One of the most questioned aspects of the healthcare system is how many providers do not list out actual prices for their services, but rather give estimates. Sometimes, those estimates aren’t even close to the price of the final bill.
This is one reason the direct care model is gaining popularity: their price for each service is listed out.
A reason many hospitals do not list their actual prices is that oftentimes, due to the complexity of the insurance system and payment negotiating, they cannot predict the amount of a specific operation various insurance companies and plans will cover.
Hospitals use a “chargemaster” sheet to document their prices. But those sheets are incredibly long and complex, and often don’t provide real costs.
To stop this, some advocates point to price transparency to level the playing field for consumers.
The Trump Administration jumped on board with this idea in June of 2019, issuing a rule directing hospitals to remove the ambiguity.
The American Hospital Association (AHA) and other organizations immediately filed suit against the rule, arguing that the requirement violates their First Amendment rights, defies statutory authority, and disrupts the price negotiation process.
Judge Carl Nichols, appointed to his post with the Washington D.C. District Court last year, was persuaded by neither.
The provision within Obamacare which the current administration based its order on reads that “a list of the hospital’s standard charges for items and services [must be] provided by the hospital” — “standard charges” being the term of examination.
What constitutes a “standard charge” went unanswered by the law passed in 2009.
Even though Obamacare has struggled, if not failed entirely, to accomplish the goal of improving the affordability of America’s healthcare system, the intention of this provision was to provide some sort of transparency in pricing — enabling consumers to more easily navigate an already complicated and restricted market.
Within the Trump Administration’s rule, two categories of required prices were established: one for insurance-based consumers and one for cash-based consumers. This would put the prices for third-party patients in direct competition with the self-payers.
While this is the very point of the Trump Administration’s directive — to put downward pressure on ambiguous prices by unveiling hidden rates — hospitals rely heavily on the inflated costs that more often come with insurance-based payments.
A 2019 RAND study found that hospitals charged privately insured patients 2.4 times more than the publicly insured (i.e. Medicare and Medicaid).
For example, an average hip replacement cost in a hospital is $40,000 while the same surgery in a direct care center that does not accept insurance costs about half that.
Health economist with Vanderbilt University, Larry van Horn, found that market-based healthcare costs were averaged 39 percent less than insurance-based costs.
Nearly 20 percent of America’s gross domestic product (GDP) goes toward healthcare, making it one of the world’s top healthcare spenders.
In contrast, Singapore which uses a mostly cash-and-catastrophic-insurance system, spends less than five percent of its GDP on healthcare.
The U.S. also spends substantially more than the United Kingdom, which operates predominantly under a single-payer health system, which spends just under 10 percent.
Cynthia Fisher, founder and chairman of PatientsRightsAdvocate.org, a non-profit aimed at improving transparency and reducing costs within the healthcare system, told The Texan, “This was a huge win for patients, a victory for all Americans.”
Fisher, whose group filed an amicus brief in the case, added it will “change the game” on how patients shop for their healthcare, allowing them to accurately compare prices between cash models and insurance models.
AHA General Counsel, Melinda Hatton, said of the ruling, “Today’s decision was also premised on the erroneous conclusion that the ‘standard charges’ referenced in current law can be interpreted to include rates negotiated with third-party payers. While the Court ruled that this was a close call, that conclusion clearly does not reflect the experience of hospitals and health care systems. The AHA will appeal this decision and seek expedited review.”
Due to the complications of the current system, hospitals maintain that revamping will create immense costs in time and resources. On the flip side, knowing exactly how much is owed beforehand will help consumers narrow down the best possible price for the care they need while eliminating surprise billing.
It’s important to remember that this is an administrative rule, not a law passed by Congress, so it could be reneged by another administration.
But there is some momentum in the Senate to codify this new rule as part of a Phase IV stimulus measure.
The AHA will appeal the ruling to the D.C. Court of Appeals.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.