new digs.
November 13, 2020
What Biden Will Do: 24 Policy Plays to Expect From the Next Administration
Politics

What Biden Will Do: 24 Policy Plays to Expect From the Next Administration

The Kiplinger Letter forecasts President-Elect Joe Biden’s biggest priorities -- and the likelihood of progress on them.
November 19, 2020

Recommended

Bad News for Super Savers
Financial Planning

Bad News for Super Savers

Low inflation keeps thresholds on retirement savings plans in check.
November 25, 2020
Making Wise Choices During Open Enrollment
health insurance

Making Wise Choices During Open Enrollment

Contributing Editor Lisa Gerstner runs through the new variables of the 2020 open enrollment season. Also, hosts Sandy Block and David Muhlbaum talk a…
November 17, 2020
Dear Mom and Dad: Thanks
Making Your Money Last

Dear Mom and Dad: Thanks

Ideally, living at home should provide a way to improve your financial well-being and lay the groundwork for future success.
November 17, 2020
What the New President Means for Your Money
Politics

What the New President Means for Your Money

President-Elect Biden wants more consumer protections and perks for the middle class and seniors.
November 17, 2020