During his 2020 State of the Union Message, Donald Trump promised that his administration would assure there will be transparency in health care billing. And like the good salesman that he is, he also promised it would save consumers a lot of money. Of course Trump’s speech writers knew that 95% of Americans don’t know what transparency in health care is, but it sounds good, so it must be good, right?
In a nutshell, Trump issued an executive order directing the Department of Health and Human Services to create rules for health care insurance companies and hospitals to publicize their prices and charges. These rules take effect this year (2021). Republicans believe that by posting charges, providers will have to compete for business and thus will be forced to lower fees as consumers seek the best price.
To understand why competition in health care is so important to Republicans and why it doesn’t necessarily work as promised we have to realize that conservatives and liberals view health care differently. As I explain in my book, conservatives/Republicans view health care as a commodity, where purchasing medical care is no different than buying a new refrigerator, car, or furniture. Conversely, liberals and most Democrats view health care as a lifesaving service. How we access, use, and measure the outcomes of that service are quite different than buying a tangible product like a new refrigerator.
Under the new rules hospitals have to post their charges for the most common procedures they perform, such as colonoscopies. In that way you can shop around for the best price just as you would for any other commodity. For example, comparing prices makes a lot of sense when purchasing a tangible good like a refrigerator. You have to figure out what you need in terms of capacity, the available space in your kitchen to accommodate the appliance, and how much you are willing to pay. Then you can shop around at local stores and/or the Internet to find items that meet your specifications. Assuming that you find several models that meet your needs you can then compare prices. And for some commodities, particularly cars, you may be able to negotiate the price.
Unfortunately, the same process does not work for much of health care, which is most often provided on an emergent basis. If you’re having chest pains, it’s unlikely you’ll search the Internet for the hospital that has best price for treating patients having a heart attack.
Conservative and television personality John Stossel claims that health insurance shields the real cost of health care from consumers (the topic of an upcoming blog). To some extent he’s correct because if you’re insured you don’t pay the full price for service; you’re only interested in your deductible and what you’ll be billed for. Let’s use the example of a colonoscopy, the internal examination of your large intestine to look for precancerous and cancerous growths. Assume that the price for this procedure varies across the five hospitals that serve your city, with prices ranging from $2,300 to $6,400. If you were paying cash, price would matter. However, the majority of Americans, 90%, have some form of health insurance which will pay for the procedure, minus copays and deductibles. So for the insured, there isn’t much need for transparency. It will of course help those without insurance, unfortunately if you can’t afford insurance it is unlikely you’d be able to afford the cost of a colonoscopy regardless of the cost.
John Stossel used the example of LASIK surgery, a procedure that corrects vision so that you don’t have to wear glasses. As it is an elective procedure, most health insurance companies do not cover it. So for consumers, that’s where transparency works, i.e. for elective procedures. However, as one study found, in the U.S., about 95 percent of medical procedures are delivered on an emergent basis; only 5 percent are elective. Consequently for consumers with health insurance, transparency is of limited value.
Given that the cost to perform a procedure, such as a colonoscopy, can vary greatly between health care facilities, wouldn’t this information be useful to hospitals and health insurance companies? Here’s where transparency might be useful in controlling health care costs. First, if I were a hospital administrator, I would want to know why my costs to perform this procedure is so much more than my competitor’s. This might result in cost savings to my hospital (although those savings might not be passed on to consumers).
Insurers negotiate the price they will pay for a procedure with providers, but they don’t know what their competitors pay. Under the new rule this will changes as Cigna will be able to see the charge the hospital negotiated with Humana, Aetna, and Anthem: “The availability of price information could alter the dynamics of negotiations between providers and insurers by allowing each to see what their competition charges and pays, respectively. Insurers and large employers may be able to utilize the information to configure their networks to include lower-priced providers.”
In the end, transparency will provide useful information to health researchers, limited but practical information to hospitals and health insurance companies, and limited information to consumers. But transparency in the health care market is definitely not the panacea Republicans claim it is. If we really want to provide quality, cost effective health care, than universal health care is the way to go.
 It’s highly unlikely that Trump himself understands what transparency in health care means.
 For more information about colonoscopy, see my December 18, 2018 blog article, “The Tube Snake Boogey.”